Business Law for Accountants - C241 100118

in 1890 Congress passed

"An Act to Protect Trade and Commerce against Unlawful Restraints and Monopolies"—more commonly referred to as Sherman Antitrust Act, or simply the Sherman Act.

To pay for investment advice from financial consultants Buffet and Carraldo, Doris signs a check payable to "Buffet or Carraldo." A proper indorsement of the check is

"Buffet" only, or "Carraldo" only, or "Buffet" and "Carraldo."

Section 7 of the National Labor Relations Act states:

"Employees shall have the right to self-organization, to form, join, or assist labor organizations ... and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection."

Define and describe a "bailee."

A bailee is a party who acknowledges possession of goods and/or contracts to deliver them (by bill of lading, warehouse receipt, or other document of title).

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.

homestead exemption

A law permitting a debtor to retain the family home, either in its entirety or up to a specified dollar amount, free from the claims of unsecured creditors or trustees in bankruptcy.

Under the provisions of the TILA, all of the terms of a credit instrument must be clearly and conspicuously disclosed.

A lender must disclose the annual percentage rate (APR), finance charge, amount financed, and total payments (the sum of the amount loaned, plus any fees, finance charges, and interest at the end of the loan). The TILA provides for contract rescission (cancellation) if a creditor fails to follow the exact procedures required by the act.

What is a lien?

A lien is an encumbrance on property to satisfy a debt or protect a claim for the payment of a debt.

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 [UCC 2-312(1) (b), 2A-211(1)].

What is a secured transaction?

A secured transaction is any transaction in which the payment of a debt is guaranteed, or secured, by personal property owned by the debtor or in which the debtor has a legal interest.

purchase-money security interest (PMSI)

A security interest that arises when a seller or lender extends credit for part or all of the purchase price of goods purchased by a buyer.

e-agent

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

How can an agency be terminated?

An agency agreement can be terminated either by an act of the parties or by operation of law.

by agreement of the parties

An agency agreement can take the form of an express written contract or be created by an oral agreement.

Agency by Estoppel

An agency by estoppel arises when the principal's actions have created the appearance of an agency that does not in fact exist. The third person must prove that he or she reasonably believed that an agency relationship existed, however.

requirements 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.

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.

hot-cargo agreements

An agreement in which employers voluntarily agree with unions not to handle, use, or deal in nonunion-produced goods of other employers; a type of secondary boycott explicitly prohibited by the Labor-Management Reporting and Disclosure Act of 1959.

What is the definition of a security agreement?

An agreement that creates or provides for a security interest

A security agreement

An agreement that creates or provides for a security interest between the debtor and a secured party.

liquidated damages clauses

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.

The Age Discrimination in Employment Act(ADEA)

An employer must have 20 or more employees, and the employer's business activities must affect interstate commerce. The EEOC administers the ADEA, but the act also permits private causes of action against employers for age discrimination.

wrongful discharge

An employer's termination of an employee's employment in violation of an employment contract or laws that protect employees.

suretyship

An express contract in which a third party to a debtor-creditor relationship (the surety) promises to be primarily responsible for the debtor's obligation.

special indorsement (it is an order instrument)

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. ex: Words such as "Pay to the order of Russell Clay" or "Pay to Russell Clay," followed by the signature of the indorser, are sufficient to identify the indorsee.

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.

Orders

An order is associated with three-party instruments, such as checks, drafts, and trade acceptances. An order directs a third party to pay the instrument as drawn. In the typical check, for instance, the word pay (to the order of a payee) is a command to the drawee bank to pay the check when presented, and thus it is an order.

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."

How does the Private Securities Litigation Reform Act of 1995 impact the liability of accountants?

By limiting an accountant's liability to a proportionate share of the damage resulting from a wrongful act

DISCLAIMER OF MERCHANTABILITY

CAN BE GIVEN ORALLY

Nuisance laws falls under the category of

COMMON LAW

Cici signs a check "pay to the order of Doug" drawn on Cici's account in Eastside Bank. Cici shows the check to Frederica, who agrees that the signature is Cici's and that Doug is owed the amount that the check represents. Doug signs the back of the check. Liability on this check extends to

Cici and Doug only.

Government in the Sunshine Act

Congress passed the Government in the Sunshine Act, or open meeting law, in 1976. It requires that "every portion of every meeting of an agency" be open to "public observation." The act also requires the establishment of procedures to ensure that the public is provided with adequate advance notice of scheduled meetings and agendas.

Fisheries Fisheries

Cooperative Marketing Act of 1976—Allows the fishing industry to set prices.

Creditworthy Loan Company extends credit in the ordinary course of its business. Under the Truth-in-Lending Act, Creditworthy must inform potential borrowers of

Creditworthy's credit terms.

Termination by Operation of Law

Death or insanity. Impossibility Changed circumstances.

Describe the types of discharge from liability.

Discharge can occur when the liable party pays or tenders payment, by cancellation or surrender, if an instrument has been material altered, if reacquired by a previous holder (discharges all intervening indorsers), by impairment of recourse, and by impairment of collateral.

How are employer-employee relationships the same as agent-principal relationships?

Employees who deal with third parties are considered to be agents of the employers (principal) so agency law can apply to them.

incidental damages

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

Attempts at protecting the environment consist of regulations passed by

FEDERAL AND STATE AND LOCAL GOVERNMENTS

Dougal, an accountant, prepares for Econo Enterprise, Inc., a financial statement that omits a material fact. The statement is included in Econo's registration statement with the Securities and Exchange Commission. Felicia, who reads the statement, and Graham, who does not, each buy Econo stock. Hiram reads the statement but does not buy the stock. Under Section 11 of the Securities Act of 1933, Dougal may be liable to

Felicia and Graham.

Analysis, and Conclusion

How does the court's holding modify the rule of law?

Open Price Term.

If the parties have not agreed on a price, the court will determine a "reasonable price at the time for delivery" [UCC 2-305(1)]. If either the buyer or the seller is to determine the price, the price is to be decided in good faith [UCC 2-305(2)]

Opinions by Experts Ordinarily, statements of opinion do not create warranties.

If the seller or lessor is an expert, however, and gives an opinion as an expert to a layperson, then a warranty may be created.

DISCLAIMER OF IMPLIED WARRANTY OF FITNESS

MUST BE IN WRITING

Define "Deceptive Advertising."

Occurs if a reasonable consumer would be misled by the advertising claim. Vague generalities and obvious exaggerations are permissible.

When a sale is made on credit, when does the credit period begin, according to the Uniform Commercial Code (UCC)?

On the date of shipment

course of dealing

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

The most famous trust in the late 1800s was the .

STANDARD OIL TRUST

Changed circumstances.

Sometimes, an event occurs that has such an unusual effect on the subject matter of the agency that the agent can reasonably infer that the principal will not want the agency to continue. In such situations, the agency terminates.

The UCC's provisions relating to passage of title do not apply to leased goods.

TRUE

Conditional Sales

The UCC states that (unless otherwise agreed) if the goods are for the buyer to use, the transaction is a sale on approval. If the goods are for the buyer to resell, the transaction is a sale or return.

Consideration

The UCC states that an agreement modifying a contract for the sale or lease of goods "needs no consideration to be binding" [UCC 2-209(1), 2A-208(1)]. Of course, any contract modification must be made in good faith [UCC 1-304].

Describe and differentiate between the rights and remedies of agents and principals.

The agent has the right to be compensated, reimbursed, indemnified, have a safe work environment and to perform agency duties without interference by the principal. Remedies for the agent for breach of duty by the principal follow normal contract and tort remedies. An agent can also withhold further performance and demand an accounting from the principal. The principal has contract remedies available for an agent's breach of fiduciary duties and tort remedies available for any misrepresentation, negligence, deceit, libel, slander, or trespass activities. If there is a breach of fiduciary duties the principal may be justified to terminate the agency. The main remedies available to the principle include constructive trust, avoidance and indemnification.

Agent's Rights and Remedies against the Principal

The agent has the right to be compensated, to be reimbursed and indemnified, and to have a safe working environment. An agent also has the right to perform agency duties without interference by the principal. Remedies of the agent for breach of duty by the principal follow normal contract and tort remedies.

After having had a reasonable opportunity to inspect the goods, the buyer or lessee can demonstrate acceptance in any of the following ways:

The buyer or lessee indicates (by words or conduct) to the seller or lessor that the goods are conforming or that he or she will retain them in spite of their nonconformity [UCC 2-606(1)(a), 2A-515(1)(a)]. The buyer or lessee fails to reject the goods within a reasonable period of time [UCC 2-602(1), 2-606(1)(b), 2A-515(1)(b)]. In sales contracts, the buyer will be deemed to have accepted the goods if he or she performs any act inconsistent with the seller's ownership. For instance, any use or resale of the goods—except for the limited purpose of testing or inspecting the goods—generally constitutes an acceptance [UCC 2-606(1)(c)].

Company A, located in the United States, submits an offer to Company B. Company B is located in Spain. Company B makes a change to the payment terms, signs, and returns the contract to Company A. Has there been an enforceable contract formed under the Contracts for the International Sale of Goods (CISG)?

The contract is unenforceable because the CISG considers an alteration of payment terms to be a material change.

What can a creditor/lender do if a homeowner defaults?

The creditor has the right to foreclose on a mortgaged property.

A farmer or fisherman who has already filed a reorganization or repayment plan may convert it to a Chapter 12 plan.

The debtor may also convert a Chapter 12 plan to a liquidation plan.

Define Professional Breach of Contract.

The failure to perform duties as agreed upon in the contract between the professional and client.

According to the UCC, what are the four types of negotiable instruments?

The four types of negotiable instruments are drafts, checks, notes and certificates of deposit.

An EIS must analyze the following:

The impact on the environment that the action will have. Any adverse effects on the environment and alternative actions that might be taken. Any irreversible effects the action might generate.

Describe the "Imposter Rule."

The imposter rule provides that an imposter's indorsement will be effective as far as the drawer or maker is concerned because the maker or drawer intended the imposter to receive the instrument due to the belief that the imposter is the named payee at the time.

Parties are secondarily liable on a negotiable instrument only if the following events occur

The instrument is properly and timely presented. The instrument is dishonored. Timely notice of dishonor is given to the secondarily liable party.

Jane A. writes an order to pay Martha B. The order to pay states: "I, Jane A., owe Martha B. $1,000. I will pay Martha B. the full amount when I receive payment from Acme Manufacturing for invoice number 1234." Jane A. signs with her initials but does not date the document. The document is scanned and emailed to Martha B. Which element is needed to make this a valid negotiable instrument?

The instrument must be an unconditional promise or order to pay.

Judicial Controls

The judicial branch exercises control over agency powers through the courts' review of agency actions. the Administrative Procedure Act provides for judicial review of most agency decisions. Agency actions are not automatically subject to judicial review, however. The party seeking court review must first exhaust all administrative remedies under what is called the exhaustion doctrine.

An agency's failure to comply with an FOIA request can be challenged in a federal district court.

The media, industry trade associations, public-interest groups, and even companies seeking information about competitors rely on these FOIA provisions to obtain information from government agencies.

As just described, negotiation is the transfer of an instrument in such form that the transferee becomes a holder. There are two methods of negotiating an instrument so that the receiver becomes a holder.

The method used depends on whether the instrument is an order instrument or a bearer instrument.

defalcation

The misuse of funds.

Company X submits a sales and lease contract to Company Y. Company Y modifies the agreement and sends it back to Company X. Why is the contract still enforceable under the Uniform Commercial Code (UCC) rules?

The modification allows for the acceptance to be upheld.

public policy.

The most common exception to the employment-at-will doctrine is made on the basis that the employer's reason for firing the employee violates a fundamental public policy of the jurisdiction. Generally, the courts require that the public policy involved be expressed clearly in the statutory law governing the jurisdiction.

What are the seller's and buyer's obligations under the good faith provision?

The obligations of the seller is to transfer and deliver conforming goods and the obligation of the buyer is to accept and pay for conforming goods in accordance with the contract.

The CISG Provides that an Offer Will Be Irrevocable If:

The offeror states orally that the offer is irrevocable. The offeree reasonably relies on the offer as being irrevocable.

Under UCC 2-207(2), in contracts between merchants, the additional terms automatically become part of the contract unless one of the following conditions arises:

The original offer expressly limited acceptance to its terms. The new or changed terms materially alter the contract. The offeror objects to the new or changed terms within a reasonable period of time.

Describe the traditional check collection process.

The payee deposits a check in their account (depository & collecting bank), the bank either sends the check to an intermediary bank or directly to the drawee and payor bank who then debits the drawer's account and sends payment to the depositary bank.

Describe the "Perfect Tender" rule, including possible exceptions to the rule.

The perfect tender rule indicates that a buyer does not have the right to reject goods that conform to the terms of the contract. However, if the delivery fails to conform exactly the buyer may accept the goods, reject the entire shipment, or accept part and reject part of the shipment.

Any person who presents an instrument for payment or acceptance makes the following

The person obtaining payment or acceptance is entitled to enforce the instrument or is authorized to obtain payment or acceptance on behalf of a person who is entitled to enforce the instrument. (This is, in effect, a warranty that there are no missing or unauthorized indorsements.) The instrument has not been altered. The person obtaining payment or acceptance has no knowledge that the signature of the drawer of the instrument is unauthorized.Footnote

Potentially Responsible Parties (PRP) Superfund provides that when a release or a threatened release of hazardous chemicals from a site occurs, the following persons may be held responsible for cleaning up the site:

The person who generated the wastes disposed of at the site. The person who transported the waste to the site. The person who owned or operated the site at the time of the disposal. The current owner or operator.

Describe a principal's duties to an agent.

The principal has the duty to pay the agent for services rendered (compensation), to reimburse any funds disbursed at the principal's request (reimbursement), to compensate an agent for liabilities incurred because of authorized and lawful acts and transactions on behalf of the principal (indemnification), to cooperate with and assist the agent in performing their duties (cooperation) and to provide safe working premises, equipment and conditions (safe working conditions).

What rights does a principal have?

The principal has the right to control the agent's conduct in matters entrusted to the agent.

right of contribution

The right of a co-surety who pays more than his or her proportionate share on a debtor's default to recover the excess paid from other co-sureties.

Describe the scope and purpose of Articles 2 and 2A of the UCC.

The scope of Articles 2 and 2A set forth the requirements for sales and lease contracts respectively, as well as the duties and obligations of the parties involved in the contracts.

Cure The UCC does not specifically define the term cure, but it refers to the right of the seller or lessor to repair, adjust, or replace defective or nonconforming goods [UCC 2-508, 2A-513].

The seller or lessor has a right to attempt to "cure" a defect when the following are true: A delivery is rejected because the goods were nonconforming. The time for performance has not yet expired. The seller or lessor provides timely notice to the buyer or lessee of the intention to cure. The cure can be made within the contract time for performance.

When the Buyer or Lessee Breaches The general rule is that when a buyer or lessee breaches a contract, the risk of loss immediately shifts to the buyer or lessee. This rule has three important limitations [UCC 2-510(3), 2A-220(2)

The seller or lessor must have already identified the contract goods. The buyer or lessee bears the risk for only a commercially reasonable time after the seller or lessor has learned of the breach. The buyer or lessee is liable only to the extent of any deficiency in the seller's or lessor's insurance coverage.

The Right to Cancel the Contract If the buyer or lessee breaches the contract, the seller or lessor can choose to simply cancel the contract [UCC 2-703(f), 2A-523(1)(a)].

The seller or lessor must notify the buyer or lessee of the cancellation, and at that point all remaining obligations of the seller or lessor are discharged. The buyer or lessee is not discharged from all remaining obligations, however. She or he is in breach, and the seller or lessor can pursue remedies available under the UCC for breach.

shipment contract requires or authorizes

The seller to ship goods by a carrier, rather than to deliver them at a particular destination [UCC 2-319, 2-509(1)(a)].

Describe the "Shelter Principle."

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

How can you distinguish whether a person is an employee or independent contractor?

The situations that would indicate independent contractor status would be if they worker is engaged in an occupation or business distinct from the employer, the worker supplies their own tools or place of work, the contract has a fixed length time period, pays the person in a lump sum at the end of the contract, and the degree of skill the worker has. If the employer has considerable control over the work or the activities of the worker, supplies the tools and workplace, pays the person in regular intervals it indicates employee status.

what are types of "exclusionary practices?"

There are exclusive-dealing contracts that restrict a buyer from dealing with a competitor and tying arrangements which obligate the buyer of a product to purchase an additional product as well.

Describe the different types of conditional sales.

There are two types of conditional sales. The first is sale on approval which is when a seller offers to sell goods to a buyer and permits the buyer to take the goods on a trial basis. The second is a sale or return which allows the buyer the option to return the goods and undo the sale.

The U.S. Food and Drug Administration (FDA) and the U.S. Department of Agriculture (USDA) are the primary agencies that issue regulations on food labeling.

These rules are published in the Federal Register and updated annually. For instance, labels on fresh meats, vegetables, and fruits must indicate where the food originated so that consumers can know whether their food was imported.

What rights do strikers have after a strike ends:

They are guaranteed to return to their jobs after the strike if no satisfactory replacement workers have been found.

National Labor Relations Act

This act established the rights of employees to engage in collective bargaining and to strike.

The Delegation Doctrine

This doctrine holds that Article I grants Congress the authority to delegate some of its power by establishing administrative agencies to create rules for implementing those laws.

The SBREFA also authorizes the courts to enforce the Regulatory Flexibility Act.

This helps to ensure that federal agencies, such as the Internal Revenue Service, will consider ways to reduce the economic impact of new regulations on small businesses. Federal agencies are required to prepare guides that explain in plain English how small businesses can comply with federal regulations.

What Are Goods?

To be characterized as a good, an item of property must be tangible, and it must be movable.

Rivers and Harbors Appropriations Act (1899)

To prohibit ships and manufacturers from discharging and depositing refuse in navigable waterways. 33 U.S.C. Sections 401-418.

Endangered Species Act (1973)

To protect species that are threatened with extinction. 16 U.S.C. Sections 1531-1544.

Jason's consumer debt is beyond what he can now afford to pay, as he is having difficulty making the minimum payments. The credit card companies are calling daily asking him when he is going to pay. Which of the following goals of bankruptcy is applicable to Jason's situation?

To protect the debtor by giving him a fresh start without creditors' claims.

What is the purpose of informal agency actions?

To provide advance notice that formal rulemaking may be forthcoming

Comprehensive Environmental Response, Compensation, and Liability Act (1980) (CERCLA)

To regulate the clean-up of hazardous waste-disposal sites leaking into the environment.

Accounting

Unless the agent and principal agree otherwise, the agent must keep and make available to the principal an account of all property and funds received and paid out on the principal's behalf. This includes gifts from third parties in connection with the agency.

Three requirements must be met for a creditor to have an enforceable security interest:

Unless the creditor has possession of the collateral, there must be a written or authenticated security agreement that clearly describes the collateral subject to the security interest and is signed or authenticated by the debtor. The secured party must give the debtor something of value. The debtor must have rights in the collateral.

The Bankruptcy Code exempts the following property:

Up to $22,975 in equity in the debtor's residence and burial plot (the homestead exemption). Interest in a motor vehicle up to $3,675. Interest, up to $550 for a particular item, in household goods and furnishings, wearing apparel, appliances, books, animals, crops, and musical instruments (the aggregate total of all items is limited, however, to $12,250). Interest in jewelry up to $1,550. Interest in any other property up to $1,225, plus any unused part of the $22,975 homestead exemption up to $11,500. Interest in any tools of the debtor's trade up to $2,300. A life insurance contract owned by the debtor (other than a credit life insurance contract). Certain interests in accrued dividends and interest under, or loan value of, life insurance contracts owned by the debtor, not to exceed $12,250. Professionally prescribed health aids. The right to receive Social Security and certain welfare benefits, alimony and support, certain retirement funds and pensions, and education savings accounts held for specific periods of time. The right to receive certain personal-injury and other awards up to $22,975.

Puffery

Vague generalities and obvious exaggerations are permissible in advertising

Unauthorized signatures arise in two situations:

When a person forges another person's name on a negotiable instrument. When an agent who lacks the authority signs an instrument on behalf of a principal.

Apparent Implied Authority

When a principal has placed an agent in a position of apparent authority—making it possible for the agent to defraud a third party—the principal may also be liable for the agent's fraudulent acts. For instance, partners in a partnership generally have the apparent implied authority to act as agents of the firm, as discussed in Chapter 2. Thus, if one of the partners commits a tort or a crime, the partnership itself—and often the other partners personally—can be held liable for the loss.

Tying Arrangements

When a seller conditions the sale of a product (the tying product) on the buyer's agreement to purchase another product (the tied product) produced or distributed by the same seller

Risk of Loss

When risk of loss passes from a seller or lessor to a buyer or lessee is generally determined by the contract between the parties.

War.

When the principal's country and the agent's country are at war with each other, the agency is terminated. In this situation, the agency is automatically suspended or terminated because there is no way to enforce the legal rights and obligations of the parties.

How is risk of loss affected when the seller breaches? When the buyer breaches?

When the seller breaches the contract the risk of loss is not passed to the buyer and if the buyer accepts the goods and later discovers a defect acceptance can be revoked and the risk of loss is passed back to the seller. If the buyer or lessee breaches a contract the risk of loss is immediately shifts to the buyer or lessee with these limitations, the goods must have already identified the contract goods, the buyer or lessee bears the risk for only a commercially reasonable time and the buyer or lessee is liable only to the extent of any deficiency in the seller's or lessor's insurance coverage.

Impossibility.

When the specific subject matter of an agency is destroyed or lost, the agency terminates.

Under what circumstances can there be NO retraction of anticipatory repudiation?

When, since the time of repudiation, the other party has materially changed position.

The Scope of Employment under the doctrine of respondeat superior

Whether the employee's act was authorized by the employer. The time, place, and purpose of the act. Whether the act was one commonly performed by employees on behalf of their employers. The extent to which the employer's interest was advanced by the act. The extent to which the private interests of the employee were involved. Whether the employer furnished the means or instrumentality (for example, a truck or a machine) by which an injury was inflicted. Whether the employer had reason to know that the employee would perform the act in question and whether the employee had done it before. Whether the act involved the commission of a serious crime.

Differentiate between perfection by attachment and by possession.

With perfection by possession the collateral (personal property), or the rights to the collateral, must have been transferred to the creditor. With perfection by attachment the creditor obtains perfection automatically when the security interest is created regardless of possession.

Define and describe "signature liability," including primary and secondary liability.

With signature liability a person who signs a negotiable instrument is potentially liable for payment of the amount stated on the instrument. Warranty liability does not require a signature and extends to both signers and nonsigners.

Describe the function and powers of the bankruptcy trustee.

Within ten days the trustee must file a statement indicating whether the case is presumed to be an abuse under the means test and must provide a copy of this statement to all creditors within five days. If abuse is suspected, then the trustee must either file a motion to dismiss the petition or a statement explaining why a motion would not be appropriate. The trustee has the power to require persons holding the debtor's property at the time the petition is filed to deliver the property to the trustee, the trustee has specific powers of avoidance that enable them to set aside a sale or other transfer of the debtor's property and take the property back for the debtor's estate, the trustee also has the voidable rights to obtain the return of the debtor's property due to fraud, duress, incapacity and mutual mistakes.

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 [UCC 2-401(2)].

Discharge by Cancellation or Surrender

Writing "Paid" across the face of an instrument. Intentionally tearing up an instrument. Crossing out a party's signature. Doing this will discharge that party's liability and the liability of subsequent indorsers who have already signed the instrument. Surrendering the instrument (such as a promissory note) to the party to be discharged.

To qualify as a firm offer, the offer must be:

Written (or electronically recorded, such as in an e-mail). Signed by the offeror.

If a warranty were created, would Oscar have to pay for the linguine in clam sauce?

Yes, Melnick needed to feed twenty people, and he did so (as long as the amount and price of the linguine in clam sauce was a reasonable substitute for the missing food on the party platter).

Does putting "party platter feeds twenty" on the platter create a warranty?

Yes, it is an affirmative statement about the quantity of the goods.

Digital Enterprises, Inc., a data analysis firm, wants to hire Ernesto, a noncitizen. A temporary work visa is most likely to be set aside for a noncitizen who is

a "person of extraordinary ability."

When a seller of consumer goods extends credit for the purchase to a person buying for household purposes,

a PMSI is created. PMSIs are automatically perfected and no financing statement filing is necessary, except in two special situations.

A check made out to "cash" and signed by the writer is

a bearer instrument

State laws may restrict

a business's discharge of chemicals into the air or water or regulate its disposal of toxic wastes.

The U.S. Patent and Trademark Office uses notice-and-comment rulemaking. The final rule in such a proceeding is sometimes referred to as

a legislative rule.

David is a pilot for Ethereal Airlines. The Federal Aviation Administration restricts David and other pilots from flight responsibilities after a certain age. This is most likely

a legitimate bona fide occupational qualification.

Cady files an employment discrimination suit against Durable Goods Wholesale Distribution Corporation under the Civil Rights Act of 1964. If Cady shows that Durable Goods acted with malice or reckless indifference, she may recover

a limited amount of compensatory and punitive damages.

Excavators & Haulers, Inc., is the major wholesale distributor of heavy equipment in the state of Georgia. Its closest competitor is Forklifts & Tractors Company, another Georgia firm. The two firms agree that Excavators will operate in southern Georgia and Forklifts will operate in northern Georgia. This is

a market division.

To prevent its competitors from obtaining sufficient supplies to make their products, Continental Steel, Inc., uses its market power to increase the prices of those supplies. This is

a. predatory pricing.

in 2008 Congress passed the Genetic Information Nondiscrimination Act (GINA). Under GINA, employers cannot make decisions

about hiring, firing, job placement, or promotion based on the results of genetic testing. GINA also prohibits group health plans and insurers from denying coverage or charging higher premiums based solely on a genetic predisposition to develop a disease in the future.

Legislative rules

administrative agency rule that carries the same weight as a congressionally enacted statute and affect substantive legal rights.

A floating lien is created by a security agreement that provides for a security interest in the proceeds of the sale of collateral as well as in:

after-acquired property and future advances.

The FCC is

an administrative agency.

A time draft is payable

at a definite future time.

Builders Exchange, Inc., issues an instrument in favor of Custom Construction Company. For the instrument to be negotiable, it must

be payable on demand or at a specific time.

The National Environmental Policy Act of 1969 requires that an environmental impact statement (EIS)

be prepared for every major federal action that significantly affects the quality of the environment.

Checks are demand instruments

because they are payable on demand.

the two different types of promissory notes that are used as credit devices.

collateral note installment note

prove a disparate impact

comparing the employer's workforce to the pool of qualified individuals available in the local labor market. The plaintiff must show that as a result of educational or other job requirements or hiring procedures, the percentage of nonwhites, women, or members of other protected classes in the employer's workforce does not reflect the percentage of that group in the pool of qualified applicants.

Section 5 of that act

condemns all forms of anticompetitive behavior that are not covered under other federal antitrust laws.

In a destination contract, the seller agrees to deliver

conforming goods to the buyer at a particular destination. The goods must be tendered at a reasonable hour and held at the buyer's disposal for a reasonable length of time. The seller must also give the buyer appropriate notice and any necessary documents to enable the buyer to obtain delivery from the carrier [UCC 2-503].

Tangible collateral for perfect a security interest

conmsumer goods, equipment, farm products, inventory, and accessions

environmental law,

consists of all laws and regulations designed to protect and preserve our environmental resources.

To a great extent, environmental law

consists of statutes passed by federal, state, or local governments and regulations issued by administrative agencies.

A certified public accountant (CPA) is engaged to perform an audit for a company. During the course of the audit, the CPA accepts explanations from management of financial data irregularities that seem to indicate fraud. The CPA issues a clean opinion on the company's financial statements. Investors extend additional funding to the company based on the financial statements issued by the CPA. A short time later, the company declares bankruptcy and closes. The investors suffer losses and file a motion to sue the CPA for gross negligence due to fraud. Which type of fraud did this CPA engage in?

constructive fraud

This type of security interest (floating lien.)

continues in the collateral or proceeds even if the collateral is sold, exchanged, or disposed of in some other way.

Exceptions to the Employment-at-Will Doctrine

contract theory, tort theory, and public policy.

Bertram, Chaka, and Dougal are co-sureties of Erica's debt to Finance Loan Company. Bertram pays Erica's entire debt. Bertram's right to seek proportionate payments from Chaka and Dougal is the right of

contribution.

The Fair Credit Reporting Act (FCRA protects consumers against inaccurate credit reporting and requires that lenders and other creditors report

correct, relevant, and up-to-date information. The act provides that consumer credit reporting agencies may issue credit reports to users only for specified purposes. Legitimate purposes include the extension of credit, the issuance of insurance policies, and in response to the consumer's request.

ECOA act also prohibits

credit discrimination on the basis of whether an individual receives certain forms of income, such as public-assistance benefits.

A lien may be defined as a(n):

creditor's claim on the property of a debtor.

Administrative agencies also issue interpretive rules, which simply

declare policy or explain agency's positions and do not affect legal rights or obligations.

A person taking an instrument for value can_____ the indorsement conditioning the right to receive payment. In other words, conditional instruments do not prevent further negotiation.

disregard

A statement in an instrument that only allows payment to be made from a designated fund:

does not render the note nonnegotiable

After it determines that an advertisement is deceptive or unfair, the Federal Trade Commission's first step is to:

draft a formal complaint

Section 11 of the Securities Act of 1933 imposes on accountants a duty of

due diligence

If the report were to be part of a registration statement filed with the SEC and Ray were to take Ms. Gladdis' word on whether or not Onyx had the assets in question, he would not be doing what requirement under Section 11 of the Securities Act of 1933?

due diligence.

The administrative law judge and the agency's investigative and prosecutorial staff are basically one integrated unit.

false

The EPA sets the maximum permissible levels of certain pollutants and the states _________ plans to achieve those standards.

formulate

A firm offer arises when a merchant-offeror

gives assurances in a signed writing that the offer will remain open. The merchant's firm offer is irrevocable without the necessity of considerationFootnote for the stated period or, if no definite period is stated, a reasonable period (neither to exceed three months) [UCC 2-205,

Global Talk Corporation sells phones and other mobile devices. Under most circumstances, Global Talk will be presumed to have warranted that its title to the goods is

good and valid.

Commercial fund transfers are

governed by Article 4A of the UCC.

Lisa writes a check on her account at Metro Bank to Niklas to pay a debt. Niklas negotiates the check by indorsement to O'Leary, who presents it for payment to Prime Bank. Refer to Fact Pattern 14-1A. If Prime Bank dishonors the check, O'Leary can obtain payment from Niklas

if O'Leary timely notifies Niklas.

The chain of production normally

includes the purchase of inventory, basic manufacturing, distribution to wholesalers, and eventual sale of a product at the retail level. For some products, these distinct phases are carried on by different firms. In other instances, a single firm carries out two or more of the separate functional phases. Such enterprises are said to be vertically integrated firms.

Sunrich Company can process solar energy into an inexpensive fuel for internal combustion engines. As an innovator in its market, Sunrich currently has the power to affect the price of its product. This is

market power.

Avis is an officer of Budget Building Materials Corporation. With respect to binding Budget to contracts, Avis's authority

may be actual or apparent.

In secured transactions, attachment:

means that the creditor has met all of the requirements to obtain an enforceable security interest in the collateral

The phrase perfected on attachment

means that these security interests are automatically perfected at the time of their creation.

Gala and Hoyt are employees of IT Business Solutions, Inc. Under the Equal Pay Act, IT Business Solutions can legitimately pay different wages on the basis of

merit

A buyer must be made aware of any warranty disclaimer or ________ at the time the contract is formed.

modifications

During the rulemaking process, the U.S. Citizenship and Immigration Service conducts investigations to obtain information. After the final rule is issued, the agency conducts investigations to

monitor compliance with the rules.

The Equal Employment Opportunity Commission (EEOC)

monitors compliance with Title VII.

Two distinct types of behavior are subject to sanction under Section 2 OF THE SHERMAN ANTI TRUST

monopolization and attempts to monopolize.

The UCC sets out detailed rules for determining when the debtor's name as it appears on a financing statement is sufficient. These rules do NOT apply to:

mortagages

With a mortgage, the creditor is the

mortgagee

Donovan repays his debt, incurred to buy consumer goods, to EZ Retail Credit and immediately files a written request for a termination statement. EZ

must comply within twenty days of receipt of the letter.

The second requirement for HDC status is that the holder

must take the instrument in good faith [UCC 3-302(a)(2)(ii)]. This means that the holder must have acted honestly in the process of acquiring the instrument. UCC 3-103(a)(4) defines good faith as "honesty in fact and the observance of reasonable commercial standards of fair dealing" [UCC 3-103(a)(4)]. The good faith requirement applies only to the holder.

The company's policy would probably be overly broad since it did not specifically mention activity protected under Section 7 of the NLRA, a

nd the Facebook post therefore would probably be considered to be an attempt at concerted activity by the NLRB.

Dom's Grill, Inc., borrows $10,000 to finance a new range and the payments will be made monthly over a two-year period. The bank:

need not make any special disclosures. because it's a company

O'Shea issues a check drawn on Prime Bank to Quality Equipment Supply to pay for a backhoe. Later, O'Shea discovers a defect in the backhoe and orders the bank to stop payment on the check. O'Shea does not renew the order, and the bank clears the check eight months later. The bank

need not recredit O'Shea's account

Delany makes out an instrument payable to Captain Terrible. This instrument is

negotiable as a bearer instrument

Jacob signs a promissory note payable to Kendyl "with interest" on which he conspicuously notes that it is "nonnegotiable." This instrument is

nonnegotiable, because it includes the notation "nonnegotiable."

Camille signs an instrument in favor of Donald that states it is "subject to a certain agreement between Camille and Enzo." This instrument is

nonnegotiable, because it is made subject to a separate agreement.

Ryan owes $5,000 to State University. In the sand on the side of Treetop Hill, he executes an instrument for that amount that otherwise meets the requirements for negotiability. This instrument is likely

nonnegotiable, because sand is not sufficiently permanent.

Article 9 does

not cover creditor tools such as liens and mortgages on real property

When the collateral is

not in the possession of the secured party, the security agreement must be either written or authenticated, and it must describe the collateral

Copper Piping Company's liabilities exceed its assets, but the firm's employees falsify its books to reflect a positive net worth. Copper Piping hires Dart & Dash, an accounting firm, to prepare a balance sheet, which is certified to show a net worth. Equity Bank relies on the balance sheet to make a loan to Copper Piping. When the firm defaults, Equity Bank files a suit against Dart & Dash. Under the Ultramares rule, the accounting firm is most likely

not liable because Dart & Dash and Equity Bank were not in privity

Kirk receives an unsolicited credit card in the mail and tosses it on his desk. Without Kirk's permission, his roommate Leif uses the card to buy a new laptop for $1,800. Kirk is

not liable for any amount.

Each bank in the collection chain must pass the check on before midnighT

of the next banking day following its receipt A "banking day" is any part of a day on which the bank is open to carry on substantially all of its banking functions.

Primary liability is unconditional. A person who is primarily liable

on a negotiable instrument is absolutely required to pay the instrument—unless, of course, he or she has a valid defense to payment. Liability is immediate when the instrument is signed or issued. No action by the holder of the instrument is required. Only makers and acceptors of instruments are primarily liable

The Due Diligence Standard. Section 11 imposes a duty

on accountants to use due diligence in preparing financial statements included in the filed registration statements. After the purchaser has proved a loss on the security, the accountant has the burden of showing that he or she exercised due diligence in preparing the financial statements. To prove due diligence, an accountant must demonstrate that she or he followed generally accepted standards and did not commit negligence or fraud.

An opportunity for inspection is a condition_____ to the right of the seller to enforce payment.

precedent

To prevent its competitors from obtaining sufficient supplies to make their products, Continental Steel, Inc., uses its market power to increase the prices of those supplies. This is

predatory bidding.

presentment occurs when a person

presents an instrument either to the party liable on the instrument for payment or to a drawee for acceptance.

Section 2 of the Clayton Act prohibits

price discrimination, which occurs when a seller charges different prices to competing buyers for identical goods or services.

To drive its competitors out of a certain geographic segment of its market, Superior HVAC, Inc., sets the prices of its products below cost for the buyers in that area. This is

price discrimination.

the Electronic Communications Privacy Act

prohibits employers from intercepting an employee's personal electronic communications unless they are made on devices and systems furnished by the employer.

the Employee Polygraph Protection Act generally

prohibits employers from requiring employees or job applicants to take lie-detector tests or suggesting or requesting that they do so. The act also restricts employers' ability to use or ask about the results of any lie-detector test or to take any negative employment action based on the results.

Title VII of the Civil Rights Act of 1964

prohibits employment discrimination on the basis of race, color, religion, national origin, and gender.

-The Electronic Communications Privacy Act

prohibits private employers from reading personal communications unless they are made on company devices.

Acceptance is the drawee's written

promise to pay the draft when it comes due. Usually, an instrument is accepted by writing the word accepted across its face, followed by the date of acceptance and the signature of the drawee.

Once an instrument has been dishonored,

proper notice must be given to secondary parties (drawers and indorsers) for them to be held liable.

Some states have passed consumer_____ laws forbidding "as is" sales.

protection

If two warranties on a good are inconsistent,

samples take precedence over inconsistent general descriptions

Lisa writes a check on her account at Metro Bank to Niklas to pay a debt. Niklas negotiates the check by indorsement to O'Leary, who presents it for payment to Prime Bank. Refer to Fact Pattern 14-1A. Niklas is

secondarily liable.

Whenever payment of debt is guaranteed by personal property owned by the debtor, the transaction is known as a(n)

secured transaction

A written or electronic stop-payment order is effective for .

six months, at which time it must be renewed in writing

The Nutrition Labeling and Education Act requires

standard nutrition facts (including the amount and type of fat that the food contains) to be listed on food labels and regulates the use of such terms as fresh and low fat.

The most important federal legislation regulating food and drugs is the Federal Food, Drug, and Cosmetic Act (FDCA).

the act protects consumers against adulterated (contaminated) and misbranded foods and drugs.

Brenda is an attorney whose clients include Capital Finance Company. If Brenda is negligent in her work for Capital, under the Restatement (Third) of Torts, Brenda may be liable to Capital and

third parties who are foreseen users of the work.

Normally, the guaranty contract terms determine the extent and time of the guarantor's liability when the principal debtor defaults.

true

The Securities Exchange Act of 1934 relieves an accountant from liability if the accountant acted in "good faith."

true

The term fixed amount means the same thing as a sum certain and is a requirement for negotiability.

true

Bert's Bagels & Nosh, Inc., and other bakeries refer to a "baker's dozen" as consisting of a collection of thirteen baked goods. This is an example of

usage of trade

An indorsement is a signature

with or without additional words or statements. It is most often written on the back of the instrument itself. If there is no room on the instrument, the indorsement can be written on a separate piece of paper (called an allonge) that is firmly affixed to the instrument, such as with staples. A paper firmly attached to a negotiable instrument is part of the instrument [UCC 3-204(a)].

Chapter 13 of the Bankruptcy Code provides for "Adjustment of Debts of an Individual with Regular Income." Individuals (not partnerships or corporations)

with regular income who owe fixed (liquidated) unsecured debts of less than $383,175 or fixed secured debts of less than $1,149,525 may take advantage of bankruptcy repayment plans.

Unless an amendment to the financing statement is filed

within this four-month period, collateral acquired by the debtor after the four-month period is unperfected

Deferred Posting after Cutoff Hour.

"a bank may fix an afternoon hour of 2:00 p.m. or later as a cutoff hour for the handling of money and items and the making of entries on its books." Any checks received after that hour "may be treated as being received at the opening of the next banking day." Thus, if a bank's "cutoff hour" is 3:00 p.m., a check received by a payor bank at 4:00 p.m. on Monday will be deferred for posting until Tuesday. In this situation, the payor bank's deadline will be midnight Wednesday.

An order instrument is an instrument that is payable

"to the order of an identified person" or "to an identified person or order" [UCC 3-109(b)].

Theo signs a check payable to the order of Urban Bank, filling in the blanks for the amount with the figures "$100" and "One thousand and 00/100 dollars." This check is payable in the amount of

$1,000.

On Monday, Elin deposits in her account at Fiscal Bank a local check for $500. After 5:00 P.M. on Friday, from these funds, Elin can withdraw no more than

$500.

The Telephone Consumer Protection Act gives consumers a right to sue for either ______ each violation of the act or for actual monetary losses.

$500.00

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.

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.

The surety cannot assert the statute of limitations as a defense.

(In contrast, the principal debtor can claim the statute of limitations as a defense to payment.)

C.I.F. or C.&F.

(cost, insurance, and freight or just cost and freight)—Requires, among other things, that the seller "put the goods in possession of a carrier" before risk passes to the buyer

force majeure clause

(pronounced mah-zhure)A provision in a contract stipulating that certain unforeseen events—such as war, political upheavals, acts of God, or other events—will excuse a party from liability for nonperformance of contractual obligations.

Replevin

(pronounced rih-pleh-vin) An action to recover specific goods in the hands of a party who is wrongfully withholding them from the other party.

unconscionable contract

(pronounced un-kon-shun-uh-bul) 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.

When an agency creates a new rule, the first step is to

- administrative agency first publish a notice of the proposed rulemaking proceeding in the Federal Register. - -After the notice is given, the agency must allow time for interested parties to comment

The FTC has issued guidelines to help online businesses comply with existing laws prohibiting deceptive advertising These guidelines include three basic requirements:

-All ads—both online and offline—must be truthful and not misleading. -The claims made in an ad must be substantiated—that is, advertisers must have evidence to back up their claims. -Ads cannot be unfair, which the FTC defines as "likely to cause substantial consumer injury that consumers could not reasonably avoid and that is not outweighed by the benefit to consumers or competition."

What is the potential liability of accountants under Securities laws?

-An accountant can be held civilly liable for violations of sections 11, 12 (2) the penalties include fines up to 10,000, imprisonment up to 5 years or both. The accountant can also be held civilly liable under sections 18, 10(b) and SEC rule 10(b)-5. -An accountant can be help criminally liable for willful violations of the Securities Act of 1933 and 1934 if they knowingly certify false reports, falsify, alter or destroy books of account and obtain property or credit through the use of false financial statements. Penalties include fines of up to 10,000 and/or imprisonment of up to five years for the 1933 Act and imprisonment of up to 10 years and a fine of 100,000 for the 1934 Act.

Credit-Card Rules

-One provision limits the liability of a cardholder to $50 per card for unauthorized charges made before the creditor is notified that the card has been lost. -If a consumer receives an unsolicited credit card in the mail that is later stolen, the company that issued the card cannot charge the consumer for any unauthorized charges. -Another provision requires credit-card companies to disclose the balance computation method that is used to determine the outstanding balance and to state when finance charges begin to accrue. -Other provisions set forth procedures for resolving billing disputes with the credit-card company

Describe the different types of sexual harassment (by employers, coworkers, same gender, online, etc.)

-Sexual harassment from employers include the Quid pro quo or sexual favors for job related benefits such as promotions, salary increases, etc. -There is also Hostile-environment sexual harassment where the employer is complacent about known offensive behavior. Employers may also be held liable for a supervisor's sexual harassment behavior if there was a tangible employment action (significant change in employment status or benefits). -When sexual harassment occurs between members of the same gender it is called same-gender harassment and sexual orientation harassment occurs when individuals are harassed based on their gender identity or expression. -If an individual is consistently exposed to offensive material in emails, texts or other social media or on a computer screen it can be considered online harassment and an employer may be liable if they do not take prompt action to remedy the situation.

Describe the types of employee privacy acts.

-The Electronic Communications Privacy Act -The Employee Polygraph Protection Act -Public employers -The Genetic Information Nondiscrimination Act

Describe the Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994. (TCFAPA)

-The TCFAPA directed the FTC to establish rules governing telemarketing and to bring actions against fraudulent telemarketers. -The FTC enacted the Telemarketing Sales Rule (TSR) which requires a telemarketer to identify the seller's name, describe the product being sold and disclose all material facts related to the sale. -The TSR makes it illegal for telemarketers to misrepresent information or facts about their goods or services. -Also a telemarketer must remove a consumer's name form its list of potential contacts at the customer's request and must refrain from calling a consumer who is listed on the national Do Not Call Registry.

Define the Superfund - CERCLA.

-The purpose of the CERCLA is to regulate the clean-up of disposal sites in which hazardous waste is leaking into the environment. -The four primary elements are information-gathering and analysis system, authorization for the EPA to respond to hazardous substance emergencies and arrange for clean-up if the responsible party fails to, the creation of HSRTF (Superfund) to pay for the clean-up of hazardous sites, and it allows the government to recover the cost of clean-up from responsible parties.-

Ocean Dumping Act (1972)

-To prohibit the dumping of radiological, chemical, and biological warfare agents and high-level radioactive waste into the ocean. -The act also established a permit program for transporting and dumping other materials, and designated certain areas as marine sanctuaries. -Each violation of any provision or permit requirement in the Ocean Dumping Act may result in a civil penalty of up to $50,000.

Safe Drinking Water Act (1974)

-To regulate pollutants in public drinking water systems. -requires each supplier of drinking water to send every household it supplies with water an annual statement describing the source of its water. -The statement must also disclose the level of any contaminants contained in the water, and any possible health concerns associated with the contaminants.

A transferee or holder who takes an instrument in good faith

-can sue on the basis of breach of a warranty as soon as he or she has reason to know of the breach . -Notice of a claim for breach of warranty must be given to the warrantor within thirty days after the transferee or holder has reason to know of the breach and the identity of the warrantor - Failure to give notice relieves the warrantor from liability for any loss caused by a delay.

Describe the actions that can be taken by the FTC.

-draft a formal complaint and send it to the alleged offender who may or may not settle without further proceedings. -Conducts a hearing and proves that an advertisement is unfair they usually issue a cease-and-desist order requiring the company to stop the challenged advertising. -may also impose a sanction known as counter-advertising which requires the company to advertise a new advertisement to inform the public about the earlier misinformation. -Sometimes the FTC issues a multiple product order which requires a firm to sop false advertising for all of its products.

The Arbitrary and Capricious Standard Includes Factors, Such as Whether the Agency Has Done Any of the Following:

-failed to provide rational explanation for the decision -Changed its prior policy without justification -considered legally inappropriate facts -entiredly failed to consider a relevant act. rendered a decision plainly contrary to the evidence

The Telephone Consumer Protection Act (TCPA)Footnote

-prohibits telephone solicitation using an automatic telephone dialing system or a prerecorded voice. -In addition, most states have statutes regulating telephone solicitation. -The TCPA also makes it illegal to transmit ads via fax without first obtaining the recipient's permission.

The Energy Policy and Conservation Act of 1975

-requires automakers to attach an information label to every new car. -The label must include the Environmental Protection Agency's fuel economy estimate for the vehicle.

The Fair Packaging and Labeling Act requires that food product labels identify

-the product -he net quantity of the contents (and, if the number of servings is stated, the size of a serving), -the manufacturer, and -the packager or distributor. The act includes additional requirements concerning descriptions on packages, savings claims, components of nonfood products, and standards for the partial filling of packages.

Dilip has been asked to be part of the group that was responsible for a drafting uniform act relating to the sale and lease of goods, otherwise known as the

. National Conference of Commissioners on Uniform State Laws.

Under a shipment contract, title passes from the seller to the buyer:

. at the time and place of shipment, typically by a carrier.

arley gets a $300 check as a gift from Gena. Farley crudely increases the amount of the check to $3,000—the alteration is obvious—and transfers it to Home Entertainment store in exchange for a new HD TV. The store deposits the check in its bank account at Intrastate Bank. HDCs of this check include

. none of these parties.

The measure of damages under the Convention on Contracts for the International Sale of Goods (CISG) normally is:

. the difference between the contract price and the market price.

When the goods delivered are not as promised, the measure of damages equals: Remedies of the Buyer, Other Remedy Issues, and International Contracts

. the difference between the value of the goods as accepted and their value if they had been delivered as warranted.

holder in due course (HDC)

.An HDC must first be a holder of a negotiable instrument and must have taken the instrument for value, in good faith, and without notice that it is defective (such as when the instrument is overdue, dishonored, irregular, or incomplete).

Even when the bank knows of the death of its customer, for days after the date of death, it can pay or certify checks drawn on or before the date of death.

10

Generally, the states are immune under the Amendment from lawsuits brought by private individuals in federal court.

11TH

Only the debtor may file a plan within the first days after the date of order for relief.

120

Title VII applies to employers with or more employees.

15

Hyacinth signs a check payable to Ishmael Accountants, P.C., and gives it to Ishmael, leaving the amount blank but authorizing Ishmael to fill in the check for $10,000. Ishmael fills in $15,000 and negotiates the check to Green Valley Bank, to whom Ishmael owes $15,000. Green Valley Bank, an HDC, can enforce the check for

15,000

The United Nations Convention on Contracts for the International Sale of Goods (CISG) was created in

1980

For the Age Discrimination and Employment Act to apply, the employer must have or more employees.

20

At what point in time is the bank relieved of liability if the customer fails to report the forged indorsements?

3 years

Regulation Z applies to any transaction involving an installment sales contract that calls for payment to be made in more than __ installments

4

The automatic stay on secured property terminates ______ after the creditors' meeting.

45 DAYS

If a continuation statement is filed within six months prior to the expiration date of a financing statement, the effectiveness of the original statement is continued for another .

5 years

The FMLA affects employers who have ____ or more employees.

50

Marlene loses her Neighborly Bank access card. She realizes her loss the next day but waits a week to call the bank. Meanwhile, Odell finds and uses Marlene's card to withdraw $3,000 from Marlene's account. Refer to Fact Pattern 28-1A. Marlene is responsible for

500

Article of the Uniform Commercial Code creates various rights and remedies for creditors.

9

The article of the UCC that governs secured transactions is

9

To have a recoverable preferential payment, an insolvent debtor must have transferred property or a preexisting debt with before the filing of the bankruptcy petition.

90 DAYS

An independent regulatory agency is usually run by

A COMMISSION OR BOARD

How is a Chapter 7 bankruptcy proceeding commenced?

A Chapter 7 bankruptcy can be commenced by the filing of either a voluntary or an involuntary petition in bankruptcy.

Hady's Health Services is advertising hair growth miracle cures for baldness and numerous related miracle cures. The FTC has received numerous complaints and will decide to issue a __________ , requiring Hady's to stop false advertising for all of its products.

A MULITPLE PRODUCT ORDER

Automatic Perfection.

A PMSI in consumer goods is perfected automatically at the time of a credit sale—that is, at the time the PMSI is created. The seller in this situation does not need to do anything more to perfect her or his interest.

Ed offers to sell to Nicole an antique chest of drawers worth more than $2,000. Nicole agrees to buy the chest and signs a contract for the purpose, but the price of the chest is left out of the contract. Ed and Nicole have:

A VALID CONTRACT AS LONG AS THE COURT CAN DETERMINE A REASONABLE PRICE

cover

A buyer or lessee's purchase on the open market of goods to substitute for those promised but never delivered by the seller. 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

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.

authorization card

A card signed by an employee that gives a union permission to act on his or her behalf in negotiations with management. Unions typically use authorization cards as evidence of employee support during union organization.

prima facie case

A case in which the plaintiff has produced sufficient evidence of his or her conclusion that the case can go to a jury; a case in which the evidence compels the plaintiff's conclusion if the defendant produces no evidence to disprove it.

Differentiate between Cashier's checks, Traveler's checks, and certified checks.

A cashier's check is a check drawn by a bank on itself and the bank assumes responsibility for paying the check. Traveler's checks are designed to be a safe substitute for cash when a person is traveling and the issuing institution is directly obligated to accept and pay them according to the check's terms. A certified check has already been accepted by the bank on which it is drawn and promises to pay the amount of the check when presented.

cashier's check

A check drawn by a bank on itself. and is a negotiable instrument on issue

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.

overdraft

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

stale check

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

protected class

A class of persons with identifiable characteristics who historically have been victimized by discriminatory treatment for certain purposes. Depending on the context, these characteristics include age, color, gender, national origin, race, and religion.

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.

extension clause

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

mirror image rule

A common law rule that requires, for a valid contractual agreement, that the terms of the offeree's acceptance adhere exactly to the terms of the offeror's offer.

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.

Amendments to Credit-Card Rules Amendments to the TILA's credit-card rules that became effective in 2010 added the following protections:

A company may not retroactively increase the interest rates on existing card balances unless the account is sixty days delinquent. A company must provide forty-five days' advance notice to consumers before changing its credit-card terms. Monthly bills must be sent to cardholders twenty-one days before the due date. The interest rate charged on a customer's credit-card balance may not be increased except in specific situations, such as when a promotional rate ends. A company may not charge over-limit fees except in specified situations. When the customer has balances at different interest rates, payments in excess of the minimum amount due must be applied first to the balance with the highest rate (for instance, a higher interest rate is commonly charged for cash advances). A company may not compute finance charges based on the previous billing cycle (a practice known as double-cycle billing, which hurts consumers because they are charged interest for the previous cycle even though they have paid the bill in full).

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.

unilateral contract

A contract that results when an offer can only be accepted by the offeree's performance.

Exclusive-Dealing Contracts

A contract under which a seller forbids a buyer to purchase products from the seller's competitors A seller is prohibited from making an exclusive-dealing contract under Section 3 if the effect of the contract is "to substantially lessen competition or tend to create a monopoly."

order for relief

A court's grant of assistance to a complainant. In bankruptcy proceedings, the order relieves the debtor of the immediate obligation to pay the debts listed in the bankruptcy petition.

writ of execution

A court's order, after a judgment has been entered against the debtor, directing the sheriff to seize (levy) and sell any of the debtor's nonexempt real or personal property. The proceeds of the sale are used to pay off the judgment, accrued interest, and costs of the sale; any surplus is paid to the debtor.

writ of attachment

A court's order, prior to a trial to collect a debt, directing the sheriff or other officer to seize nonexempt property of the debtor; if the creditor prevails at trial, the seized property can be sold to satisfy the judgment.

Creditor-Debtor Relationship

A creditor-debtor relationship is created between a customer and a bank when, for example, the customer makes cash deposits into a checking account. When a customer makes a deposit, the customer becomes a creditor, and the bank a debtor, for the amount deposited.

Define and describe Creditor's Composition agreements.

A creditors' composition agreement is an agreement formed between a debtor and their creditors in which the creditors agree to accept a lesser sum than that owed by the debtor in full satisfaction of the debt.

Define and describe a DIP (Debtor in Possession).

A debtor in possession is a debtor that is allowed to continue in possession of the estate in property and to continue business operations. The DIP's role is similar to the role of a trustee in a liquidation.

business necessity

A defense to allegations of employment discrimination in which the employer demonstrates that an employment practice that discriminates against members of a protected class is related to job performance.

What is a "disability?"

A disability according to the ADA is any person with a physical or mental impairment that substantially limits one or more of the major life activities, has a record of having such an impairment or being regarded as having such an impairment.

When will discharge be revoked?

A discharge may be revoked within one year if it is discovered that the debtor acted fraudulently or dishonestly during the bankruptcy proceeding.

Disclosed or Partially Disclosed Principal

A disclosed or partially disclosed principal is liable to a third party for a contract made by the agent. If the principal is disclosed, the agent has no contractual liability for the nonperformance of the principal or the third party. If the principal is partially disclosed, in most states the agent is also treated as a party to the contract, and the third party can hold the agent liable for contractual nonperformance.

Differentiate between a disclosed, partially disclosed, and undisclosed principal.

A disclosed principal is a principal whose identity is known to the third party. A partially disclosed principal is a principal whose identity is not known by the third party, but the third party knows that the agent is or may be acting for a principal. An undisclosed principal is a principal whose identity is unknown by the third party and the third party has no knowledge that the agent is acting in an agency capacity.

Define the doctrine of "respondeat superior."

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.

respondeat superior (pronounced ree-spahn-dee-uht soo-peer-ee-your) 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.

financing statement

A document prepared by a secured creditor and filed with the appropriate government official to give notice to the public that the creditor claims an interest in collateral belonging to the debtor named in the statement. The financing statement must contain the names and addresses of both the debtor and the creditor, and describe the collateral by type or item.

What is a Uniform Commercial Code-1 (UCC-1) financing statement?

A document that provides a creditor with ownership rights to collateral in the event of a debtor's default

Who is eligible for Chapter 12? Under what conditions?

A family farmer whose gross income is at least 50 percent farm dependent and whose debts are at least 50 percent farm related. The total debt for a family farmer must not exceed $4,031,575. A family fisherman whose gross income is at least 50 percent dependent on commercial fishing operations and whose debts are at least 80 percent related to commercial fishing. The total debt for a family fisherman must not exceed $1,868,200. In either case a partnership or close corporation at least 50 percent owned by the farm or fisher family can also qualify.

Finance Leases

A finance lease involves a lessor, a lessee, and a supplier. The lessor buys or leases goods from the supplier and leases or subleases them to the lessee [UCC 2A-103(1)(g)]. Typically, in a finance lease, the lessor is simply financing the transaction

Effective Time Duration of Perfection

A financing statement is effective for five years from the date of filing [UCC 9-515]. If a continuation statement is filed within six months prior to the expiration date, the effectiveness of the original statement is continued for another five years. The continuation period starts with the expiration date of the first five-year period [UCC 9-515(d), (e)]. The effectiveness of the statement can be continued in the same manner indefinitely.

Define and describe a firm offer.

A firm offer is when a merchant-offeror gives assurances in a signed writing that the offer will remain open. A firm offer is irrevocable without the necessity of consideration for the stated period or a reasonable period if no definite period is stated, neither to exceed 3 months. To qualify for a firm offer, the offer must be written and signed by the offeror.

Disparate-impact discrimination

A form of employment discrimination that results from certain employer practices or procedures that, although not discriminatory on their face, have a discriminatory effect.

disparate-treatment discrimination

A form of employment discrimination that results when an employer intentionally discriminates against employees who are members of protected classes.

William wants to obtain information from the Securities and Exchange Commission regarding the number of active cases related to insider trading. To request this information, he would need to fill which of the following with the SEC:

A freedom of information request

Define and describe garnishment, including any possible limits on the amount.

A garnishment is a legal process used by a creditor to collect a debt by seizing property of the debtor that is being held by a third party. Garnishments are usually property such as wages or funds in a bank account. The debtor's employer or bank may be ordered to turn over funds to pay the debt. The FCCPA provides that a debtor can retain either 75 percent of their disposable earnings per week or an amount equivalent to thirty hours of work paid at federal minimum wage rate, whichever is greater. Under federal law an employer can not dismiss an employee because their wages are being garnished.

What is a Guaranty?

A guaranty is an arrangement where the guarantor is secondarily liable for the debtor's obligation. The guarantor can be required to pay the obligation on after the principal debtor defaults and usually only after the creditor has made an attempt to collect from the debtor.

What are the three requirements for HDC?

A holder in due course must have taken an instrument for value, in good faith, and without notice that it is defective.

Differentiate between a holder and a holder in due course (HDC).

A holder obtains only those rights that the transferor had in the instrument however, a holder in due course receives a higher level of protection from defenses and claims asserted by other parties.

What is a homestead exemption?

A homestead exemption is a law permitting a debtor to retain the family home, either in its entirety or up to a specified dollar amount, free from the claims of unsecured creditors or trustees in bankruptcy. The purpose of the homestead exemption is to ensure that the debtor will retain some for

Differentiate between "horizontal" and "vertical" restraints.

A horizontal restraint is anything that restrains competition between rival firms competing in the same market, such as price-fixing agreements and group boycotts. A vertical restraint is any restraint on trade created by agreements between firms at different levels in the manufacturing and distribution process, such as territorial or customer restrictions and resale price maintenance agreements.

deficiency judgment

A judgment against a debtor for the amount of a debt remaining unpaid after collateral has been repossessed and sold.

Define a lease agreement and consumer leases.

A lease agreement is an agreement in which the lessor agrees to transfer the right to the possession and use of property to the lessee in exchange for rental payments. A consumer lease involves a lessor who regularly engages in the business of leasing or selling, a lessee who leases the goods (primarily for personal use), and total lease payments that are less than $25,000.

secured party

A lender, seller, or any other person in whose favor there is a security interest, including a person to whom accounts or chattel paper has been sold.

Consumer Leases A consumer lease involves three elements:

A lessor who regularly engages in the business of leasing or selling. A lessee (except an organization) who leases the goods "primarily for a personal, family, or household purpose." Total lease payments that are less than $25,000 [UCC 2A-103(1)(e)].

Chapter 7 Schedules The voluntary petition must contain the following schedules:

A list of both secured and unsecured creditors, their addresses, and the amount of debt owed to each. A statement of the financial affairs of the debtor. A list of all property owned by the debtor, including property that the debtor claims is exempt. A list of current income and expenses. A certificate of credit counseling (as discussed previously). Proof of payments received from employers within sixty days prior to the filing of the petition. A statement of the amount of monthly income, itemized to show how the amount is calculated. A copy of the debtor's federal income tax return for the most recent year ending immediately before the filing of the petition.

Defined the term "lockout."

A lockout occurs when the employer shuts down to prevent employees from working. They are usually used when the employer believes that a strike is imminent.

Differentiate between an encumbrance, mechanic's lien, artisan's lien, and judicial lien.

A mechanic's lien is placed on real property if a person who has contracted for services fails to make payment. A creditor can recover payment through an artisan's lien if a debtor fails to pay for labor or materials for the repair or improvement of personal property. If a creditor wins a legal action against a debtor the creditor can request a judicial lien be placed on nonexempt property to ensure that the judgement will be collected.

Section 2-104 sets forth three ways in which merchant status can arise:

A merchant is a person who deals in goods of the kind involved in the sales contract. Thus, a retailer, a wholesaler, or a manufacturer is a merchant of the goods sold in his or her business. A merchant for one type of goods is not necessarily a merchant for another type. For instance, a sporting goods retailer is a merchant when selling tennis rackets but not when selling a used computer. A merchant is a person who, by occupation, holds himself or herself out as having knowledge and skill unique to the practices or goods involved in the transaction. This broad definition may include banks or universities as merchants. A person who employs a merchant as a broker, agent, or other intermediary has the status of merchant in that transaction. Hence, if an art collector hires a broker to purchase or sell art for her, the collector is considered a merchant in the transaction.

What is a mortgage?

A mortgage is a written instrument that fives the creditor an interest in, or lien on, the debtor's real property as security for payment of a debt.

What is a negotiable instrument?

A negotiable instrument is a signed writing that contains an unconditional promise or order to pay an exact sum of money, on demand or at an exact future time, to a specific person or order, or to bearer. It can function as a substitute for cash or as an extension of credit if it is easily transferable without danger of being uncollectible.

substitute check

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.

Federal Reserve System

A network of twelve central banks, located around the country and headed by the Federal Reserve Board of Governors. Most banks in the United States have Federal Reserve accounts.

What is the one requirement that is NOT necessary for a writing (or electronic record) to be sufficient to satisfy the UCC's statute of frauds?

A notary public's signature.

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.

bearer

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

junior lienholder

A person or business that holds a lien that is subordinate to one or more other liens on the same property.

indorsee

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

payee

A person to whom an instrument is made payable.

lessee

A person who acquires the right to the possession and use of another's goods in exchange for rental payments.

guarantor

A person who agrees to satisfy the debt of another (the debtor) only after the principal debtor defaults; a guarantor's liability is thus secondary.

bankruptcy trustee

A person who is either appointed by the U.S. Department of Justice or by creditors in bankruptcy cases. In all bankruptcies under Chapters 7, 12, or 13, a trustee is appointed by the U.S. Trustee, who is an officer of the Department of Justice. Chapter 11 bankruptcies allow the debtor to continue to manage the property as a "debtor in possession," but this person can be replaced for cause with a bankruptcy trustee.

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. ex A parent who cosigns a promissory note with her or his son or daughter, for instance, is an accommodation party, and the child (the maker) is the accommodated party.

indorser

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

Describe transfer warranties.

A person who transfers an instrument for consideration makes these five transfer warranties, the transferor is entitled to enforce the instrument, all signatures are authentic and authorized, the instrument has not been altered, the instrument is not subject to a defense or claim of any party that can be asserted against the transferor, and the transferor has no knowledge of any bankruptcy proceedings against the maker, the acceptor, or the drawer of the instrument.

lessor

A person who transfers the right to the possession and use of goods to another in exchange for rental payments.

Toxic Tort

A personal injury caused by exposure to a toxic substance, such as asbestos or hazardous waste. Victims can sue for medical expenses, lost wages, and pain and suffering.

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.

antecedent claim

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

Liability for Agent's Misrepresentation

A principal is exposed to tort liability whenever a third person sustains a loss due to the agent's misrepresentation. The principal's liability depends on whether the agent was actually or apparently authorized to make representations and whether the representations were made within the scope of the agency. The principal is always directly responsible for an agent's misrepresentation made within the scope of the agent's authority.

Describe when an agent or principal may be liable to a third party as it pertains to torts, crimes, and negligence.

A principal who acts through an agent may be liable for harm resulting from the principal's own negligence or recklessness or if the principal authorizes an agent to commit a tort. In the case of the principal instructing the agent to commit a tort the agent may be liable as a tortfeasor. The principal can be liable due to an agent's misrepresentation and for an agent's negligence. A principal may be liable for an agent's intentional torts if acting within the scope of employment.

Principal's Tortious Conduct

A principal who acts through an agent may be liable for harm resulting from the principal's own negligence or recklessness. Thus, a principal may be liable if he or she gives improper instructions, authorizes the use of improper materials or tools, or establishes improper rules that result in the agent's committing a tort.

disclosed principal

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

undisclosed principal

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 principal

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.

notice-and-comment rulemaking

A procedure in agency rulemaking that requires notice, opportunity for comment BY THE PUBLIC, and a published draft of the final rule.

forum-selection clause

A provision in a contract designating the court, jurisdiction, or tribunal that will decide any disputes arising under the contract.

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. To exercise the court's right under this provision, the court must demonstrate that the plan does not discriminate unfairly against any creditors and is fair and equitable.

Special versus Blank Qualified Indorsements

A qualified indorsement ("without recourse") can be accompanied by either a special indorsement or a blank indorsement. In either situation, the instrument still transfers title and can be further negotiated.

When must a reorganization plan be filed?

A reorganization plan must be filed by the debtor within the first 120 days after the date of the order of relief. This period may be extended, but not beyond eighteen months from the date of the order of relief.

Define the terms "sale" and "goods."

A sale is the passing of title from the seller to the buyer for a price. A good is a tangible item of property that is movable.

Explain the disposition procedures.

A secured party who does not choose to retain the collateral or who is required to sell it must dispose of it in a commercially reasonable manner. The secured party must notify the debtor or other concerned parties in writing in advance of the sale or disposition of the collateral. The sale can be public or private, however, the method, manner, time and place must be commercially reasonable.

Describe how a security interest can be perfected by "filing."

A security interest can be perfected by filing a financing statement with the office of the appropriate government official which gives public notice to third parties of the secured party's security interest. The statement must provide the names of the debtor, the secured party, and it must indicate the collateral covered.

How is a security interest perfected?

A security interest can be perfected by filing, by having the collateral in possession, or by perfection by attachment.

Describe how a security interest can be perfected without filing.

A security interest can be perfected by the collateral being transferred into the possession of the creditor or it can be perfected by attachment which means the security interest is automatically perfected at the time of creation.

Only statements of fact create express warranties.

A seller or lessor who makes a statement that merely relates to the value or worth of the goods, or states an opinion about or recommends the goods, does not create an express warranty [UCC 2-313(2), 2A-210(2)].

Regulation E (EFTA)

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.

Regulation Z

A set of rules promulgated by the Federal Reserve Board to implement the provisions of the Truth-in-Lending Act. credit provisions associated with installment sales contracts

negotiable instrument

A signed writing that contains an unconditional promise or order to pay an exact sum of money, on demand or at an exact future time, to a specific person or order, or to bearer.

tangible employment action

A significant change in employment status, such as firing or failing to promote an employee, reassigning the employee to a position with significantly different responsibilities, or effecting a significant change in employment benefits.

Which worker is eligible for unemployment compensation under the Federal Unemployment Tax Act?

A staff member who is involuntary terminated and actively seeking employment

mechanic's lien

A statutory lien on the real property of another, created to ensure payment for work performed and materials furnished in the repair or improvement of real property, such as a building.

What is Suretyship?

A suretyship is a promise made by a third person to be responsible for the debtor's obligation. It is an express contract between the surety and the creditor. The creditor can demand payment from the surety from the moment the debt is due without exhausting all legal remedies against the principal debtor before holding the surety responsible for the payment.

clearinghouse

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

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.

Constructive discharge

A termination of employment brought about by making an employee's working conditions so intolerable that the employee reasonably feels compelled to leave.

rule of reason

A test by which a court balances the positive effects (such as economic efficiency) of an agreement against its potentially anticompetitive effects. In antitrust litigation, many practices are analyzed under the rule of reason.

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.

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 personFootnote [UCC 2-312(3), 2A-211(2)].

electronic fund transfer (EFT)

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

sale on approval

A type of conditional sale in which the buyer may take the goods on a trial basis. The sale becomes absolute only when the buyer approves of (or is satisfied with) the goods being sold.

sale or return

A type of conditional sale in which title and possession pass from the seller to the buyer; however, the buyer retains the option to return the goods during a specified period even though the goods conform to the contract.

Differentiate between void and voidable title.

A void title legally does not exist and a later purchaser can not obtain a good title. With a voidable title a later good faith buyer may obtain a good title.

What schedules must be prepared for Chapter 7 bankruptcy?

A voluntary petition must contain these schedules, a list of both secured and unsecured creditors with addresses and the amount of debt owed to each, a statement of financial affairs of the debtor, a list of all property owned, including any property claimed as exempt, a list of current income and expenses, a certificate of credit counseling, proof of payments received from employers within sixty days prior to the filing of the petition, a statement of the amount of itemized monthly income, a copy of the debtor's most recent income tax return.

What is a warranty?

A warranty is an assurance or guarantee by the seller or lessor about the quality and features of the goods being sold or leased.

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.

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).

letters of credit

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

Marie-Claire buys a $3.5 million house in which she puts all of her assets. Six months later, she declares bankruptcy. How much can she claim for her homestead exemption?

ABOUT $160,000

Potentially, the most widespread form of discrimination is .

AGE

Delmonico buys a car from a used car dealer. The purchase order that he signs indicates that the car is sold "as is." The phrase disclaims

AN IMPLIED WARRANTY OF MERCHANTABILITY

Unlike remedies under the common law, remedies under the UCC .

ARE CUMULATIVE

The CISG is similar to of the UCC.

ARTICLE 2

the two ways in which a negotiable instrument can be transferred to others. __

ASSIGNMENT AND NEGOTIATION

Define and describe methods of acceptance, including the "mailbox" rule.

Acceptance of an offer to buy, sell, or lease goods may be made in any reasonable manner and by any reasonable means. Acceptance can be either by a prompt promise to ship or by the prompt or current shipment of conforming or nonconforming goods. Conforming goods meet the terms of the contract where nonconforming goods do not. If the goods are nonconforming it is both an acceptance and a breach of contract unless the seller notifies the buy within a reasonably time that the nonconforming shipment is offered only as an accommodation.

The Uniform Electronic Transactions Act (UETA) sets forth provisions relating to the principal's liability for the actions of e-agents.

According to Section 15 of the UETA, e-agents can enter into binding agreements on behalf of their principals—at least, in those states that have adopted the act. Thus, if consumers place an order over the Internet, and the company (principal) takes the order via an e-agent, the company cannot later claim that it did not receive the order.

Civil and criminal liability may be imposed on accountants under the following acts EXCEPT:

Accountant's Liability Procedures Act of 1999.

Differentiate between an agent's "actual" authority and "apparent" authority.

Actual authority either expressed or implied is from what the principal makes clear to the agent. Apparent authority is from what the principal caused a third party to believe.

Explain Affirmative Action, and its purpose.

Affirmative action programs give members of protected classes preferential treatment in hiring or promotions in an attempt to make up for past patterns of discriminations.

Describe the repayment plan for a chapter 13 bankruptcy proceeding.

After filing the petition, a trustee is appointed who will make the payments to the creditors according to the repayment plan. The repayment plan may provide either for payment of all obligations in full or for payment of a lesser amount. The debtor must begin making payments within thirty days after the plan has been filed.

Explain what a "Termination Statement" is.

After the debtor has fully paid the debt the secured party files a statement that the perfected security interest has been terminated.

Which type of agency relationship is formed by express consent or implied by conduct.

Agency by agreement

Agency by Operation of Law

Agency by operation of law may also occur in emergency situations. If an agent cannot contact the principal and failure to act would cause the principal substantial loss, the agent may take steps beyond the scope of her or his authority. This may occur in family relationships, such as when one spouse purchases certain basic necessaries and charges them to the other spouse's account.

Exceptions to the Perfect Tender Rule

Agreement of the Parties Cure Substitution of Carriers Installment contract Commercial Impracticability Destruction of Identified Goods Assurance and Cooperation

CONSUMER LAW

All statutes, agency rules, and common law judicial decisions that serve to protect the interests of consumers.

After the debtor has completed all payments, the court grants a discharge of all debts provided for by the repayment plan. Generally, all debts are dischargeable except the following:

Allowed claims not provided for by the plan. Certain long-term debts provided for by the plan. Certain tax claims and payments on retirement accounts. Claims for domestic-support obligations. Debts related to injury or property damage caused while driving under the influence of alcohol or drug

Judicial Remedies

Alternatively, a secured party can relinquish the security interest and use any judicial remedy available, such as obtaining a judgment on the underlying debt, followed by execution and levy

After-acquired propertyExample 21.9

Amato buys factory equipment from Bronson on credit, giving as security an interest in all of her equipment—both what she is buying and what she already owns. The security agreement with Bronson contains an after-acquired property clause. Six months later, Amato pays cash to another seller of factory equipment for additional equipment. Six months after that, Amato goes out of business before she has paid off her debt to Bronson. Bronson has a security interest in all of Amato's equipment, even the equipment bought from the other seller.

Describe an "E-Agent."

An E-Agent is a semiautonomous computer program that is capable of executing specific tasks.

Describe accommodation parties.

An accommodation party is someone who signs an instrument for the purpose of lending their name as credit to another party on the instrument (co-signer).

Statute of Limitations

An action for breach of contract under the UCC must be commenced within four years after the cause of action accrues [UCC 2-725(1)]. This means that a buyer or lessee must file the lawsuit within four years after the breach occurs.Footnote The parties can agree in their contract to reduce this period to not less than one year, but cannot extend it beyond four years [UCC 2-725(1), 2A-506(1)].

What is the purpose of Administrative law?

An administrative agency is a federal, state, or local government agency established to perform a specific function. The agency then creates the detailed rules and regulations necessary to carry out the duties and responsibilities

BP violated the Clean Air Act by discharging pollutants from one of its refineries and was unable to reach a settlement with the EPA regarding a violation of the law. The EPA plans to go forward with a trial on this matter which will be heard by

An administrative law judge

What is one characteristic of an express warranty?

An affirmation of fact from the seller of the quality and feature of a good

Differentiate between an agency by agreement, by ratification, by estoppel, and by operation of law.

An agency relationship by agreement is either expressed or implied agreement that the agent will act for the principal and that the principal agrees to have the agent act on their behalf. It can be either written, oral or implied by conduct. An agency relationship by ratification is when a person is not an agent makes a contract for the principal and the principal approves or affirms the contract by word or action. An agency relationship by estoppel occurs when the principal's actions have created the appearance that the third person acts as an agent of the principal. An agency relationship by operation of law is based on a social or legal duty or emergency situations when the agent is unable to contact the principal and failure to act would cause the principal substantial loss. terminate the agency. The main remedies available to the principle include constructive trust, avoidance and indemnification.

How is an agency relationship formed?

An agency relationship is formed in four ways, by agreement of the parties, by ratification, by estoppel and by operation of law.

Notification

An agent is required to notify the principal of all matters that come to her or his attention concerning the subject matter of the agency. This is the duty of notification, or the duty to inform.

reaffirmation agreement

An agreement between a debtor and a creditor in which the debtor reaffirms, or promises to pay, a debt dischargeable in bankruptcy. To be enforceable, the agreement must be made prior to the discharge of the debt by the bankruptcy court.

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.

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.

Differentiate between authorized and unauthorized signatures.

An authorized signature places liability with the principal except in some situations and an unauthorized signature will not bind the principal or the person whose signature was signed or forged.

What is an "Automatic Stay?" What are the exceptions?

An automatic stay is the suspension of virtually all litigation and other action by creditors against the debtor or the debtor's property and is effective the moment the debtor files a petition in bankruptcy.

Modern business practice allows several exceptions to the equal dignity rule:

An executive officer of a corporation normally can conduct ordinary business transactions without obtaining written authority from the corporation (see Chapters 4 and 5). When the agent acts in the presence of the principal, the rule does not apply. When the agent's act of signing is merely a formality, then the agent does not need written authority to sign.

Only unconditional promises or orders can be negotiable [UCC 3-104(a) ]. A promise or order is conditional (and not negotiable) if it states any of the following:

An express condition to payment. That the promise or order is subject to or governed by another writing (or record). That the rights or obligations with respect to the promise or order are stated in another writing or record.

Performance

An implied condition in every agency contract is the agent's agreement to use reasonable diligence and skill in performing the work. When an agent fails to perform his or her duties, liability for breach of contract may result.

Define and describe implied warranties.

An implied warranty is 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.

Define an "independent contractor."

An independent contractor is a person who contracts with another person to perform a service but who is not controlled by or subject to the other's right to control with respect to the contractors' physical conduct in the performance of the service.

Describe "Liability for Fraud."

An individual could be held liable for fraud if they misrepresent material facts, they intended to deceive, the innocent party justifiably relied on the misrepresentation and there must be actual injury to an innocent party. The fraud can be actual, where the misrepresentation was intentional and the client was injured, or constructive where the misrepresentation was so grossly negligent that it doesn't matter if it was intentional or not.

consumer-debtor

An individual whose debts are primarily consumer debts (debts for purchases made primarily for personal or household use).

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.

What as an "indorsement?"

An indorsement is a signature with or without additional words or statements.

Alternative or Joint Payees

An instrument payable to two or more persons in the alternative (for instance, "Pay to the order of Ying or Tuan") requires the indorsement of only one of the payees [UCC 3-110(d)]. If, however, an instrument is made payable to two or more persons jointly (such as, "Pay to the order of Bridgette and Tony Van Horn"), all of the payees' indorsements are necessary for negotiation.

How can creditors force a Chapter 7 bankruptcy?

An involuntary action requires that either the debtor has twelve or more creditors and three or more of these have unsecured claims totaling at least $15,325 and they must join in the petition, or if the debtor has fewer than twelve creditors, one or more creditors having a claim totaling $15,325 or more may file.

Define and describe an offer, including "open" terms.

An offer must be definite enough for the parties to ascertain its essential terms when it is accepted. The sales or lease contract will not fail for indefiniteness even if one or more terms are left open if both of the following are true. The parties intended to make a contract and there is a reasonably certain basis for the court to grant an appropriate remedy.

stop-payment order

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

Explain the concept of "anticipatory repudiation."

Anticipatory repudiation is an assertion or action by a party indicating that he or she will not perform and obligation that the party is contractually obligated to perform at a future time. This is considered a breach of contract and the non-breaching party can suspend performance and can either treat the repudiation as a final breach by pursing a remedy or wait and see if the repudiating party will decide to honor the contract despite the communicated intention to renege. The breaching party may retract the repudiation and have their rights under the contract reinstated unless the other party has canceled, materially changed position or has indicated that the repudiation is final.

Section 2 also prohibits attempted monopolization of a market, which requires proof of the following three elements:

Anticompetitive conduct. The specific intent to exclude competitors and garner monopoly power. A "dangerous" probability of success in achieving monopoly power. The probability cannot be dangerous unless the alleged offender possesses some degree of market power.Footnote

intermediary bank

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

Future Goods

Any goods that are not in existence at the time of contracting are known as future goods. If a sale or lease involves unborn animals to be born within twelve months after contracting, identification takes place when the animals are conceived. Any goods that are not in existence at the time of contracting are known as future goods. If a sale or lease involves unborn animals to be born within twelve months after contracting, identification takes place when the animals are conceived.

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.

draft

Any instrument (such as a check) drawn on a drawee (such as a bank) that orders the drawee to pay a certain sum of money, usually to a third party (the payee), on demand or at a definite future time. A draft is an unconditional written order that involves three parties.

security interest

Any interest "in personal property or fixtures which secures payment or performance of an obligation" [UCC 1-201(37)]

Who can and cannot file for Chapter 7 bankruptcy?

Any person except for railroads, insurance companies, banks, savings and loan associations, investment companies licensed by the SBA, and credit unions can file for chapter 7 bankruptcy.

Describe presentment warranties.

Any person who presents an instrument for payment or acceptance to any other person who in good faith pays or accepts the instrument makes these presentment warranties, the person obtaining the payment or acceptance is entitled to enforce the instrument or is authorized to obtain payment or acceptance on behalf of a person who is entitled to enforce the instrument, the instrument has not been altered, and the person obtaining payment or acceptance has no knowledge that the signature of the drawer of the instrument is unauthorized.

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.

secured transaction

Any transaction in which the payment of a debt is guaranteed, or secured, by personal property owned by the debtor or in which the debtor has a legal interest.

Constructive Trust

Anything that an agent obtains by virtue of the employment or agency relationship belongs to the principal. An agent commits a breach of fiduciary duty if he or she secretly retains benefits or profits that, by right, belong to the principal.

A Pattern of Conduct

Apparent authority usually comes into existence through a principal's pattern of conduct over time.

wetlands

Areas of land designated by government agencies (such as the Army Corps of Engineers or the Environmental Protection Agency) as protected areas that support wildlife and that therefore cannot be filled in or dredged by private contractors or parties.

The Writing Requirement

Article 11 of the CISG, however, states that a contract of sale "need not be concluded in or evidenced by writing and is not subject to any other requirements as to form. It may be proved by any means, including witnesses." Article 11 of the CISG accords with the legal customs of most nations, which no longer require contracts to meet certain formal or writing requirements to be enforceable.

In regard to Article 2, keep two points in mind.

Article 2 deals with the sale of goods. It does not deal with real property (real estate), services, or intangible property such as stocks and bonds. Thus, if the subject matter of a dispute is goods, the UCC governs. If it is real estate or services, the common law applies. In some situations, the rules can vary depending on whether the buyer or the seller is a merchant.

Cam enters into a contract with Tractors & Lifts Lease Company for a two-year lease of a backhoe. This contract is subject to

Article 2A of the UCC.

Leases under breach OF SELLOR OR LESSOR

Article 2A provides a similar rule for leases. If the tender or delivery of goods is so nonconforming that the lessee has the right to reject them, the risk of loss remains with the lessor (or the supplier) until cure or acceptance [UCC 2A-220(1)(a)]. If the lessee accepts the goods and then rightfully revokes acceptance, the risk of loss passes back to the lessor to the extent that the lessee's insurance does not cover the loss [UCC 2A-220(1)(b)].

If a conflict arises between Articles 3 and 4,

Article 4 controls.

Remedies for Breach of International Sales Contracts

Article 74 of the CISG provides for money damages, including foreseeable consequential damages, on a contract's breach. As under the UCC, the measure of damages normally is the difference between the contract price and the market price of the goods.

rturo is the maker of a note, on which Bev is secondarily liable. Consumer Credit Union is the current holder of the note. Bev will be obligated to pay the note if

Arturo defaults on the note.

Termination by one party.

As a general rule, either party can terminate the agency relationship. The act of termination is called revocation if done by the principal and renunciation if done by the agent. Although both parties may have the power to terminate the agency, they may not possess the right and therefore may be liable for breach of contract or wrongful terminat

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.

When does identification take place for existing goods?

At the time the contract is made

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.

Types of EFT Systems Most banks offer EFT services to their customers. The following are the most common types of EFT systems used by bank customers:

Automated teller machines (ATMs) Point-of-sale systems Direct deposits and withdrawal Internet payment systems

Why is the Ultramares Rule sometimes referred to as the New York Rule?

BECAUSE LIABILITY WAS IMPOSED NEW YORK COURT OF APPEALS

In an age discrimination lawsuit, the employee has the burden of establishing causation.

BUT FOR

What are the goals of bankruptcy law?

Bankruptcy law has two main goals, to protect a debtor by giving them a fresh state without creditors' claims, and to ensure equitable treatment of creditors who are competing for a debtor's assets.

For an instrument to be negotiable, it must meet the following requirements:

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.

Article 2A covers similar issues for lease contracts.

Bear in mind, however, that the parties to sales or lease contracts are free to agree to terms different from those stated in the UCC. governs sales contracts

Why is an instrument that is undated and made payable "15 days after date" nonnegotiable?

Because there is no way to determine the maturity date from the face of the instrument.

Why can the bank recover the amount of loss of an altered check from the transferor who presented the check for payment?

Because transferor, by presenting a check for payment, warrants that the check has not been altered.

Identification

Before any interest in specific goods can pass from the seller or lessor to the buyer or lessee, the goods must be in existence and identified as the specific goods designated in the contract [UCC 2-105(2)]

Differentiate between blank, special, qualified, and restrictive indorsements.

Blank indorsements do not specify a particular indorsee, a special indorsement identifies the person to whom the indorser intends to make the instrument payable, a qualified indorsement is when the indorser disclaims any contract liability on the instrument, a restrictive indorsement requires the indorsee to comply with certain instructions regarding the funds involved but does not prohibit further negotiation of the instrument.

Candidate A is a 35-year-old man with 10 years of work experience. Candidate B is a 50-year-old woman with 25 years of work experience. Both candidates interview for a job at the county prison working with male prisoners. Candidate A is hired over Candidate B. Candidate B sues for discrimination. The court finds for the prison, and the case is dismissed. Which type of discrimination defense did the prison successfully employ?

Bona fide occupational qualification

Knowing that Oscar was not putting the actual amount of food he said, what warranties is he violating?

Both an express warranty and an implied warranty of fitness for a particular purpose.

Personal defenses (sometimes called limited defenses) are used to avoid payment to an ordinary holder of a negotiable instrument. They are not a defense against an HDC or a holder through an HDC. Personal defenses include the following:

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 [UCC 3-305(a)(1)(ii)]. Discharge by previous payment or cancellation [UCC 3-601(b), 3-602(a), 3-603, 3-604]. Unauthorized completion of an incomplete instrument [UCC 3-115, 3-302, 3-407, 4-401(d)(2)]. Nondelivery of the instrument [UCC 1-201(14), 3-105(b), 3-305(a)(2)].

Buffy, an accountant, includes a false statement in a report for Cloud Computing, Inc., that is filed with the Securities and Exchange Commission. Cloud Computing publishes a misleading ad about its future prospects. Daria sees the ad and calls Elmer, who buys stock in Cloud Computing. Under Section 18 of the Securities Exchange Act of 1934, liability may attach to

Buffy's report.

Business A signs a lease agreement with Business B to lease a labeling machine. The lease agreement includes a destination contract. Business A is located in New Hampshire. The labeling machine is shipped free on board (FOB) to New Hampshire and is damaged in transit. Which business assumes the risk for the damage to the labeling machine?

Business B assumes the risk, because the risk of loss transfers to Business A when goods are delivered.

How does an agent exercise implied authority?

By acting in a manner indirectly understood by custom or inferred from the position the agent occupies

How does an agent exercise apparent authority?

By acting when the principal causes a third party to believe that the agent has the authority to act

Subsequent to a 2009 Supreme Court case, the EPA can regulate ____emissions.

CO2

Define and describe COBRA.

COBRA allows an employee to continue health coverage after termination, for up to 18 months (24 for the disabled) or until other coverage is obtained, by paying the full premium for the health plan.

Brad leaves an iPod at Computer Sales & Repair (CSR) to have the battery replaced. CSR sells the iPod to Doris, who does not know that it belongs to Brad. Brad can recover from

CSR

Under the UCC, when there are express and implied warranties and they are consistent with one another, they become

CUMULATIVE

An agent's implied authority can be inferred by

CUSTOM

A creditor has two main concerns if the debtor defaults:

Can the debt be satisfied through the possession and (usually) sale of the collateral? Will the creditor have priority over any other creditors or buyers who may have rights in the same collateral?

When the Seller or Lessor Refuses to Deliver the Goods If the seller or lessor refuses to deliver the goods to the buyer or lessee, the basic remedies available to the buyer or lessee include the right to:

Cancel (rescind) the contract. Obtain goods that have been paid for if the seller or lessor is insolvent. Sue to obtain specific performance if the goods are unique or if damages are an inadequate remedy. Buy other goods (obtain cover) and recover damages from the seller. Sue to obtain identified goods held by a third party (replevy goods). Sue to obtain damages.

Under the UCC, if the buyer or lessee breaches the contract before the goods have been delivered, the seller or lessor has the right to pursue the following remedies:

Cancel (rescind) the contract. Resell the goods and sue to recover damages. Sue to recover the purchase price or lease payments due. Sue to recover damages for the buyer's nonacceptance of goods.

Chaka signs a check "pay to the order of Darryl" drawn on Chaka's account in Evergreen Bank. Darryl signs the back of the check. Secondary liability on this check extends to

Chaka and Darryl only.

Describe Chapter 11 bankruptcy.

Chapter 11 is the most common bankruptcy proceeding used by corporations and is a reorganization of the debtor's debts.

Describe Chapter 12 bankruptcy.

Chapter 12 bankruptcy is to help relieve economic pressure on small family farmers and family fishermen.

Adam is a sole proprietor, and must file for bankruptcy to reorganize his debt under a repayment plan so he can pay his creditors and continue operating his business. He should file a

Chapter 13 bankruptcy

Describe Chapter 13 bankruptcy.

Chapter 13 bankruptcy provided adjustment of debts of an individual with regular income who owe fixed unsecured debts of less than $383,175 or fixed secured debts of less than $1,149,525. This type of bankruptcy provides for repayment plan arrangements in stead of discharge of debt.

Four chapters of the Code set forth the most important types of relief that debtors can seek:

Chapter 7 provides for liquidation proceedings (the selling of all nonexempt assets and the distribution of the proceeds to the debtor's creditors). Chapter 11 governs reorganizations. Chapter 12 (for family farmers and family fishermen) and 13 (for individuals) provide for the adjustment of debts by persons with regular incomes.

Define and explain the purpose of Chapter 7 bankruptcy.

Chapter 7 provides for liquidation proceedings and the proceeds distributed to the debtor's creditors.

Before the implementation of Check 21, banks had to present the original paper check for payment in the absence of an agreement for presentment in some other form.

Check 21 has changed the situation by creating a new negotiable instrument called a substitute check.

Congress passed the Check Clearing in the 21st Century Act (Check 21).

Check 21 is a federal law and applies to all financial institutions, other businesses, and individuals in the United States.

Describe the FLSA as it pertains to child labor, minimum wages, and overtime.

Children under age 14 are only allowed to work in certain situations, such as working for parents, agriculture and entertainment, children 14 & 15 are allowed to work except in hazardous occupations. There are also restrictions on how many hours children are allowed to work per day and week.

the three items that are typically included in a contract for the international sale of goods.

Choice-of-Language Clause Forum-Selection Clause Choice-of-Law Clause

A Letter-of-Credit Transaction

Chronology of Events Buyer contracts with issuer bank to issue a letter of credit. This sets forth the bank's obligation to pay on the letter of credit and buyer's obligation to pay the bank. Letter of credit is sent to seller informing seller that on compliance with the terms of the letter of credit (such as presentment of necessary documents—in this example, a bill of lading), the bank will issue payment for the goods. Seller delivers goods to carrier and receives a bill of lading. Seller delivers the bill of lading to issuer bank and, if the document is proper, receives payment. Issuer bank delivers the bill of lading to buyer. Buyer delivers the bill of lading to carrier. Carrier delivers the goods to buyer. Buyer settles with issuer bank.

Exceptions to Discharge Claims that are not dischargeable in bankruptcy include the following:

Claims for back taxes accruing within two years prior to bankruptcy. Claims for amounts borrowed by the debtor to pay federal taxes or any nondischargeable taxes.Footnote Claims against property or funds obtained by the debtor under false pretenses or by false representations. Claims by creditors who were not notified of the bankruptcy. These claims did not appear on the schedules the debtor was required to file. Claims based on fraudFootnote or misuse of funds by the debtor while acting in a fiduciary capacity or claims involving the debtor's embezzlement or larceny. Domestic-support obligations and property settlements as provided for in a separation agreement or divorce decree. Claims for amounts due on a retirement account loan. Claims based on willful or malicious conduct by the debtor toward another or the property of another. Certain government fines and penalties. Student loans, unless payment of the loans imposes an undue hardship on the debtor and the debtor's dependents. (For an example of what constitutes undue hardship, see Case in Point 22.5.) Consumer debts of more than $650 for luxury goods or services owed to a single creditor incurred within ninety days of the order for relief. Cash advances totaling more than $925 that are extensions of open-end consumer credit obtained by the debtor within seventy days of the order for relief. Judgments against a debtor as a result of the debtor's operation of a motor vehicle while intoxicated. Fees or assessments arising from property in a homeowners' association, as long as the debtor retained an interest in the property. Taxes with respect to which the debtor failed to provide required or requested tax documents.

Agricultural associations

Clayton Act and Capper-Volstead Act of 1922—Allow agricultural cooperatives to set prices.

Labor

Clayton Act—Permits unions to organize and bargain without violating antitrust laws and specifies that strikes and other labor activities normally do not violate any federal law.

The Code provides the following exceptions to the automatic stay:

Collection efforts can continue for domestic-support obligations, which include any debt owed to or recoverable by a spouse, a former spouse, a child of the debtor, that child's parent or guardian, or a governmental unit. Proceedings against the debtor related to divorce, child custody or visitation, domestic violence, and support enforcement are not stayed. Investigations by a securities regulatory agency (see Chapter 7) can continue. Certain statutory liens for property taxes are not stayed.

define the term "collective bargaining."

Collective bargaining is the process by which labor and management negotiate the terms and conditions of employment.

The estate in bankruptcy includes all of the following:

Community property (property jointly owned by a husband and wife in certain states—see Chapter 29). Property transferred in a transaction voidable by the trustee. Proceeds and profits from the property of the estate.

Which act regulates the cleanup of hazardous waste disposal sites?

Comprehensive Environmental Response, Compensation and Liability Act

Regulatory Flexibility Act

Concern over the effects of regulation on the efficiency of businesses, particularly smaller ones, led Congress to pass the Regulatory Flexibility ActFootnote in 1980. Under this act, whenever a new regulation will have a "significant impact upon a substantial number of small entities," the agency must conduct a regulatory flexibility analysis. The analysis must measure the cost that the rule would impose on small businesses and consider less burdensome alternatives. The act also contains provisions to alert small businesses—through advertising in trade journals, for example—about forthcoming regulations. The act reduces some record-keeping burdens for small businesses, especially with regard to hazardous waste management.

To avoid liability, the accountant must show that he or she:

Conducted a reasonable investigation. Had reasonable grounds to believe and did believe, at the time the registration statement became effective, that the statements therein were true and that there was no omission of a material fact that would be misleading.

Legislative Controls

Congress exercises authority over agency powers through legislation. Congress gives power to an agency through enabling legislation and can take power away—or even abolish an agency altogether—through subsequent legislation. Legislative authority is required to fund an agency, and enabling legislation usually sets certain time and monetary limits on the funding of particular programs. Congress can always revise these limits. In addition to its power to create and fund agencies, Congress has the authority to investigate the implementation of its laws and the agencies that it has created. Congress also has the power to "freeze" the enforcement of most federal regulations before the regulations take effect. (Another legislative check on agency actions is the Administrative Procedure Act, discussed shortly.)

Define and describe the Check Clearing and Check 21 Act.

Congress passed the Check Clearing in the 21st Century Act (Check 21) to streamline the check collection process and improve the overall efficiency the payment system. The implementation of Check 21 changed how the banks present checks for payment, the banks no longer have to present the original paper check but can instead present a substitute check electronically.

Executive control over the Federal Aviation Administration, and other agencies, may be exercised through a presidential veto of

Congress's attempt to modify the agency's authority.

Midwest Steel Corporation is subject to regulations issued by the Occupational Safety and Health Administration (OSHA). Like other federal administrative agencies, the OSHA was created by

Congress, through enabling legislation.

Describe "constructive discharge."

Constructive discharge occurs when an employees' treatment is so intolerable that the employee is compelled to quit or take a demotion.

Under the FDCPA, a collection agency may not do any of the following:

Contact the debtor at the debtor's place of employment if the debtor's employer objects. Contact the debtor at inconvenient or unusual times (for example, at three o'clock in the morning) or at any time, if the debtor is being represented by an attorney. Contact third parties other than the debtor's parents, spouse, or financial adviser about payment of a debt unless a court authorizes such action. Harass or intimidate the debtor (by using abusive language or threatening violence, for example) or make false or misleading statements (such as posing as a police officer). Communicate with the debtor at any time after receiving notice that the debtor is refusing to pay the debt, except to advise the debtor of further action to be taken by the collection agency.

Businesspersons' joint efforts to seek government action

Cooperative efforts by businesspersons to obtain legislative, judicial, or executive action are exempt unless it is clear that an effort is "objectively baseless" and is an attempt to make anticompetitive use of government processes.F

UCC 9-503 sets out detailed rules for determining when the debtor's name as it appears on a financing statement is sufficient.

Corporations. For corporations, which are organizations that have registered with the state, the debtor's name on the financing statement must be "the name of the debtor indicated on the public record of the debtor's jurisdiction of organization" [UCC 9-503(a)(1)]. Trusts. If the debtor is a trust or a trustee for property held in trust (see Chapter 31), the financing statement must disclose this information and provide the trust's name as specified in its official documents [UCC 9-503(a)(3)]. Individuals and organizations. For all others, the financing statement must disclose "the individual or organizational name of the debtor" [UCC 9-503(a)(4)(A)]. The word organization includes unincorporated associations, such as clubs and some churches, as well as joint ventures and general partnerships. If an organizational debtor does not have a group name, the names of the individuals in the group must be listed. Trade names. In general, it is not sufficient to provide only the debtor's trade name (or fictitious name), when the business is not organized as a corporation or other entity that is distinct from the owner [UCC 9-503(c)]. In other words, listing the debtor as Pete's Plumbing would not be sufficient for perfection. The financing statement must also include the owner-debtor's actual name—Pete Hanson. The reason for this rule is to ensure that the debtor's name on a financing statement is one that prospective lenders can locate and recognize in future searches.

The act grants the FTC the power to do the following:

Create "rules and regulations for the purpose of carrying out the Act." Conduct investigations of business practices. Obtain reports from interstate corporations concerning their business practices. Investigate possible violations of federal antitrust statutes. (The FTC shares this task with the Antitrust Division of the U.S. Department of Justice—see Chapter 26.) Publish findings of its investigations. Recommend new legislation. Hold trial-like hearings to resolve certain trade disputes that involve FTC regulations or federal antitrust laws.

Direct deposits and withdrawals—

Customers can authorize the bank to allow another party, such as the government or an employer, to make direct deposits into their accounts. Similarly, a customer can ask the bank to make automatic payments to a third party at regular, recurrent intervals from the customer's funds (insurance premiums or loan payments, for example).

An instrument that is payable to bearer is negotiated by

DELIVERY

Order instruments are negotiated by

DELIVERY WITH THE NECESSART INDORSEMENT

The Equal Credit Opportunity Act (ECOA) prohibits lenders from denying credit solely on the basis of all of the following EXCEPT:

DISABILITY

Darwin writes a check to Education Loan Management, Inc., that is drawn on Darwin's account at First Federal Bank. If the bank does not accept the check, liability for its amount is on

Darwin.

Defense activities

Defense Production Act of 1950—Allows the president to approve, and thereby exempt, certain activities to further the military defense of the United States.

Define and describe the different types of delivery.

Delivery can be to a designated destination or can be tendered (made available to the buyer). Delivery can be shipped via carrier with shipment contracts or can be tendered at the place or residence of the seller.

A reorganization plan to rehabilitate the debtor is a plan to conserve and administer the debtor's assets in the hope of an eventual return to successful operation and solvency. The plan must be fair and equitable and must do the following:

Designate classes of claims and interests. Specify the treatment to be afforded to the classes of creditors. (The plan must provide the same treatment for all claims in a particular class.) Provide an adequate means for the plan's execution. (Individual debtors are required to utilize postpetition assets as necessary to execute the plan.) Provide for payment of tax claims over a five-year period.

A crucial consideration in most merger cases is market concentration.

Determining market concentration involves allocating percentage market shares among the various companies in the relevant market. When a small number of companies share a large part of the market, the market is concentrated.

describe the types of discharge from liability.

Discharge can occur when the liable party pays or tenders payment, by cancellation or surrender, if an instrument has been material altered, if reacquired by a previous holder (discharges all intervening indorsers), by impairment of recourse, and by impairment of collateral.

Differentiate between disparate-treatment, intentional, and unintentional discrimination.

Disparate-treatment or intentional discrimination is when the employer deliberately hires or treats members of a protected class differently than members of non-protected classes. Unintentional or disparate-impact discrimination is when an employer does not deliberately discriminate against members of a protected class but inadvertently do so by some action of the employer.

Doctors Medical Clinic agent Emma is authorized to write checks on the clinic's account in Finance Bank. Greater Pharma Corporation is a clinic supplier. Emma writes a check on the clinc's account "pay to the order of Greater Pharma [signed] Emma," indorses it in Greater Pharma's name, and deposits it in her own account in Heartland Bank. If Heartland collects payment, the ultimate party most likely to suffer the loss is

Doctors Medical Clinic.

Analysis

Does the rule apply to these unique facts?

Obedience

During emergency situations, however, when the principal cannot be consulted, the agent may deviate from the instructions without violating this duty. Whenever instructions are not clearly stated, the agent can fulfill the duty of obedience by acting in good faith and in a manner reasonable under the circumstances.

The National Labor Relations Act established the right to:

ENGAGE IN COLLECTIVE BARGAINING AND TO STRIKE

The agency that implements the Clean Air Act of 1963 and its amendments is the .

ENVIRONMENTAL PROTECTION AGENCY (EPA)

When the principal grants an agent an exclusive territory, we say that the principal has created a(n)

EXCLUSIVE AGENCY

The FTC is composed of five members.

Each is appointed by the president, with the advice and consent of the Senate, for a term of seven years. The president designates one of the commissioners to be the chair.

Describe "Employment at Will."

Either party may terminate the employment relationship at any time and for any reason unless doing so violates and employee's statutory or contractual rights.

Notification Requirements.

Employers must provide advance notice of the layoff to the affected workers or their representative (if the workers are members of a labor union). Employers must also notify state and local government authorities so that they can provide resources, such as job training, to displaced workers. Any part-time and seasonal employees who are being laid off must be notified, even though these workers do not count in determining whether the act's provisions are triggered. Even companies that anticipate filing for bankruptcy normally must provide notice under the WARN Act before implementing a mass layoff.

Freedom of Information Act (FOIA)

Enacted in 1966, the Freedom of Information Act (FOIA) requires the federal government to disclose certain records to any person or entity on written request, even if no reason is given for the request. All federal government agencies must make their records available electronically on the Internet and in other electronic formats.

Equipment Rents Company and Road Builders, Inc., enter into a contract for a lease of excavators. Equipment Rents is a merchant who deals in goods of the kind leased. Under the UCC, an implied warranty of merchantability arises

Equipment Rents Company and Road Builders, Inc., enter into a contract for a lease of excavators. Equipment Rents is a merchant who deals in goods of the kind leased. Under the UCC, an implied warranty of merchantability arises

Agreement of the Parties

Exceptions to the perfect tender rule may be established by agreement. If the parties have agreed, for instance, that defective goods or parts will not be rejected if the seller or lessor is able to repair or replace them within a reasonable period of time, the perfect tender rule does not apply.

what types of real/personal property of a debtor are protected (exempt)?

Exempted real property includes the debtor's family home, either in its entirety or up to a specified dollar amount, is free from the claims of unsecured creditors or trustees in bankruptcy. Exempted personal property includes household furniture up to a specified dollar amount, clothing and certain personal possessions, a vehicle for transportation, certain classified animals, usually livestock but including pets, and equipment that the debtor uses in a business or trade up to a specified dollar amount.

Define and describe express warranties.

Express warranties are when the seller makes representations concerning the quality, condition, description, or performance potential of the goods. Such as in advertisements, brochures, promotional materials, expressed orally, or in an express warranty provision in a sales or lease contract.

Conflicting Warranties If the warranties are inconsistent, the courts usually apply the following rules to interpret which warranty is most important:

Express warranties displace inconsistent implied warranties, except implied warranties of fitness for a particular purpose. Samples take precedence over inconsistent general descriptions. Exact or technical specifications displace inconsistent samples or general descriptions.

Differentiate between an agent's "express" authority and "implied" authority.

Expressed authority is declared in clear, direct, and definite terms either orally or written. Implied authority can be conferred by custom, inferred from the position the agent occupies, or implied by being reasonably necessary to carry out express authority.

A buyer promises to purchase only what he or she wishes to do so, so the promise constitutes a requirements contract.

FALSE

All cabinet departments of the executive branch are included in independent regulatory agencies.

FALSE

For a written disclaimer to effectively eliminate the implied warranty of fitness, the word fitness must be included.

FALSE

In the absence of any specific agreements, the buyer must make payment at the time and place the contract is signed.

FALSE

Monopoly power in and of itself constitutes the offense of monopolization under Section 2 of the Sherman Act

FALSE

Most environmental law is based on common law.

FALSE

Most of the time, a purchaser becomes an HDC of an instrument even though it is so incomplete on its face that an element of negotiability is lacking.

FALSE

Normal debtors cannot file for bankruptcy relief unless their liabilities exceed their assets.

FALSE

Only employees are covered by the National Labor Relations Act.

FALSE

Resale price maintenance agreements are always considered per se violations of Section 1 of the Sherman Act.

FALSE

Revocation of acceptance is effective under all circumstances.

FALSE

The Magnuson-Moss Warranty Act requires sellers to give a written warranty for all consumer goods sold.

FALSE

The UCC generally does not prevent warranties to be disclaimed or limited.

FALSE

To be enforceable, reaffirmation agreements must be made after the creditor is granted a discharge.

FALSE

When Lisa offers to sell all of the tamales that she makes to Xavier, they have created a requirements contract.

FALSE

When the seller is a merchant, risk of loss to goods held by the seller passes to the buyer when the buyer signs the contract

FALSE

A Chapter 7 bankruptcy proceeding is formally commenced by the

FILING A PETITION FOR BANKRUPTCY

Nello wants to purchase a large tent for his catering business. He convinces the owner of Ajax Supplies, an outdoor equipment store, to buy the tent from the tent's manufacturer and then lease it to him. They have created a .

FINANCE LEASE

Differentiate between the shipping terms FOB, FAS, and CIF (or CC&F).

FOB (Free on board) indicates that the selling price of goods includes transportation costs to the specific destination named in the contract. FAS (free alongside) required that the seller, at his or her own expense and risk, deliver the goods alongside the carrier before risk passes to the buyer. CIF or C&F (cost, insurance and freight or just cost and freight) requires that the seller pass possession of the goods to a carrier before risk passes to the buyer.

FOB always needs a qualifier. So it is always FOB Shipping Point or FOB Destination.

FOB Shipping Point means that the buyer is responsible for costs and losses in shipping. FOB Destination means that the seller covers costs and losses, In this case, Shingles in the seller, so FOB Shingles is FOB Shipping Point, and the buyer (Red's Roofing) bears the costs and risks of shipping.

Eliza buys a new motorcycle from Fab Cycles, Inc. The most important factor in determining whether an express warranty is created is whether

Fab Cycles's promise becomes part of the basis of the bargain

Explain how "unconscionability" can affect a warranty.

Factors such as lack of bargaining position, take-it-or-leave-it choices, and a buyer's or lessee's failure to understand or know of a warranty disclaimer would be relevant.

Timeliness is important for proper presentment

Failure to present an instrument on time is a common reason for improper presentment and can lead to unqualified indorsers being discharged from secondary liability.

The Fair Trade Sustainability Alliance

FairTSA attempts to ensure that the community development associated with its work is accountable and sustainable. In addition to promoting sustainable development, FairTSA monitors suppliers and certifies those that practice ethical and accountable supply chain management.

FasTite Tool Company employs workers, including Gina, at six locations in two states. FasTite's discharge of Gina outside the terms of an implied employment contract may result in

FasTite's liability for breach of contract

Describe the two types of administrative agencies.

Federal executive agencies: a single administrator, director or secretary who is appointed by the president to oversee the agency. The Occupational Safety and Health Administration, for example, is a subagency within the U.S. Department of Labor. Independent regulatory agencies are outside the federal executive departments and is usually administered by a commission or board. (headed by a cabinet secretary.) Examples of independent agencies include the Federal Trade Commission and the Securities and Exchange Commission (SEC).

Which act did Congress pass in 2011 to give the Food and Drug Administration (FDA) greater authority to recall any food products suspected to be tainted?

Food Safety Modernization Act

The state in which a financing statement should be filed depends on the debtor's location, not the location of the collateral [UCC 9-301]. The debtor's location is determined as follows [UCC 9-307]:

For an individual debtor, it is the state of the debtor's principal residence. For an organization registered with the state, such as a corporation, it is the state in which the organization is registered. Thus, if a debtor is incorporated in Delaware and has its chief executive office in New York, a secured party would file the financing statement in Delaware because that is where the debtor's business is registered. For all other entities, it is the state in which the business is located or, if the debtor has more than one office, the place from which the debtor manages its business operations and affairs.

Promises

For an instrument to be negotiable, it must contain an express promise or order to pay.

Describe the disclaimers that can be made on express and implied warranties.

For express warranties a seller or lessor can disclaim all oral express warranties by including in a written disclaimer in a contract. Implied warranties can be disclaimed by phrases such as "as is" or "with all faults".

Indorsement can convert an order instrument into a bearer instrument.

For instance, a check originally payable to "cash" but subsequently indorsed with the words "Pay to Arnold" must be negotiated as an order instrument (by indorsement and delivery), even though it was previously a bearer instrument

Describe the Statute of Frauds, including how it pertains to merchants and exceptions to the rule.

For non-merchants sales contracts for goods priced at $500 or greater and lease contracts with total payments of $1000 or more must be in writing to be enforceable. The writing must indicate that the parties intended to form a contract and must be signed. Unless the sale or lease is for specially manufactured goods or goods that are not suitable for resale or lease to others or the seller or lessor has substantially started to manufacture the goods or has made commitments for the manufacture or procurement of the goods. For merchants sales contracts can initially be agreed upon orally and can be enforced as long as the merchant sends a signed written confirmation to the other merchant within a reasonable time.

The FOIA exempts certain types of records, such as those pertaining to national security, and those containing information that is confidential or personal.

For other records, though, a request that complies with the FOIA procedures need only contain a reasonable description of the information sought.

How can foreclosure be avoided?

Foreclosure may be avoided if the creditor grants the debtor a forbearance if the debtor may be able to make the payments in the future. The debtor and creditor may work out a payment agreement or the creditor may agree to a short sale.

Defenses and Limitations universal defenses

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

digital cash

Funds contained on computer software, in the form of secure programs stored on microchips and other computer devices.

What is the availability schedule for deposited checks?

Funds from deposited checks must be made available according to these rules, any local check must be available within one business day from the date of deposit, nonlocal checks must be available within five business days, under Check 21 the bank must credit the customer's account as soon as the bank receives the funds, cash deposits, wire transfers, and government checks must be available on the next business day and the first 100 of any deposit must be available on the opening of the next business day after the deposit. For nonproprietary ATMs a five day hold is permitted on all deposits including cash deposits.

Gaucho Ranchland Supplies Corporation believes that Vaquero Stock & Equipment Corporation engages in anticompetitive behavior in an attempt to drive Gaucho, its chief competitor, out of the market. Antitrust laws can be enforced against Vaquero by

Gaucho.

Some courts have held that an implied employment contract exists between the employer and the employee.

Generally the key consideration in determining whether an employment manual creates an implied contractual obligation is the employee's reasonable expectations.

When determining whether an alteration is material, courts consider several factors.

Generally, if the modification does not involve any unreasonable element of surprise or hardship for the offeror, a court will hold that the modification did not materially alter the contract. Courts also consider the parties' prior dealings.

The content of a plan under Chapter 12 is basically the same as that of a Chapter 13 repayment plan.

Generally, the plan must be confirmed or denied within forty-five days of filing.

Explain the term "merchantability" as it pertains to implied warranties.

Goods are reasonably fit for the ordinary purpose for which they are sold or leased, are properly packaged and labeled, and are of fair quality.

Goods Associated with Real Estate.

Goods associated with real estate often do fall within the scope of Article 2, however [UCC 2-107]. For instance, a contract for the sale of minerals, oil, or gas is a contract for the sale of goods if severance, or separation, is to be made by the seller. Similarly, a contract for the sale of growing crops or timber to be cut is a contract for the sale of goods regardless of who severs them from the land.

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.

Growers Mart buys one hundred cases of berries from Hilltop Farms. The parties agree that the berries will be transported "F.O.B. Hilltop Farms" via Refrigerated Trucking Company. Refrigerated's truck and the berries are lost in a fire following an accident. The loss of the berries is suffered by

Growers Mart.

A holder is on notice that an instrument is defective when the holder:

HAS ACTUAL NOTICE OF A DEFECT

Define and describe HIPAA.

HIPPA protects the privacy of employee health information and ensures that they receive credit for previous health plans so that the waiting period for health coverage is reduced.

Jamel hires independent contractor Stevenson to create users' manuals for Jamel's small appliances. How can Jamel be certain to own the copyright for these owners' manuals?

He can create an agreement in writing that designates Stevenson's work as work for hire.

Differentiate between horizontal and vertical mergers.

Horizontal mergers are between firms that compete with each other in the same market and Vertical mergers occur when a company at one stage of production acquires a company at a higher or lower stage of production.

Personal property that is most often exempt from satisfaction of judgment debts includes the following:

Household furniture up to a specified dollar amount. Clothing and certain personal possessions, such as family pictures or a Bible. A vehicle (or vehicles) for transportation (at least up to a specified dollar amount). Certain classified animals, usually livestock but including pets. Equipment that the debtor uses in a business or trade, such as tools or professional instruments, up to a specified dollar amount.

Garden & Field stores order a specific assortment of rose bulbs from Hybrid Flora Company. Hybrid mistakenly ships a selection of annuals, which Garden & Field rejects and returns via Intra-state Transport, Inc. During the return, the annuals are lost. The loss is suffered by

Hybrid Flora.

An instrument is NOT defective when:

IT HAS BEEN PREVIOUSLY HONORED

bona fide occupational qualification (BFOQ)

Identifiable characteristics reasonably necessary to the normal operation of a particular business. These characteristics can include gender, national origin, and religion, but not race.

Explain how Identification takes place with both existing and future goods, and goods that are part of a larger mass.

Identification takes place when specific goods are designated as the subject of a sales or lease contract. For existing goods identification takes place at the time the contract is made. For future goods identification occurs when the seller or lessor ships, marks or otherwise designates the goods except for animals (within 12 months of conception) and crops (within 12 months or the next harvest season from planting). Goods that are part of a larger mass are identified when the goods are marked, shipped or designated.

When Acceptance Is Revoked UNDER SELLOR OR LESSOR

If a buyer accepts a shipment of goods and later discovers a defect, acceptance can be revoked. The revocation allows the buyer to pass the risk of loss back to the seller, at least to the extent that the buyer's insurance does not cover the loss [UCC 2-510(2)].

Statute of Limitations-2

If a buyer or lessee has accepted nonconforming goods, that party has a reasonable time to notify the seller or lessor of the breach. Failure to provide notice will bar the buyer or lessee from pursuing any remedy [UCC 2-607(3) (a), 2A-516(3)].

Describe the basic remedies for default, including repossession, judicial remedies, and disposition of collateral.

If a debtor defaults on a security interest the secured party may take possession of the collateral covered by the security agreement or sue the debtor to obtain a judgement. Once the secured party obtains possession of the collateral they can either retain the collateral or sell, leas, license or otherwise dispose of the collateral in any commercially reasonable manner and apply the proceeds toward the satisfaction of the debt.

There are some limitations on the shelter principle.

If a holder participated in fraud or illegality affecting the instrument, that holder is not allowed to improve her or his status by repurchasing the instrument from a later HDC. Similarly, a holder who had notice of a claim or defense against an instrument cannot gain HDC status by later reacquiring the instruments from HDCs [UCC 3-203(b)].

Describe the remedies a buyer has when the seller breaches.

If a seller breaches the contract the buyer has the right to cancel (rescind) the contract, obtain goods that have been paid for if the seller is insolvent, sue to obtain specific performance if the goods are unique or if damages are an inadequate remedy, buy other goods (obtain cover) and recover damages from the seller, sue to obtain identified goods held by a third party (replevy goods), or sue to obtain damages.

Describe how the UCC applies to a merchant.

If a seller is determined to have merchant status special business standards are imposed because of the merchants' relatively high degree of commercial expertise.

The Right to Recover the Purchase Price or Lease Payments Due Under the UCC, an unpaid seller or lessor can bring an action to recover the purchase price or the payments due under the lease contract, plus incidental damages [UCC 2-709(1), 2A-529(1)].

If a seller or lessor is unable to resell or dispose of the goods and sues for the contract price or lease payments due, the goods must be held for the buyer or lessee. The seller or lessor can resell the goods at any time before collecting the judgment from the buyer or lessee. If the goods are resold, the net proceeds from the sale must be credited to the buyer or lessee because of the duty to mitigate damages.

Describe the foreclosure procedure.

If all attempts to resolve the issue have failed the creditor may repossess and auction off the property. The creditor must strictly comply with the state statute governing foreclosures and must have a standing to sue.

Unauthorized Acts

If an agent has no authority but nevertheless contracts with a third party, the principal cannot be held liable on the contract. It does not matter whether the principal was disclosed, partially disclosed, or undisclosed. The agent is liable, however.

Purpose achieved.

If an agent is employed to accomplish a particular objective, such as the purchase of breeding stock for a cattle rancher, the agency automatically ends after the cattle have been purchased. If more than one agent is employed to accomplish the same purpose, such as the sale of real estate, the first agent to complete the sale automatically terminates the agency relationship for all the others.

Describe the remedies for sexual harassment.

If an employee proves discrimination or harassment, he or she may be awarded reinstatement, back pay, retroactive promotions and damages. Compensatory dames are available only in cases of intentional discrimination and punitive damages may be recovered against a private employer only if the employer acted with malice and reckless indifference to an individual's rights.

Describe the employer-independent contract relationship?

If an employer hires an independent contractor to perform a service it may or may not be an agency relationship.

What are the exceptions to the employment are at will doctrine?

If an implied employment contract exists between the employer and the employee. Under tort theory wrongful discharge is an exception and under public policy the termination of employee that violates a fundamental public policy of the jurisdiction is also an exception.

Bankruptcy.

If either the principal or the agent petitions for bankruptcy, the agency is usually terminated. In certain circumstances, such as when the agent's financial status is irrelevant to the purpose of the agency, the agency relationship may continue. Insolvency (the inability to pay debts when they come due or when liabilities exceed assets), as distinguished from bankruptcy, does not necessarily terminate the relationship.

Under what conditions can/can't a union strike?

If good faith negotiations have reached an impasse than the union may call for a strike to pressure the employer into concessions. The union may not strike if there is a no strike clause in the previous collective bargaining agreement.

Leased Goods Held by a Bailee

If leased goods held by a bailee are to be delivered without being moved, the risk of loss passes to the lessee on acknowledgment by the bailee of the lessee's right to possession of the goods [UCC 2A-219(2)(b)].

Rules When One Party or Both Parties Are Nonmerchants.

If one (or both) of the parties is a nonmerchant, the contract is formed according to the terms of the original offer and does not include any of the additional terms in the acceptance [UCC 2-207(2)].

Remedies for Violations.

If sued, an employer that orders a mass layoff or plant closing in violation of the WARN Act can be fined up to $500 for each day of the violation. Employees can recover back pay for each day of the violation (up to sixty days), plus reasonable attorneys' fees. An employee can also recover benefits under an employee benefit plan, including the cost of medical expenses that would have been covered by the plan.

Accommodation Indorsers

If the accommodation party signs on behalf of a payee or other holder (usually to make the instrument more marketable), she or he is an accommodation indorser. As an indorser, she or he is secondarily liable.

Accommodation Makers

If the accommodation party signs on behalf of the maker, he or she is an accommodation maker and is primarily liable on the instrument.

What is a bank's liability for altered checks?

If the bank fails to detect an alteration, it is liable to its customer for the difference between the original amount of the check and the amount paid unless the customer's negligence contributed to the alteration.

Describe the remedies a seller has when the buyer breaches.

If the buyer breaches the contract the seller has the right to cancel (rescind) the contract, resell the goods and sue to recover damages, sue to recover the purchase price, or sue to recover damages for the buyer's nonacceptance of goods.

Assume Jacqui and Jonathon decide to hire Sunil. Decide:

If the company can prove that no U.S. worker is qualified, willing, and able to take the job the company can apply for a green card for Sunil.

Existing Goods

If the contract calls for the sale or lease of specific and ascertained goods that are already in existence, identification takes place at the time the contract is made.

Place of Delivery The buyer and seller (or lessor and lessee) may agree that the goods will be delivered to a particular destination where the buyer or lessee will take possession.

If the contract does not indicate where the goods will be delivered, then the place for delivery will be one of the following: The seller's place of business. The seller's residence, if the seller has no business location [UCC 2-308(a)]. The location of the goods, if both parties know at the time of contracting that the goods are located somewhere other than the seller's business [UCC 2-308(b)].

Explain what law applies when a transaction combines both goods and services.

If the contract involves a combination of goods and services, the predominant-factor test is used to determine whether the contract is primarily for the sale of goods or the sale of services. If it is determined that a mixed contract is primarily a goods contract any dispute will be decided under the UCC.

Describe the homestead exemption, including the maximum equity amount.

If the debtor acquired the homestead within three and a half years preceding the date of filing, the maximum equity exempted is $155,675, even if the state law would permit a higher amount, in addition the state homestead exemption is available only if the debtor has lived in a state for two years prior to filing. If a debtor has violated securities law, been convicted of a felony, or engaged in certain other intentional misconduct may not be permitted to claim the homestead exemption.

For an involuntary action to be filed, the following requirements must be met:

If the debtor has twelve or more creditors, three or more of these creditors having unsecured claims totaling at least $15,325 must join in the petition. If a debtor has fewer than twelve creditors, one or more creditors having a claim totaling $15,325 or more may file.

When the Seller or Lessor Breaches

If the goods are so nonconforming that the buyer has the right to reject them, the risk of loss does not pass to the buyer.

Differentiate between voluntary and involuntary proceedings.

If the petition in bankruptcy is filed by the debtor it is voluntary, if on or more creditors file the petition to force the debtor into bankruptcy it is involuntary.

Agency by Ratification

If the principal approves or affirms that contract by word or by action, an agency relationship is created

Implied Warranty

If the principal is disclosed or partially disclosed, and the agent contracts with a third party without authorization, the agent is liable to the third party who relied on the agency status. The agent's liability here is based on his or her breach of the implied warranty of authority, not on the breach of the contract itself. An agent impliedly warrants that he or she has the authority to enter a contract on behalf of the principal.

Effect of Insolvency and Breach

If the seller or lessor learns that the buyer or lessee is insolvent, the seller or lessor can stop the delivery of the goods still in transit, regardless of the quantity of goods shipped. A different rule applies if the buyer or lessee is in breach but is not insolvent. In this situation, the seller or lessor can stop the goods in transit only if the quantity shipped is at least a carload, a truckload, a planeload, or a larger shipment [UCC 2-705(1), 2A-526(1)].

Describe what happens when there are "overlapping" warranties.

If the warrants are consistent then express and implied warranties are cumulative and if the warranties are inconsistent then express warranties displace implied warranties, samples take precedence over general descriptions, and exact or technical specifications displace samples or general descriptions.

Warranties Implied from Prior Dealings or Trade Custom

Implied warranties can also arise (or be excluded or modified) as a result of course of dealing or usage of trade [UCC 2-314(3), 2A-212(3)]. 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.

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.

In a state that follows the Restatement rule, if Ray were to write a report that contained false information, would he be liable to the company who was buying Onyx?

In a state that follows the Restatement rule, if Ray were to write a report that contained false information, would he be liable to the company who was buying Onyx?

Describe how property will be distributed in voluntary bankruptcies.

In a voluntary bankruptcy all the debtor's nonexempt property, property from voidable transactions, after-acquired property are collected and sold to be distributed first to the secured creditor, then to unsecured creditors and then any excess is disbursed to the debtor.

Explain what an agent-principal relationship is.

In an agent-principal relationship the parties (principal and agent) have agreed that the agent will act on behalf and instead of the principal in negotiating and transacting business with third parties.

workouts

In bankruptcy proceedings, a formal contract between a debtor and his or her creditors in which the parties agree to negotiate a payment plan for the amount due on the loan instead of proceeding to foreclosure.

automatic stay

In bankruptcy proceedings, the suspension of virtually all litigation and other action by creditors against the debtor or the debtor's property; the stay is effective the moment the debtor files a petition in bankruptcy.

Indemnification

In certain situations, when a principal is sued by a third party for an agent's negligent conduct, the principal can sue the agent for indemnification—that is, for an equal amount of damages. The same holds true if the agent violates the principal's instructions.

An agency relationship also arises between the customer and the bank when the customer writes a check on his or her account.

In effect, the customer is ordering the bank to pay the amount specified on the check to the holder when the holder presents the check to the bank for payment. In this situation, the bank becomes the customer's agent and is obligated to honor the customer's request.

Principal's Rights and Remedies against the Agent

In general, a principal has contract remedies for an agent's breach of fiduciary duties. The principal also has tort remedies if the agent engages in misrepresentation, negligence, deceit, libel, slander, or trespass. In addition, any breach of a fiduciary duty by an agent may justify the principal's termination of the agency. The main actions available to the principal are constructive trust, avoidance, and indemnification.

Good Title

In most sales, sellers warrant that they have good and valid title to the goods sold and that the transfer of the title is rightful [UCC 2-312(1)(a)]. If the buyer subsequently learns that the seller did not have valid title to the goods that were purchased, the buyer can sue the seller for breach of this warranty.

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.

exhaustion doctrine.

In other words, the complaining party normally must have gone through the administrative process—which occurs from a complaint to a hearing to a final agency order—before seeking court review.

seniority system

In regard to employment relationships, a system in which those who have worked longest for the company are first in line for promotions, salary increases, and other benefits; they are also the last to be laid off if the workforce must be reduced.

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.

tort theory

In some situations, the discharge of an employee may give rise to an action for wrongful discharge under tort theories. Abusive discharge procedures may result in a lawsuit for intentional infliction of emotional distress or defamation. In addition, some courts have permitted workers to sue under the tort theory of fraud when an employer made false promises to a prospective employee.

Explain confidentiality and privilege as it pertains to the accountant-client relationship.

In some states the accountant-client communications may not be reveled even in court. However, the majority of states and federal law do not provide for accountant-client privilege. In federal cases that state accountant-client confidentiality is not recognized.

Defenses of the Surety and the Guarantor

Incapacity and Bankruptcy Fraud

Describe the guaranty defenses.

Incapacity and bankruptcy as a personal defense, If the creditor fraudulently induced the person to act as a surety or guarantor that can be used as a defense.

What is one step the creditor must perform when creating a security interest?

Including material variations in names in order to prevent the financing statement from being ruled as misleading

Who owns the copyright for work that is completed for an employer?

Independent contractors own the copyright for work that they complete for an employer unless otherwise stated in a work for hire agreement.

Sufficiency of the Writing A writing, e-mail, or other electronic record will be sufficient to satisfy the UCC's Statute of Fraud as long

Indicates that the parties intended to form a contract. Is signed by the party (or agent of the party) against whom enforcement is sought. (Note that a typed name can qualify as a signature on an electronic record.)

F.O.B. (free on board)—

Indicates that the selling price of goods includes transportation costs to the specific F.O.B. place named in the contract. The seller pays the expenses and carries the risk of loss to the F.O.B. place named

Regulated industries

Industries (such as airlines) are exempt when a federal administrative agency (such as the Federal Aviation Administration) has primary regulatory authority.

Define and describe "insurable interest."

Insurable interest is 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. In order to purchase an insurance policy a person must have an insurable interest in the person or item insured. A buyer has insurable interest in identified goods and a seller has insurable interest in goods as long as the seller retains title to the good or has a security interest (right to secure payment) in the goods.

Which action has the government implemented in order to minimize health care costs?

Insurance companies must spend at least 80% of individual premiums on benefits or pay a rebate to the insured.

Define "interlocking directorates."

Interlocking directorates is when an individual serves on more than one board of directors of competing corporations at the same time if either corporation has capital, surplus, or undivided profits aggregating more than 28,883,000 or competitive sales of 2,888,300 or more.

Oil marketing

Interstate Oil Compact of 1935—Allows states to set quotas on oil to be marketed in interstate commerce.

CERCLA, as amended, has four primary elements:

It established an information-gathering and analysis system that enables the government to identify chemical dump sites and determine the appropriate action. It authorized the EPA to respond to hazardous substance emergencies and to arrange for the clean-up of a leaking site directly if the persons responsible for the problem fail to clean up the site. It created a Hazardous Substance Response Trust Fund (also called Superfund) to pay for the clean-up of hazardous sites using funds obtained through taxes on certain businesses. It allowed the government to recover the cost of clean-up from the persons who were (even remotely) responsible for hazardous substance releases.

What is the legal effect of a special indorsement?

It identifies the person to whom the instrument is payable.

Reasonable Reliance

It is not always easy to determine whether a statement constitutes an express warranty or puffery. The reasonableness of the buyer's or lessee's reliance appears to be the controlling criterion in many cases.

What is a bank's liability regarding an altered check that has been honored?

It is not liable if it asserts customer contributory negligence and the bank has exercised ordinary care.

What is the idea behind the right of redemption?

It is only fair for the creditor to be able to resell the house quickly after foreclosure.

Taking without Notice A person cannot be an HDC if she or he knows or has reason to know that the instrument is defective in any one of the following ways [UCC 3-302(a)]:

It is overdue. It has been dishonored. It is part of a series in which at least one instrument has an uncured (uncorrected) default. The instrument contains an unauthorized signature or has been altered. There is a defense against the instrument or a claim to the instrument. The instrument is so incomplete or irregular as to call into question its authenticity.

The maker of a promissory note unconditionally promises to pay the note according to its terms.

It is the maker's promise to pay that renders the instrument negotiable. Even if the promissory note was incomplete at the time the maker signed it, the maker is still obligated to pay. The maker must pay it according to either its stated terms or terms that were agreed on and later filled in to complete the instrument

Mr. A borrowed $1,000 from Mrs. X. He constructed a note promising to pay back the loan. Mr. A wrote "I, Mr. A, will pay Mrs. X the money that I borrowed as soon as I am able." The note was signed "Mr. A." Which two requirements need to be added to make this note a negotiable instrument?

It must be an unconditional order to pay. It must be a stated, fixed amount.

What is one requirement of a firm offer for the formation of a sales and lease contract?

It must be signed by the offeror.

Title VII of the Civil Rights Act of 1964-2

It prohibits discrimination in the hiring process, discipline procedures, discharge, promotion, and benefits.

How does the United Nation's Convention on Contracts for the International Sale of Goods (CISG) provide legal remedies when there is a breach of international sales contracts?

It provides the seller a release from contract obligations when the buyer breaches the contract.

The WARN Act applies to employers with at least one hundred full-time employees.

It requires an employer to provide sixty days' notice before implementing a mass layoff or closing a plant that employs more than fifty full-time workers. A mass layoff is a layoff of at least one-third of the full-time employees at a particular job site.

Explain the purpose of the Worker Adjustment and Retraining Notification Act.

It requires employers of at least one hundred full-time employees to provide sixty days' notice before implementing a mass layoff (at least one-third of the full-time employees at the site) or closing a plant that employs more than fifty full-time workers.

Jayme's voluntary petition for bankruptcy is found to be proper. The order for relief is effective as soon as

Jayme files the petition.

Jenna receives a check from Kristy. Without Jenna's knowledge, Leland indorses it in his own name and deposits it in his account at Metro Bank. In Jenna's subsequent suit against the bank for the money, the court will most likely rule in favor of

Jenna, because Leland's signature is not authorized.

First Union Bank refuses to pay funds to James for a check written by Eli due to insufficient funds. James assigns the check to Jennie for payment of a debt he owes her. When Jennie presents the check for payment to her bank it is returned for insufficient funds. In this situation

Jennie is a holder in due course.

Stephanie needs to have her car's radiator replaced so she takes it to Jesse, who makes the necessary repairs. Stephanie writes him a check. In this transaction, presentment occurs when:

Jesse presents the check to Stephanie's bank.

Juanita wishes to borrow cash from Kenneth and offers him a security interest in her neighbor's diamond ring, which she will most certainly receive when her neighbor dies. Regarding Juanita's proposal, which of the following statements is true?

Kenneth cannot take a security interest in the ring, because Juanita does not have legal rights to it.

Exemptions to Antitrust Enforcement

LABOR Agricultural associations Fisheries Insurance companies Exporters Professional baseball Oil marketing Defense activities Small businesses' cooperative research State actions Regulated industries Businesspersons' joint efforts to seek government action

Explain labeling and packaging laws.

Labels must be accurate, use words that are easily understood by the ordinary consumer and specify the raw materials used and carry a warning if the product is hazardous

Which act by a party terminates an agency relationship?

Lapse of time

Termination by Act of the Parties

Lapse of time. Purpose achieved. Occurrence of a specific event. Mutual agreement. Termination by one party.

Describe letter of credit transactions, as they pertain to international sales contracts.

Letter-of-Credit transactions occur when an issuer (bank or other financial institution) agrees to issue a letter of credit and to maker sure the beneficiary (seller) performs certain acts. The account party (buyer) promises to reimburse the issuer for the amount paid to the beneficiary.

The federal law that is designed to prevent deception in warranties is known as the .

MAGNUSON-MOSS ACT

One type of pollution that local governments typically regulate is

MAXIMUM NOISE LEVEL

When a court determines that a contract was unconscionable at the time that it was made, the UCC allows all of the following EXCEPT one, which is:

Make the parties go through with the contract no matter what.

Key Provisions of the Sarbanes-Oxley Act Relating to Public Accounting Firms:

Makes it unlawful for the Register PUblic Accountinf firms (RPAF) TO PERFORM BOTH AUDIT AND NON AUDIT SERVICES FOR THE SAME COMPANY AT THE SAME TIME REQUIRES PREAPPROVAL FOR MOST AUDITING SERVICES FROM THE ISSURER'S AUDIT COMMITTE

What actions will release surety and guarantor?

Making any material modifications to the terms of the original contract without the surety's consent will discharge the surety's obligation. If a creditor surrenders the collateral to the debtor or impairs the collateral without the surety's consent, any payment of the principal obligation by the debtor or by another person on the debtor's behalf will discharge the surety from the obligation.

Exceptions to Automatic Perfection. There are two exceptions to the rule of automatic perfection for PMSIs: Certain types of security interests that are subject to other federal or state laws may require additional steps to be perfected [UCC 9-311].

Many jurisdictions, for instance, have certificate-of-title statutes that establish perfection requirements for security interests in certain goods, including automobiles, trailers, boats, mobile homes, and farm tractors. PMSIs in nonconsumer goods, such as a business's inventory or livestock, are not automatically perfected [UCC 9-324]. These types of PMSIs will be discussed later in this chapter in the context of priorities.

Discharge by Material Alteration

Materially altering an instrument may discharge the liability of all parties, as previously discussed

Insurance companies

McCarran-Ferguson Act of 1945—Exempts the insurance business in states in which the industry is regulated.

Delivery ex-ship (delivery from the carrying vessel)—

Means that risk of loss does not pass to the buyer until the goods are properly unloaded from the ship or other carrier [UCC 2-322].

Special Rules for Contracts between Merchants

Merchants can satisfy the Statute of Frauds if, after the parties have agreed orally, one of the merchants sends a signed written (or electronic) confirmation to the other merchant within a reasonable time IN SALES TRANSACTIONS ONLY.

Horizontal Mergers

Mergers between firms that compete with each other in the same market

Metro Hospital, Inc., employs New Collection Company as an agent for the collection of Metro's unpaid accounts. While garnishing O'Shea's wages, New Collection misstates the amount and collects too much. O'Shea can recover from

Metro or New Collection.

Describe some of the common indorsement problems.

Misspelled names can be indorsed with the misspelled name, the correct name, or both.

Describe "monopolization."

Monopolization is the possession of control of a specific market by a single entity and the willful acquisition or maintenance of power. Both monopoly power (ability to affect prices) and intent must be present to violate section 2 of the SAA.

Internet payment systems—

Most financial institutions permit their customers to access the institution's computer system via the Internet and direct a transfer of funds between accounts or pay a particular bill. Payments can be made on a one-time or a recurring basis.

Julian receives a promissory note from his grandmother as a birthday present. Is Julian a holder in due course (HDC) with respect to the note?

NO, BECAUSE THE NOTE WAS A GIFT

Which act ensures employees have the right to a duly designated representative who bargains collectively on their behalf?

National Labor Relations Act

In practice, the permit system under the CWA includes the following elements:

National effluent (pollution) standards set by the EPA for each industry. Water-quality standards set by the states under EPA supervision. A discharge permit program that sets water-quality standards to limit pollution. Special provisions for toxic chemicals and for oil spills. Construction grants and loans from the federal government for publicly owned treatment works, primarily sewage treatment plants.

A Fixed Amount of Money

Negotiable instruments must state with certainty a fixed amount of money to be paid at the time the instrument is payable [UCC 3-104(a) ]. This requirement ensures that the value of the instrument can be determined with clarity and certainty. payable in money

Define and describe "negotiation."

Negotiation is the transfer of an instrument in such form that the transferee becomes a holder. Transfer by negotiation provides that the transferee becomes a holder and the holder receives the rights of the previous possessor but can also receive more rights in the instrument than the prior possessor had.

Who are the members of juries in administrative hearings?

No one, because there are no juries.

If a warranty were created by putting "party platter feeds twenty" on the platter does it always have to feed twenty people?

No, a reasonable person standard would be followed.

If an order instrument is indorsed in blank, is it still a "secure" instrument?

No, because it becomes a bearer instrument, which anybody can cash.

In a state that follows the Ultramares rule, if Ray were to write a report that contained false information, would he be liable to the company who was buying Onyx?

No, since there is no privity (or near privity) of contract between Ray and the firm buying Onyx.

U.S. Antitrust Laws in the Global Context

Not only may persons in foreign nations be subject to their provisions, but the laws may also be applied to protect foreign consumers and competitors from violations committed by U.S. business firms. Consequently, foreign persons, a term that by definition includes foreign governments, may sue under U.S. antitrust laws in U.S. courts.

Third Party's Knowledge

Note that if the third party knows at the time the contract is made that the agent does not have authority, then the agent is not liable. Similarly, if the agent expressed to the third party uncertainty as to the extent of her or his authority, the agent is not personally liable.

At the federal level, the primary legislation protecting employees' health and safety is the

Occupational Safety and Health Act,which is administered by the Occupational Safety and Health Administration (OSHA). The act imposes on employers a general duty to keep the workplace safe.

Commercial Impracticability

Occurrences unforeseen by either party when a contract was made may make performance commercially impracticable. When this occurs, the perfect tender rule no longer applies. The seller or lessor must, however, notify the buyer or lessee as soon as practicable that there will be a delay or nondelivery.

Describe "price discrimination."

Occurs when a seller charges different prices to competing buyers for identical goods or services.

Future Advances

Often, a debtor will arrange with a bank to have a continuing line of credit under which the debtor can borrow funds intermittently. Advances against lines of credit can be subject to a properly perfected security interest in certain collateral.

Private Security Service employs Olsen as an agent. Without Private Security's knowledge but otherwise acting within the scope of employment, Olsen commits a crime. The state can successfully prosecute

Olsen

Drawers and indorsers are secondarily liable.

On a negotiable instrument, secondary liability is contingent liability. In other words, a drawer or an indorser will be liable only if the party that is primarily responsible for paying the instrument refuses to do so—that is, dishonors the instrument.

government regulation brings two ethical principles into conflict.

On the one hand, deeply embedded in American culture is the idea that the government should play a limited role in directing our lives. On the other hand, one of the basic functions of government is to protect the welfare of individuals and the environment in which they live.

Agency law is similar to contract law in that both an agency and a contract may be terminated by an act of the parties or by operation of law.

Once the relationship between the principal and the agent has ended, the agent no longer has the right (actual authority) to bind the principal. For an agent's apparent authority to be terminated, though, third persons may also need to be notified that the agency has been terminated.

Point-of-sale systems—

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

How do statements of opinion or value affect express warranties?

Only statements of fact create an express warranty, so statements of opinion do not create an express warranty unless the opinion is given by an expert then an express warranty can be created.

Agency Actions

Only the DOJ can prosecute violations of the Sherman Act, which can be either criminal or civil offenses. Violations of the Clayton Act are not crimes, but the act can be enforced by either the DOJ or the FTC through civil proceedings.

Assume that Ray agrees to write the report in question and Onyx is required to be in compliance with the Private Securities Litigation Reform Act of 1995. If Ray were to detect a securities fraud while doing the work, to whom must he report it?

Onyx's board of directors, Onyx's audit committee, and/or the Securities Exchange Commission.

The Right to Recover Damages for the Buyer's Nonacceptance If a buyer or lessee repudiates a contract or wrongfully refuses to accept the goods, a seller or lessor can bring an action to recover the damages sustained.

Ordinarily, the amount of damages equals the difference between the contract price or lease payments and the market price or lease payments at the time and place of tender of the goods, plus incidental damages [UCC 2-708(1), 2A-528(1)]. When the ordinary measure of damages is inadequate to put the seller or lessor in as good a position as the buyer's or lessee's performance would have, the UCC provides an alternative. In that situation, the proper measure of damages is the lost profits of the seller or lessor, including a reasonable allowance for overhead and other expenses [UCC 2-708(2), 2A-528(2)].

Nakamura, an accountant for Outdoor Outfitters, Inc., issues company checks payable to nonexistent persons drawn on Outdoor's account at Peerless Bank. Nakamura indorses the checks and deposits them in his account. Outdoor discovers the theft and demands that Peerless recredit its account. Peerless's best defense is that

Outdoor was in a better position than Peerless to prevent the theft.

Which of the following is NOT a type of transaction that commonly uses cashier's checks:

PAYMENTS FOR RENT

document of title

Paper 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).

Define and describe Parol Evidence.

Parol evidence is any negotiations or agreements made prior to a contract or any contemporaneous oral agreements made by the parties. Parol evidence consists of evidence outside the contract.

Define Negligence and Strict Liability.

Parties may be sued for a negligent action if their failure to use reasonable care toward another party whose injury was foreseeable and was caused by the lack of reasonable care.

Which employer requirement is included in Davis-Bacon Act?

Paying prevailing rates to all employees paid with federal funds

What are two requirements of the buyer under the Uniform Commercial Code (UCC) when there are products that are sight unseen?

Payment for goods for which reasonable opportunity for inspection expired Acceptance of part of a shipment where goods are defective and cannot be replaced prior to expiration of contract terms

What types of transfers will NOT constitute a preference?

Payment for services rendered within fifteen days before the payment is not a preference.

Which provision within a repayment plan determines approval for debt adjustment?

Payment of claims entitled to priority, such as taxes

Proceeds Example 21.8

People's Bank has a perfected security interest in the inventory of a retail seller of heavy farm machinery. The retailer sells a tractor out of this inventory to Jacob Lamensdorf, who is by definition a buyer in the ordinary course of business (this term will be discussed later in the chapter). Lamensdorf agrees, in a security agreement, to make monthly payments to the retailer for a period of twenty-four months. If the retailer goes into default on the loan from the bank, the bank is entitled to the remaining payments Lamensdorf owes to the retailer as proceeds.

The UCC's rules of priority can be summarized as follows:

Perfected security interest versus unsecured creditors and unperfected security interests. When two or more parties have claims to the same collateral, a perfected secured party's interest has priority over the interests of most other parties [UCC 9-322(a) (2) This includes priority to the proceeds from a sale of collateral resulting from a bankruptcy (giving the perfected secured party rights superior to those of the bankruptcy trustee, as will be discussed in Chapter 22). Conflicting perfected security interests. When two or more secured parties have perfected security interests in the same collateral, generally the first to perfect (by filing or taking possession of the collateral) has priority [UCC 9-322(a)(1)]. Conflicting unperfected security interests. When two conflicting security interests are unperfected, the first to attach (be created) has priority [UCC 9-322(a)(3)]. This is sometimes called the "first-in-time" rule.

Under UCC 3-303(a), a holder takes an instrument for value if the holder has done any of the following:

Performed the promise for which the instrument was issued or transferred. Acquired a security interest or other lien in the instrument, excluding a lien obtained by a judicial proceeding (see Chapters 20 and 21). Taken the instrument in payment of, or as security for, a preexisting obligation (sometimes called an antecedent claim). Given a negotiable instrument as payment. Given an irrevocable commitment (such as a letter of credit, described in Chapter 18) as payment.

Before being transported, hazardous waste generated by Perilous Fabrication, Inc., must be properly labeled and packaged under the Resource Conservation and Recovery Act by

Perilous Fabrication, Inc

Restatement (Third) of Torts. This rule states that accountants are subject to liability for negligence not only to their clients but also to foreseen, or known, users of their reports or financial statements.

Persons for whose benefit and guidance the accountant intends to supply the information or knows that the recipient intends to supply it. Persons whom the accountant intends the information to influence or knows that the recipient so intends.

Define Nuisance.

Persons may be held liable if they use their property in a manner that unreasonably interferes with others' rights to use or enjoy their own property.

The Food and Drug Administration (FDA) regulates the distribution of Gensol. The FDA is a federal executive agency. It has rules about off-label marketing of drugs. If Pharzime was to be accused of violating one of the FDA rules, which of the following is true?

Pharzime could only have the case in the federal court system after it exhausted all of the administrative remedies available to it.

Under a shipment contract, unless otherwise agreed, the seller must do the following:

Place the goods into the hands of the carrier. Make a contract for their transportation that is reasonable according to the nature of the goods and their value. (For example, certain types of goods need refrigeration in transit.) Obtain and promptly deliver or tender to the buyer any documents necessary to enable the buyer to obtain possession of the goods from the carrier. Promptly notify the buyer that shipment has been made [UCC 2-504].

Describe "preferences" as they pertain to the bankruptcy proceedings.

Preferences in bankruptcy proceedings are the property transfers or payments made by the debtor that favor on creditor over others.

e-money

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

EXAMPLES OF PER SE VIOLATIONS IN HORIZONTAL RESTRAINTS

Price Fixing and E-Books. Price Fixing and Drug Manufacturers. Group Boycotts Horizontal Market Division Trade Associations Joint Ventures

Persons who provide information about violators may be paid up to $10,000.

Private citizens can also sue violators.

Define and describe "proceeds."

Proceeds are the cash or property received when collateral is sold or disposed of in some other way. A security inters in proceeds perfects automatically on the perfection of the secured party's security interest in the original collateral and remains effective for twenty days after the debtor receives the proceeds.

After-acquired property

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

Tangible property

Property that has physical existence and can be distinguished by the senses of touch, sight, and so on. A car is tangible property, for example.

Intangible property

Property that is incapable of being apprehended by the senses (such as by sight or touch); intellectual property is an example of intangible property.

The estate in bankruptcy does NOT include one of the following:

Property that was sold three years ago by the debtor.

The Effect of Qualified Indorsements

Qualified indorsements are often used by persons (agents—see Chapter 8) acting in a representative capacity. For instance, insurance agents sometimes receive checks payable to them that are really intended as payment to the insurance company. The agent is merely indorsing the payment through to the insurance company and should not be required to make good on a check if it is later dishonored. The "without recourse" indorsement relieves the agent from any liability on the check.

The penalty that will be imposed on a creditor who does not exactly follow the provisions of the Truth-in-Lending Act (TILA) is

RECISSION OF THE CREDIT CONTRACT

The Centers for Medicare and Medicaid Services wants to seize certain documents of Nation's Hospital Corporation. Deciding whether it is permissible for the agency to request or seize the documents depends on whether the documents are

RELEVANT

The Environmental Protection Agency (EPA) orders Waste Management Company to reveal certain information. Waste Management complains to a court, arguing that the order is an abuse of the EPA's discretion. Like other agencies, the EPA can use a subpoena to

REVEAL VIOLATIONS OF THE LAW

Describe "ratification," as it pertains to a principal and agent.

Ratification occurs when the principal accepts responsibility for an agents unauthorized act. When the principal ratifies an act, it is treated as if the principal authorized it from the outset and the principal is bound to the agent's act.

There are two exceptions to the general rule that an unauthorized signature will not bind the person whose name is signed:

Ratification. When the person whose name is signed ratifies (affirms) the signature, he or she will be bound [UCC 3-403(a)]. The parties involved need not be principal and agent for this section of the UCC to apply. For instance, a mother may ratify her daughter's forgery of the mother's signature so that the daughter will not be prosecuted for forgery. A person can ratify an unauthorized signature either expressly (by affirming the signature) or impliedly (by other conduct, such as keeping any benefits received in the transaction or failing to repudiate the signature). Negligence. When the negligence of the person whose name was forged substantially contributed to the forgery, a court may not allow the person to deny the effectiveness of an unauthorized signature [UCC 3-115, 3-406, 4-401(d)(2)].

define "reasonable accommodation."

Reasonable accommodation may include actions such as installing ramps, establishing flexible working hours or creating modified job assignments and training materials and procedures.

What is one remedy for a principal against an agent who has breached fiduciary duties?

Recovering any benefits or profits that were obtained by virtue of the agency relationship

Red's Roofing buys asphalt roofing tiles from Shingles, Inc. The parties agree that the tile will be shipped "F.O.B. Shingles's warehouse" to Red's Roofing location via Tristate Shipping Corporation. The tiles are lost in transit. The loss is suffered by

Red's Roofing.

The UCC allows a court to evaluate a contract or any clause in a contract, and if the court deems it to have been unconscionable at the time it was made, the court can do any of the following [UCC 2-302, 2A-108]:

Refuse to enforce the contract. Enforce the remainder of the contract without the unconscionable part. Limit the application of the unconscionable term to avoid an unconscionable result.

Conditioned on Offeror's Assent.

Regardless of merchant status, the UCC provides that the offeree's response cannot be construed as an acceptance if it contains additional or different terms and is expressly conditioned on the offeror's assent to those terms [UCC 2-207(1)].

Describe the Davis-Bacon Act, Walsh-Healy Act.

Requires contractors and subcontractors working on federal government construction projects to pay prevailing wages to their employees.

F.A.S. (free alongside)—

Requires that the seller, at his or her own expense and risk, deliver the goods alongside the carrier before risk passes to the buyer

Resource Industries Inc.'s agent Svetlana is authorized to draw checks on the company's account in Town Bank. The checks are preprinted with the company name. Svetlana writes a check "pay to the order of Vivian [signed] Svetlana." Vivian presents the check for payment. If Town Bank dishonors it, liability extends to

Resource Industries

Describe "Per se" violations.

Restraints that are so substantially anticompetitive that they are inherently (Per se) illegal under section 1 OF THE SHERMAN ANTITRUST ACT Price Fixing VIOLATED THE PER SE

Once default has occurred and the secured party has obtained possession of the collateral, the secured party can:

Retain the collateral in full or partial satisfaction of the debt (subject to limitations). Sell, lease, license, or otherwise dispose of the collateral in any commercially reasonable manner and apply the proceeds toward satisfaction of the debt [UCC 9-602(7), 9-603, 9-610(a), 9-613, 9-620]. Any sale is always subject to procedures established by state law.

When the principal does not ratify an unauthorized contract resulting in an unaccepted offer, the third party can then do what?

Revoke the offer at any time without liability.

Define and describe "risk of loss" and how it applies to shipment and destination contracts.

Risk of loss is the chase of suffering financial loss if the goods are damaged, destroyed, or lost in transit. Unless otherwise stated, with a shipment contract the risk of loss is passed to the buyer when the goods are delivered to the carrier and with a destination contract the risk of loss is passed to the buyer when the goods are delivered to a specific destination or the buyer.

Roasters Corporation and Outdoor Barbecue, Inc., enter into a contract for a sale of a commercial grill. The contract requires Roasters to deliver the goods to Speedy Delivery Company for transport to Outdoor. Risk of loss passes to Outdoor when

Roasters delivers the goods to Speedy.

Joann does not qualify as a holder in due course (HDC), but takes possession of a promissory note through Madison, who is an HDC. Joann can acquire the rights and privileges of an HDC though the .

SHELTER PRINCIPLE

Michael signs a promissory note and a security agreement for a line of credit over his business inventory for sale to consumers with First American Bank, and American perfects its interest. Michael then buys a truck for use in his business and finances the purchase from Second American Bank. In the event of default, who has priority in the truck?

Second American Bank

Differences between Section 1 and Section 2 OF THE SHERMAN ANTITRUST ACT

Section 1 requires two or more persons, as a person cannot contract, combine, or conspire alone. Thus, the essence of the illegal activity is the act of joining together. Section 2, though, can apply either to one person or to two or more persons because it refers to "every person." Thus, unilateral conduct can result in a violation of Section 2.

The differences between Section 1 and Section 2 of the Sherman Act concern is that:

Section 2 can apply to one person

Describe and explain the major provisions of the Sherman Antitrust Act.

Sections 1 and 2 contain the main provisions which state respectively that any contract that significantly restrains interstate trade is illegal and monopolies are prohibited. Section 3 states that sellers or lessors cannot conditionally sell or lease goods. Section 7 prevents mergers that could result in monopoly power or a substantial lessening of competition in the marketplace. Section 8 prohibits individuals from serving on more than one board of directors of competing corporations at the same time.

The author of the Sherman Antitrust Act of 1890,

Senator John Sherman, was the brother of the famed Civil War general and a recognized financial authority.

The Consumer Product Safety Act authorizes the CPSC to do the following:

Set safety standards for consumer products. Ban the manufacture and sale of any product that the commission believes poses an "unreasonable risk" to consumers. (Products banned by the CPSC have included various types of fireworks, cribs, and toys, as well as many products containing asbestos or vinyl chloride.) Remove from the market any products it believes to be imminently hazardous. The CPSC frequently works in conjunction with manufacturers to voluntarily recall defective products from stores. Require manufacturers to report on any products already sold or intended for sale if the products have proved to be hazardous. Administer other product-safety legislation, including the Child Protection and Toy Safety Act of 1969 and the Federal Hazardous Substances Act of 1960

Assume that the report that Ray is working on is covered by the Sarbanes-Oxley Act of 2002. For how long must he keep his working papers?

Seven years.

Define and describe sexual harassment and the two forms of sexual harassment.

Sexual harassment in the employment context is the granting of promotions or other benefits in return for sexual favors or conduct that is so sexually offensive that it creates a hostile working environment. The two forms of sexual harassment are Quid pro quo and hostile-environment. Quid pro quo sexual harassment occurs when sexual favors are demanded in return for promotions, salary increases or other job benefits. Hostile environment sexual harassment occurs when there is a pattern of sexually offensive conduct that runs through the workplace and the employer has taken no action to prevent or discourage it.

Realty Acquisitions borrows $1,000,000 at 4 percent interest from Shady Credit Lenders and signs a promissory note for that amount. Without the borrower's authorization, Shady changes the amount of the note to $1,200,000 and increases the rate to 8 percent. Shady materially altered the note when

Shady changed the amount and the interest rate.

buyer in the ordinary course of business PART 2

She or he buys goods in good faith (honestly). The goods are purchased without knowledge that the sale violates the rights of another person in the goods. The goods are purchased in the ordinary course from a merchant (other than a pawnbroker) in the business of selling goods of that kind. The sale to that person comports with the usual or customary practices in the kind of business in which the seller is engaged [UCC 1-201(9)].

Principal's Authorization of Agent's Tortious Conduct

Similarly, a principal who authorizes an agent to commit a tort may be liable to persons or property injured thereby, because the act is considered to be the principal's.

Small businesses' cooperative research

Small Business Administration Act of 1958—Allows small firms to undertake cooperative research.

contract theory

Some courts have held that an implied employment contract exists between the employer and the employee. If the employee is fired outside the terms of the implied contract, he or she may succeed in an action for breach of contract even though no written employment contract exists.

What are some of the defenses to negligence?

Some of the defenses are that the accountant was not negligent, the negligence was not the proximate cause of the client's losses and that the client was also negligent.

Substitution of Carriers

Sometimes, an agreed-on manner of delivery (such as the use of a particular carrier to transport the goods) becomes impracticable or unavailable through no fault of either party. In that situation, if a commercially reasonable substitute is available, this substitute performance is sufficient tender to the buyer and must be used [UCC 2-614(1)]. The seller or lessor is required to arrange for a substitute carrier and normally is responsible for any additional shipping costs (unless the contract states otherwise).

Destruction of Identified Goods

Sometimes, an unexpected event, such as a fire, totally destroys goods through no fault of either party before risk passes to the buyer or lessee. In such a situation, if the goods were identified at the time the contract was formed, the parties are excused from performance [UCC 2-613, 2A-221]. If the goods are only partially destroyed, however, the buyer or lessee can inspect them and either treat the contract as void or accept the damaged goods with a reduction in the contract price.

The Duty of Cooperation.

Sometimes, the performance of one party depends on the cooperation of the other. The UCC provides that when cooperation is not forthcoming, the other party can suspend performance without liability and hold the uncooperative party in breach or proceed to perform the contract in any reasonable manner [UCC 2-311(3)].

Ridgetop Bank is an HDC of a note for $1,000 on which there is the forged signature of "Stan." If sued on the note by Ridgetop

Stan's best defense would be forgery.

requires that a guaranty contract between the guarantor and the creditor must be in writing or electronically recorded to be enforceable unless the main purpose rule applies.

Statute of Frauds

Future AdvancesExample 21.10

Stroh is the owner of a small manufacturing plant with equipment valued at $1 million. He has an immediate need for $40,000 of working capital, so he obtains a loan from Midwestern Bank and signs a security agreement, putting up all of his equipment as security. The bank properly perfects its security interest. The security agreement provides that Stroh can borrow up to $500,000 in the future, using the same equipment as collateral for any future advances. In this situation, Midwestern Bank does not have to execute a new security agreement and perfect a security interest in the collateral each time an advance is made, up to a cumulative total of $500,000. For priority purposes, each advance is perfected as of the date of the original perfection.

Assume that Sunil is hired under the H1-B program. Which of the following is true?

Sunil must be provided a wage level at least equal to the wages offered to other individuals with similar experience and qualifications

Unwanted and unsolicited advertising sent via a fax machine may violate the .

TELEPHONE CONSUMER PROTECTION ACT

Which agency is dedicated to overseeing the practices of banks, mortgage lenders, and credit-card companies?

THE CONSUMER FINANCIAL PROTECTION AGENCY

After notice-and-comment rulemaking, the Internal Revenue Service (IRS) issues a new rule and applies it to Sales & Revenue Company. National Sales & Revenue appeals the application to a federal court. The court will most likely defer to the IRS's interpretation of

THE FACTS AND THE LAW

When a Title Document is Required

TITLE passes to the buyer when and where the document is delivered. Thus, if the goods are stored in a warehouse, title passes to the buyer when the appropriate documents are delivered to the buyer.

If the agent engages in misrepresentation, negligence, deceit, liable, slander, or trespass, what type of remedies does the principal have?

TORT

A court can apply the doctrine of agency by estoppel when a principal has given a third party reason to believe that an agent has authority to act.

TRUE

A dominant market share may be the result of good business judgment or the development of a superior product.

TRUE

A holder of an instrument receives, at the very least, the rights of the previous possessor.

TRUE

A holder who had notice of a claim or defense against an instrument cannot gain HDC status by later reacquiring the instrument from HDCs.

TRUE

A person who signs a check and leaves the dollar amount for someone else to fill out is barred from protesting when the bank unknowingly and in good faith pays whatever amount is shown.

TRUE

A potential purchaser who knows that the maker of a note has breached the underlying contract with the payee cannot purchase the note as an HDC.

TRUE

Agency relationships can exist outside an employer-employee relationship, and thus agency law has a broader reach than employment law does.

TRUE

All reaffirmation agreements must be signed and filed with the court.

TRUE

An accountant may be liable to anyone who acquires a security covered by the registration statement in which the accountant's financial statements are included.

TRUE

An implied warranty of merchantability and an implied warranty of fitness for a particular purpose, or both, can exist in addition to an expressed warranty.

TRUE

An instrument is dishonored when the party to whom the instrument is presented refuses to pay it.

TRUE

An irregularity that creates an ambiguity as to the party to pay prevents a holder from becoming an HDC.

TRUE

Businesspersons undertaking international sales transactions should draft specific forms to suit the needs of the particular transaction.

TRUE

Goods can be merchantable, but at the same time unfit for a particular purpose.

TRUE

If an additional term relates to payment, quality, quantity, price, time, and place of delivery, the CISG considers the added terms as material alterations.

TRUE

In contracts that involve the sale of both goods and services, once a court decides that such a contract is primarily a goods contract, any dispute, even over the services portion, will be decided under the UCC.

TRUE

Once a check is certified, the drawer and any prior indorsers are completely discharged from liability on the check.

TRUE

Some vertical restraints are per se violations of Section 1 whereas others are judged under the rule of reason.

TRUE

The UCC warranty rules remain the primary codification of such rules for commercial transactions.

TRUE

The majority of courts hold that auditors can be held liable to third parties for negligence.

TRUE

The primary effect of a discharge is to void any judgment on discharged debt and prohibit any action to collect a discharged debt.

TRUE

The serving of food or drink is treated as a sale of goods subject to the implied warranty of merchantability.

TRUE

To a large extent, statutory law has displaced common law doctrines that apply to employment relationships.

TRUE

Under contract law principles, an assignment gives the assignee only those rights that the assignor possessed. Therefore any defenses that can be raised against an assignor can be raised against the assignee.

TRUE

Union shops are technically illegal in the 24 states that have right-to-work laws.

TRUE

When regulated groups oppose a rule adopted by an agency, they can bring a lawsuit arguing that the rule was not authorized by the enabling statute.

TRUE

When the buyer is a consumer, any limitation of consequential damages for personal injuries resulting from consumer goods is presumed to be unconscionable.

TRUE

When the principal-agent relationship is not contractual, the agent has no right to specific performance.

TRUE

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.

TRUE

Without evidence to the contrary, when both parties to a sales 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.

TRUE

Super Sports stores order sporting goods from Team Supplies, Inc., which ships conforming items via UniWay Delivery Service. Super Sports receives and accepts the goods but fails to pay Team Supplies. Subsequently, Super Sports's warehouse collapses, and the goods are destroyed. The loss is suffered by

Team Supplies.

Sylvia asks Teresa, who does not understand English, to sign what Sylvia says is an application to open a bank account. In fact, the "application" is a note. If Teresa is sued on the note by an HDC

Teresa's best defense would be fraud in the execution.

Daily Bread Bakeries, Inc., contracts to buy all of its ingredient requirements for bread making, at a certain minimum per year, from Enriched Flour & Grain Corporation for six years. After three years, Daily Bread tells Enriched that it plans to sell its assets to Flat Bread Shops, Inc. Flat Bread refuses to assure Enriched that it will continue Daily Bread's contract.-2

Terminate the contract and seek damages

differentiate between termination by act and termination by operation of law.

Termination by an act of the parties can occur by the lapse of time, purpose achieved, occurrence of a specific event, mutual agreement, or termination by one party. Termination by operation of law can occur due to death or insanity of either the principal or agent, impossibility to continue the agency, due to changed circumstances, bankruptcy, and war.

EXAMPLES OF PER SE VIOLATIONS IN VERTICAL RESTRAINTS

Territorial or Customer Restrictions Resale Price Maintenance Agreements

Payable at a Definite Time If an instrument is not payable on demand, to be negotiable it must be payable at a definite time. An instrument is payable at a definite time if it states any of the following:

That it is payable on a specified date. That it is payable within a definite period of time (such as thirty days) after being presented for payment. That it is payable on a date or time readily ascertainable at the time the promise or order is issued [UCC 3-108(b)].

Explain the purpose of the Affordable Care Act, and when it applies to businesses.

The ACA requires employers with 50 or more full time employees to provide health insurance coverage that is not more than 9.5 percent of the employees' income.

Describe the Americans with Disabilities Act.

The ADA prohibits discrimination based on disability in all workplaces, except state government employers, with fifteen or more workers. The ADA requires employers to reasonably accommodate the needs of persons with disabilities unless to do so would cause the employer to suffer an undue hardship.

Describe the Age Discrimination in Employment Act.

The ADEA prohibits employers to discriminate on basis of age against individuals forty years of age or older and it also prohibits mandatory retirement for nonmanagerial workers. It also protects employees from retaliation based on age-related complaints.

What happens when no party appeals an adjudication?

The ALJ's decision becomes the final order of the agency.

Explain the "Administrative Procedure Act."

The Administrative Procedure Act (APA) was enacted to provide more judicial control over administrative agencies. If directives from Congress concerning an agency procedure is absent the APA applies. The APA allows the courts to set aside any agency action found to be arbitrary, capricious or an abuse of discretion.

Which federal provision requires the plaintiff to show that unlawful bias is the primary reason for an adverse employment action?

The Age Discrimination Employment Act

The Homestead Exemption

The Bankruptcy Code limits the amount of equity that can be claimed under the homestead exemption. In general, if the debtor acquired the homestead within three and a half years preceding the date of filing, the maximum equity exempted is $155,675, even if state law would permit a higher amount.

Describe the regulations designed to protect air and water.

The CAA provides the basis for issuing regulations to control multistate air pollution covering both mobile sources and stationary sources of pollution. Such as emission standards for cars and hazardous air pollutants for stationary sources. The CWA established standards to make waters safe for swimming, to protect fish and wildlife and to eliminate the discharge of pollutants into the water. The CWA created a permit system (NPDES) to regulate discharges from point sources of pollution. The SDWA requires the EPA to set maximum levels of pollutants in public water systems. The MPRSA regulates the transportation and dumping of material into ocean waters. The OPA may hold any party that discharges oil into navigable waters or onto an adjoining shore liable for clean-up costs and damages to natural resources, private property, and the local economy.

Describe how the CISG applies to the international sale of goods.

The CISG applies only to countries that have ratified the CISG and if the parties have not agreed that some other law will govern their contract. The CISG is similar to the UCC Article 2 for domestic sales contracts except that it does not apply to consumer sales

What is the purpose of the Clayton Act of 1914.

The Clayton Act was established to cover anticompetitive or monopolistic practices that the Sherman Act did not cover.

Notification Requirements

The Consumer Product Safety Act requires the distributors of consumer products to notify the CPSC immediately if they receive information that a product "contains a defect which ... creates a substantial risk to the public" or "an unreasonable risk of serious injury or death."

In the 1930s, Congress enacted several laws to regulate the wages and working hours of employees, including the following:

The Davis-Bacon Act The Walsh-Healey Act The Fair Labor Standards Act (FLSA)

Congress enacted the Equal Credit Opportunity Act (ECOA) as an amendment to the TILA.

The ECOA prohibits the denial of credit solely on the basis of race, religion, national origin, color, gender, marital status, or age. The act also prohibits credit discrimination on the basis of whether an individual receives certain forms of income, such as public-assistance benefits.

Differentiate between consumer fund transfers and commercial fund transfers.

The EFTA governs financial institutions that offer electronic transfers or funds (EFT) involving customer accounts. The type of accounts covered include checking, savings, and any other asset account established for personal, family, or household purposes. Telephone transfers are covered by the EFTA if they are made in accordance with a prearranged plan under which periodic or recurring transfers are contemplated. Commercial fund transfers are made electronically (wired) between commercial parties in larger dollar volume and are governed by Article 4A.

What defenses can an employer make against charges of sexual harassment?

The Ellerth/Faragher affirmative defense provides employers defense against sexual harassment charges if they have taken reasonable care to prevent and correct any sexually harassing behavior and the plaintiff-employee must have failed to take advantage of preventive or corrective opportunities provided by the employer to avoid harm.

Which remedy is available to an employee who is discriminated against because of a disability, according to the Americans with Disabilities Act?

The Equal Employment Opportunity Commission (EEOC) can sue on behalf of an employee.

Define and describe the Family and Medical Leave Act.

The FLMA allows employees to take time off work for family or medical reasons. FLMA allows employees to take up to twelve weeks of unpaid family or medical leave during any twelve-month period for reasons such as, child care within the 1st year of birth or adoption/fostering, care for spouse, child or parent who has a serious health condition, the employee suffers from a serious health condition and performance of essential functions are affected and any qualifying exigency of spouse, children or parent that is a covered military member on active duty. Also allows 26 weeks of military caregiver leave within a twelve-month period for the care of a family member seriously injured during military duty.

Child Labor

The FLSA prohibits oppressive child labor. Children under fourteen years of age are allowed to do only certain types of work, such as deliver newspapers, work for their parents, and be employed in entertainment and (with some exceptions) agriculture. Children aged fourteen and fifteen are allowed to work, but not in hazardous occupations. There are also numerous restrictions on how many hours per day and per week children can work. Working times and hours are not restricted for persons between the ages of sixteen and eighteen, but they cannot be employed in hazardous jobs.

Minimum Wages

The FLSA provides that a minimum wage of $7.25 per hour must be paid to employees in covered industries When the state minimum wage is greater than the federal minimum wage, the employee is entitled to the higher wage.

What is the Fair Packaging and Labeling Act?

The FPLA requires that food product labels identify the product, the net quantity of the contents and serving size information, the manufacturer and the packager or distributor. Other requirements concern the descriptions on packages, savings claims, components of nonfood products and standards for partial filling of packages

Describe the federal limitations on HDC rights, including FTC Rule 433.

The FTC Rule 433 severely limits the rights of holders in due course who purchase instruments through consumer credit transactions. The rule applies to consumers who purchase goods or services for personal, family, or household use using a consumer credit contract. The regulation prevents a consumer from being liable for a defective product to a third party HDC who has acquired an instrument from the dealer who sold the defective good.

Explain how online deceptive advertising is monitored.

The FTC actively monitors online advertising and has issued guidelines to help online businesses comply with existing laws including that all ads must be truthful and not misleading, the claims made must be substantiated, ads cannot be unfair and there must be clear and conspicuous disclosure of any qualifying or limiting information.

A specialized debt-collection agency contacted a consumer at his home at four o'clock in the morning to collect a past due medical bill owed by the consumer's mother. During the call, the collection agency harassed and threatened the consumer if payment of the debt was not forthcoming. Which federal statute prohibits this type of collection tactic?

The Fair Debt Collection Practices Act

Describe how the Federal Reserve System clears checks.

The Federal Reserve System simplifies the check collection process by acting as a clearing house, a place where banks exchange checks and drafts drawn on each other and settle daily balances.

Describe and give examples of "Public Accountability Laws."

The Freedom of Information Act (FOIA) requires the federal government to make their records available electronically to the public except items of national security or items that are confidential and personal. The Government in Sunshine Act requires that meetings of an agency be open to public observation and that adequate advance notice of scheduled meetings and agendas is given.

What is the purpose of ICRA?

The IRCA provided amnesty to certain groups of aliens living illegally in the U.S. and established a system that sanctions employers that hire immigrants who can't legally work in the U.S. It makes it illegal to hire, recruit or refer for a fee anyone who does not have the authority to work in the U.S.

Explain the purpose of the Immigration Act.

The Immigration Act placed caps on the number of visas that can be issued to immigrants each year. Most temporary visas are reserved for highly skilled foreign workers. In order to hire these workers the employer must submit a petition to the U.S. Citizenship and Immigration Services which determines whether the candidate meets the legal standards.

Explain the Magnuson-Moss Warranty Act.

The Magnuson-Moss act was designed to prevent deception in warranties by making them easier to understand. The act indicates that no seller is required to give a written warranty for consumer goods sold, however if a seller chooses to make an express written warranty and the cost of the consumer goods is more than $25, the warranty must be labeled as either full or limited. A full warranty requires free repair or replacement of any defective part and a limited warranty is where the buyer's recourse is limited in some way and it must be stated that the warranty is limited. The act also requires that the warrantor make certain disclosures in a single document that is readily understood. The seller must also clarify the buyer has legal rights and explain the limitations on the warranty.

Describe the National Labor Relations Act NRLA

The NLRA established the rights of employees to engage in collective bargaining and to strike. The act also defined a number of employer unfair labor practices pertaining to unions.

Describe the Norris-LaGuardia Act.

The Norris-LaGuardia Act protects employees from court injunctions for participating in peaceful strikes.

Define and describe the Occupational Safety and Health Act (OSHA).

The OSHA imposes a general duty to keep the workplace safe by establishing specific safety standards that employers must follow. The act requires that employers post notices, maintain records and submit reports.

Explain the Postal Reorganization Act of 1970?

The Postal Reorganization Act (PRA) indicates that if a consumer receives unsolicited merchandise sent by U.S. mail they may keep it, throw it away or dispose of it in any manner that they see fit and is not obligated to the sender.

When the Seller or Lessor Delivers Nonconforming Goods

The Right to reject the Goods Revocation of Acceptance The Right to Recover Damages for Accepted Goods

What is the Statute of Limitations for a breach of warranty?

The Statute of Limitations for a breach of warranty 4 years from the time the seller or lessor tenders delivery. The non-breaching party must notify the breaching party within a reasonable time after discovering the breach.

The Truth-in-Lending Act

The TILA is basically a disclosure law. It is administered by the Federal Reserve Board and requires sellers and lenders to disclose credit terms or loan terms so that individuals can shop around for the best financing arrangements.

Describe the Truth-in-Lending Act and the Fair and Accurate Credit Transactions Act. TILA

The TILA regulates credit and credit-card industries. It requires sellers and lenders to disclose credit terms or loan terms so that consumers may determine the best financing arrangements. TILA requirements apply only to individuals whose business it is to lend funds, sell on credit or arrange for the extension of credit.

Explain the Toxic Substance Control Act. TSCA

The TSCA regulates chemicals and chemical compounds that are known to be toxic. It also controls the introduction of new chemical compounds by requiring investigation of any possible harmful effects.

Exceptions Statute of Frauds.

The UCC defines three exceptions to the writing requirements of the Statute of Frauds. An oral contract for the sale of goods priced at $500 or more or the lease of goods involving total payments of $1,000 or more will be enforceable despite the absence of a writing in the circumstances described next [UCC 2-201(3), 2A-201(4)].

Repossession of the Collateral—The Self-Help Remedy

The UCC does not define what constitutes peaceful possession, however. The general rule is that the collateral has been taken peacefully if the secured party has taken it without committing trespass onto land, assault and/or battery, or breaking and entering.

Rules of Construction

The UCC provides rules of construction for interpreting contracts. Express terms, course of performance, course of dealing, and usage of trade are to be construed to be consistent with each other whenever reasonable. When such a construction is unreasonable, however, the UCC establishes the following order of priority [UCC 1-303(e), 2-208(2), 2A-207(2)]:

The Right of Assurance.

The UCC provides that if one party has "reasonable grounds" to believe that the other party will not perform, the first party may in writing "demand adequate assurance of due performance" from the other party. Until such assurance is received, the first party may "suspend" further performance without liability. What constitutes "reasonable grounds" is determined by commercial standards. If such assurances are not forthcoming within a reasonable time (not to exceed thirty days), the failure to respond may be treated as a repudiation of the contract [UCC 2-609, 2A-401].

Describe the UCC's "Good Faith" provision.

The UCC's good faith provision basically means that every contract has an obligation of good faith (honesty in fact) in its performance or enforcement. For a merchant it means honesty in fact and observance of reasonable commercial standards of fair dealing in trade.

State actions

The United States Supreme Court has held that actions by a state are exempt if the state clearly articulates and actively supervises the policy behind its action.

Professional baseball

The United States Supreme Court has held that professional baseball is exempt because it is not "interstate commerce.

One of the major federal laws dealing with layoffs is the:

The Worker Adjustment and Retraining Notification Act (WARN).

Explain an accountant's "Duty of Care."

The accountant must possess the skills and exercise the degree of care that an ordinarily prudent accountant would exercise, such as complying with GAAP, GAAS and IFRS standards.

In 1972, the Consumer Product Safety Act created the first comprehensive scheme of regulation over matters of consumer safety.

The act also established the Consumer Product Safety Commission (CPSC), which has far-reaching authority over consumer safety.

National Labor Relations Act-2

The act also specifically defined a number of employer practices as unfair to labor: Interference with the efforts of employees to form, join, or assist labor organizations or to engage in concerted activities for their mutual aid or protection. An employer's domination of a labor organization or contribution of financial or other support to it. Discrimination in the hiring of or the awarding of tenure to employees for reason of union affiliation. Discrimination against employees for filing charges under the act or giving testimony under the act. Refusal to bargain collectively with the duly designated representative of the employees.

The Fair Debt Collection Practices Act (FDCPA) attempts to curb perceived abuses by collection agencies.

The act applies only to specialized debt-collection agencies and attorneys who regularly attempt to collect debts on behalf of someone else, usually for a percentage of the amount owed.

Presentment

The act of presenting an instrument to the party liable on the instrument to collect payment; presentment also occurs when a person presents an instrument to a drawee for acceptance.

Describe the purpose and function of Title VII of the Civil Rights Act of 1964.

The act prohibits discrimination against employees, applicants and union members on basis of race, color, national origin, religion and gender. It prohibits discrimination in the hiring process, discipline procedures, discharge, promotion and benefits.

In 1914, Congress enacted the Clayton Act.

The act was aimed at specific anticompetitive or monopolistic practices that the Sherman Act did not cover.

The adequate protection doctrine provides that:

The adequate protection doctrine provides that:

What is one duty of an agent to the principal in an agency relationship?

The agent must employ usual and customary efforts and skill in completing the agreed-upon assignment.

The requirements for ratification can be summarized as follows:

The agent must have acted on behalf of an identified principal who subsequently ratifies the action. The principal must know all of the material facts involved in the transaction. If a principal ratifies a contract without knowing all of the facts, the principal can rescind (cancel) the contract.Footnote The principal must affirm the agent's act in its entirety. The principal must have the legal capacity to authorize the transaction at the time the agent engages in the act and at the time the principal ratifies. The third party must also have the legal capacity to engage in the transaction. The principal's affirmation (ratification) must occur before the third party withdraws from the transaction. The principal must observe the same formalities when ratifying the act as would have been required to authorize it initially.

Describe an agent's duties to the principal.

The agent owes the principal the duty of performance by using reasonable diligence and skill in performing the work, the duty to notify the principal of all matters concerning the work, the duty to act solely for the benefit of the principal (loyalty), the duty to follow all lawful and clearly stated instructions of the principal (obedience), the duty to make all accounts of property and funds available to the principal (accounting).

A party wishing to sue under the Sherman Act must prove that:

The antitrust violation either caused or was a substantial factor in causing the injury that was suffered. The unlawful actions of the accused party affected business activities of the plaintiff that were protected by the antitrust laws.

Describe the bank's duty to accept deposits.

The bank has a duty to accept the customer's deposits of cash and checks. When checks are deposited the bank must make the funds available within a certain time and the bank also has the duty to collect payments payable or indorsed to and deposited by the customer into their account.

Describe the bank's duties to honor checks, as it pertains to overdrafts, postdated checks, stale checks, stop-payment orders, and incompetence or death of the customer.

The bank has the duty to honor checks as long as there are sufficient funds, can pay an overdraft and charge an overdraft fee, may pay postdated checks unless notified by the customer not to pay until the stated date, the bank is not obligated to honor a check that is more than 6 months old but may choose to do so, if a customer has good reason a bank is obligated to stop payment on a check as long as it is not a certified check, a bank needs to be timely notified of a customers incompetence or death to have the authority to pay an item revoked and even 10 day after the date of death the bank can pay or certify checks drawn on or before the date of death.

What is the bank's duty to accept deposits for interest bearing accounts?

The bank must provide the customer with this information, the minimum balance required, the interest rate stated in in terms of annual percentage yield, how the interest is calculated, and any fees, charges and penalties and how they are calculated. Also the customer's monthly statement must disclose the interest earned, any fees that were charged, how the fees were calculated, and the number of days that the statement covers.

payor bank

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

Describe the bank-customer relationship.

The bank-customer relationship has three aspects. The creditor-debtor relationship which is created when a customer deposits funds into a bank, the customer becomes the creditor and the bank the debtor. The agency relationship arises when the customer writes a check on their account, the customer is ordering the bank to pay the holder the amount specified on the check, the bank becomes the customer's agent and is obligated to pay the amount on the check. The contractual relationship arises when a bank-customer relationship is established and hold that the bank and customer haver contractual rights and duties.

who is eligible for "fast-tract" chapter 11?

The chapter 11 "fast-track" is available to small business debtors whose liabilities do not exceed $2.49 million and who do not own or manage real estate.

A Floating Lien in a Shifting Stock of Goods

The concept of the floating lien can also apply to a shifting stock of goods. The lien can start with raw materials, follow them as they become finished goods and inventories, and continue as the goods are sold and are turned into accounts receivable, chattel paper, or cash.

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.

The procedure for filing a family-farmer or family-fisherman bankruptcy plan is very similar to the procedure for filing a repayment plan under Chapter 13.

The debtor must file a plan not later than ninety days after the order for relief. The filing of the petition acts as an automatic stay against creditors' and co-obligors' actions against the estate.

In addition to the exceptions to discharge previously discussed, a bankruptcy court may also deny the discharge based on the debtor's conduct. Grounds for denial of discharge of the debtor include the following

The debtor's concealment or destruction of property with the intent to hinder, delay, or defraud a creditor. The debtor's fraudulent concealment or destruction of financial records. The grant of a discharge to the debtor within eight years before the petition was filed. The debtor's failure to complete the required consumer education course. Proceedings in which the debtor could be found guilty of a felony (basically, a court may not discharge any debt until the completion of felony proceedings against the debtor).

With nonconforming goods, the risk of loss does not pass to the buyer until either:

The defects are cured—that is, the goods are repaired, replaced, or discounted in price by the seller—see Chapter 18. The buyer accepts the goods in spite of their defects (thus waiving the right to reject).

petition in bankruptcy

The document that is filed with a bankruptcy court to initiate bankruptcy proceedings. The official forms required for a petition in bankruptcy must be completed accurately, sworn to under oath, and signed by the debtor.

Rules When Both Parties Are Merchants.

The drafters of the UCC created a special rule for merchants to avoid the "battle of the forms," which occurs when two merchants exchange separate standard forms containing different contract terms.

Ellerth/Faragher affirmative defense to charges of sexual harassment. The defense has two elements:

The employer must have taken reasonable care to prevent and promptly correct any sexually harassing behavior (by establishing effective harassment policies and complaint procedures, for instance). The plaintiff-employee must have unreasonably failed to take advantage of preventive or corrective opportunities provided by the employer to avoid harm.

Explain the "entrustment" rule.

The entrustment rule applies to 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. This rule basically allows innocent buyers to obtain legitimate title to goods purchased from merchants even if the merchants do not have good title.

Describe what property will be included in the bankruptcy estate.

The estate in bankruptcy consists of all community property, property transferred in a transaction voidable by the trustee, proceeds and profits from the property of the estate, and certain after-acquired property, such as gifts, inheritances, property settlements, and life insurance death proceeds received within 180 days after filing may be included.

Under the UCC, instruments that include acceleration clauses are negotiable for two reasons:

The exact value of the instrument can be ascertained. The instrument will be payable on a specified date if the event allowing acceleration does not occur [UCC 3-108(b)(ii)].

Executive Controls

The executive branch of government exercises control over agencies both through the president's power to appoint federal officers and through the president's veto power. The president may veto enabling legislation passed by Congress or congressional attempts to modify an existing agency's authority.

Enforcement and Exemptions

The federal agencies that enforce the federal antitrust laws are the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC), which was established by the Federal Trade Commission Act of 1914.

depositary bank .

The first bank to receive a check for payment.

Describe the Consumer Product Safety Act. CPSA

The first comprehensive scheme of regulation over matters of consumer safety. The CPSA requires distributors of consumer products to notify the CPSC immediately if a product contains a defect or has an unreasonable risk of serious injury or death.

Describe the four defenses to employment discrimination.

The first defense for an employer is to assert that the plaintiff has failed to meet his or her initial burden of proof. If the plaintiff succeeds in meeting the burden of proof the employer can try to justify the discriminatory practice. Also if the employer has antiharassment policies and takes prompt remedial action when harassment occurs it may help to shield the

The Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ) have established guidelines for determining which mergers will be challenged.

The first factor is the overall concentration of the relevant market. The second is the relevant market's history of tending toward concentration. The final factor is whether the merger is apparently designed to establish market power or restrict competition.

security interests can be perfected without filing a financing statement.

The first occurs when the collateral is transferred into the possession of the secured party. The second occurs when the security interest is one of a limited number under the UCC that can be perfected on attachment (without a filing and without possession of the goods) [UCC 9-309]

Explain how unions can be organized.

The first step is to have workers sign authorization cards. After the cards are signed by the majority of the workers the organizer turns them into the employer who can recognize the formation of the union voluntarily or refuse. If the employer refuses to recognize the union the organizer can petition the NLRB for an election. If the NLRB holds an election and the union receives majority support the union is certified.

Issue negotiable instrument

The first transfer, or delivery, of an instrument to a holder.

Describe the "Floating Lien" concept.

The floating lien concept is that a security agreement provides a security interest in proceeds, after-acquired property, or collateral subject to future advances and is retained even when the collateral changes in character, classification, or location.

What is the general rule for forged drawer's signatures?

The general rule for forged drawer's signatures is that the bank must recredit the customer's account when it pays on a forged signature unless a customer's negligence substantially contributes to a forgery then the bank is not obligated to recredit the customer's account.

Death or insanity.

The general rule is that the death or insanity of either the principal or the agent automatically and immediately terminates an ordinary agency relationship.Footnote Knowledge of the death or insanity is not required.

Describe the general rules of priority, including possible exceptions.

The general rules of priorities are that perfected security interests have priority over unperfected security interests and unsecured creditors, unperfected security interests have priority over unsecured creditors. When there are conflicting perfected security interests then the first to perfect has priority. When there are conflicting unperfected security interests the first to attach has priority. The exception to theses general rules are that a buyer in the ordinary course of business takes the goods free from any security interest created by the sell even if the security interest is perfected and the buyer knows of its existence. Another exception is a perfected security interest in PMSI items take priority over other security interests and certain types of buyers whose interest in purchased goods have special rules of priority.

Specially Manufactured Goods. An oral contract for the sale or lease of custom-made goods will be enforceable if:

The goods are specially manufactured for a particular buyer or specially manufactured or obtained for a particular lessee. The goods are not suitable for resale or lease to others in the ordinary course of the seller's or lessor's business. The seller or lessor has substantially started to manufacture the goods or has made commitments for the manufacture or procurement of the goods. In these situations, once the seller or lessor has taken action, the buyer or lessee cannot repudiate the agreement claiming the Statute of Frauds as a defense.

Perfection

The legal process by which secured parties protect themselves against the claims of third parties who may wish to have their debts satisfied out of the same collateral; usually accomplished by the filing of a financing statement with the appropriate government official.

All parties to a negotiable instrument will be discharged when the party primarily liable on it pays to a holder the full amount due

The liability of all parties is also discharged when the drawee of an unaccepted draft or check makes payment in good faith to the holder.

Automated teller machines (ATMs)—

The machines are connected online to the bank's computers. A customer inserts a plastic card (called an ATM or debit card) issued by the bank and keys in a personal identification number (PIN) to access her or his accounts and conduct banking transactions.

the UCC states that a sales or lease contract will not fail for indefiniteness even if one or more terms are left open as long as both of the following are true:

The parties intended to make a contract. There is a reasonably certain basis for the court to grant an appropriate remedy [UCC 2-204(3), 2A-204(3)].

Mutual agreement.

The parties to an agency can cancel (rescind) their contract by mutually agreeing to terminate the agency relationship, even if it was for a specific (longer) duration.

drawee

The party that is ordered to pay a draft or check. With a check, a financial institution is always the drawee.

Court confirmation of the plan is the same as for a repayment plan.

The plan must provide for payment of secured debts at the value of the collateral. If the secured debt exceeds the value of the collateral, the remaining debt is unsecured.

The United States Supreme Court has defined monopolization as involving the following two elements:

The possession of monopoly power in the relevant market. "The willful acquisition or maintenance of the power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident."Footnote

Define and describe the effects of discharge.

The primary effect of a discharge is to void, or set aside, any judgment on a discharged debt and prohibit any action to collect a discharged debt. A discharge does not affect the liability of a co-debtor.

Principal's Duties to the Agent

The principal also has certain duties to the agent. These duties relate to compensation, reimbursement and indemnification, cooperation, and safe working conditions.

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.

Describe the priorities given to different creditor interests.

The priorities are perfected security interests over both unperfected and unsecured creditors, unperfected security interests have priority over unsecured creditors.

Describe what happens to the proceeds from disposition.

The proceeds from the disposition of collateral are distributed in the following order. First any reasonable expenses incurred by repossessing, storing, and reselling the collateral are reimbursed to the secured party. Secondly, the balance of the debt owed to the secured party is distributed. After that junior lienholders who have made written or authenticated demands receive a disbursement. Any surplus goes to the debtor, unless the collateral consists of accounts, payment intangibles, promissory notes, or chattel paper. If the proceeds were not sufficient to cover what the debtor owes the secured party can obtain a deficiency judgement from a court to collect the deficient amount from the debtor, unless the collateral are accounts, chattel paper, or promissory notes, then the debtor is not liable for the deficiency.

Collective bargaining

The process by which labor and management negotiate the terms and conditions of employment, including working hours and workplace conditions.

What protections are available to the creditor?

The protections available to creditors are requiring the debtor to obtain mortgage insurance if they do not make a 20 percent down payment so if the debtor defaults the creditor receives reimbursement from the insurer for the covered portion of the loan. The creditor will record the mortgage with the county office to ensure that the creditor is officially on record as holding an interest in the property. The creditor may also include provisions in the mortgage contract that are aimed at protecting their investment, such as a prepayment penalty clause.

supremacy clause

The provision in Article VI of the Constitution that provides that the Constitution, laws, and treaties of the United States are "the supreme Law of the Land." Under this clause, state and local laws that directly conflict with federal law will be rendered invalid.

What is the purpose and function of Social Security and Medicare?

The purpose of Social Security and Medicare is to provide a small amount of income and health coverage to retirees and disabled individuals to make up for the loss of income from retirement.

Explain the purpose of Section 2 of the Sherman Antitrust Act.

The purpose of section 2 of the SAA is to prevent monopolization or attempted monopolization of trade activities, such as price discrimination.

What is the purpose of the Environmental Regulatory agency?

The purpose of the EPA is to coordinate federal environmental responsibilities.

Describe the purpose of the Sarbanes-Oxley Act of 2002.

The purpose of the Sarbanes-Oxley Act was to increase oversight of public accounting practices. The SOA created the PCAOB to oversee audits of public companies that are subject to securities laws to protect public investors and to ensure that public accounting firms comply with the provisions of the SOA.

Factors That Courts Consider When analyzing an alleged Section 1 violation under the rule of reason, a court will consider the following factors:

The purpose of the agreement. The parties' ability to implement the agreement to achieve that purpose. The effect or potential effect of the agreement on competition. Whether the parties could have relied on less restrictive means to achieve their purpose.

Discharge by Reacquisition

The reacquisition of an instrument by a person that held it previously discharges all intervening indorsers against subsequent holders who do not qualify as HDCs

Describe remedies for breach of international sales contracts.

The remedies available to international sellers and buyers are similar to those available to domestic sellers and buyers including money damages, avoidance of obligations for breach of contract or failure to deliver goods, and specific performance.

A cable repairman, who is employed by a cable company, travels to various service locations as part of his job. One afternoon, while driving to a service call, he negligently runs a stop sign and causes an accident. A woman is injured in the car accident. Who is liable to the woman for her injuries?

The repairman and the cable company are liable to the woman because the repairman caused the accident.

Define the "ultramares rule" and an accountant's liability to third parties.

The requirement of privity, a close relationship or a nexus with an accountant must be present for the accountant to be held liable for damages. The Restatement of Torts states that accountants are subject to liability for negligence not only to their clients but also to foreseen, or known, users of their reports or financial statements

right of redemption

The right of a defaulting borrower to redeem property before a foreclosure sale by paying the full amount of the debt, plus any interest and costs that have accrued. . The idea behind this right is that it is only fair for the borrower to have a chance to regain possession after default.

right of subrogation

The right of a person to stand in the place of (be substituted for) another, giving the substituted party the same legal rights that the original party had.

Seller A signs a contract with Buyer B. The contract states that Seller A will ship one truckload of wood every month for twelve consecutive months. Seller A ships the first shipment in January and the second shipment in February. Seller A realizes that Buyer B has not made payment for the first shipment as outlined in the contract. The non-payment is a breach of contract. Which legal remedy is available to Seller A for this breached contract?

The right to stop the shipment in transit, return it to Seller A's facility, and discontinue any further deliveries

When the Warranties Are Consistent

The rule under the UCC is that express and implied warranties are construed as cumulative if they are consistent with one another [UCC 2-317, 2A-215]. In other words, courts interpret two or more warranties as being in agreement with each other unless this construction is unreasonable. If it is unreasonable for the two warranties to be consistent, then the court looks at the intention of the parties to determine which warranty is dominant.

Availability Schedule for Deposited Checks

The rules are as follows: Any local check (drawn on a bank in the same area) deposited must be available for withdrawal by check or as cash within one business day from the date of deposit. For nonlocal checks, the funds must be available for withdrawal within not more than five business days. Under the Check Clearing in the 21st Century ActFootnote (Check 21, which will be discussed shortly), a bank must credit a customer's account as soon as the bank receives the funds. For cash deposits, wire transfers, and government checks, funds must be available on the next business day. The first $100 of any deposit must be available for cash withdrawal on the opening of the next business day after deposit.

What six factors will NOT affect negotiability?

The six factors that will not affect negotiability are that if it is undated, unless needed to determine definite time for payment, antedating or postdating an instrument, words outweigh figures unless the words are ambiguous, if it simply states "with interest" and does not specify an interest rate, or a check is stamped "nonnegotiable" or "not governed by Article 3" it will still be negotiable

What are the six requirements for an instrument to be negotiable?

The six requirements are that it must be in writing, be signed by the maker or drawer, be an unconditional promise or order to pay, state a fixed amount of money, be payable on demand or at a definite time, and be payable to order or to bearer.

A special qualified indorsement includes the name of the indorsee as well as the words "without recourse," as shown in Exhibit 13-3 above.

The special indorsement makes the instrument an order instrument, and it requires an indorsement, plus delivery, for negotiation.

Describe the Substantial Abuse-Means Test.

The substantial abuse-means test is administered to determine if the debtor qualifies to file chapter 7 bankruptcy. The debtor's average monthly income is compared with the median income in the geographic area in which the debtor lives. If the debtor's income is below the median income, the debtor usually qualifies.

Describe the rights of the surety and guarantor.

The surety or guarantor has the legal right of subrogation, the right that the creditor had against the debtor now becomes the right of the surety or guarantor. The right of reimbursement from the debtor, the surety or guarantor is entitled to receive from the debtor all outlays made on behalf of the suretyship or guaranty arrangement. The right of contribution, when a co-surety or co-guarantor pays more than their proportionate share on a debtor's default they are entitled to recover from the other co-sureties or co-guarantors the amount paid above the surety's or guarantor's obligation.

discharged

The termination of an obligation. In bankruptcy proceedings, the extinction of the debtor's dischargeable debts.

The terms of the promise or order must be included in the writing on the face of a negotiable instrument.

The terms must also be unconditional—that is, they cannot be conditioned on the occurrence or nonoccurrence of some other event or agreement [UCC 3-104(a)].

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 [UCC 2-403(2)].

A person who transfers an instrument for consideration makes the following

The transferor is entitled to enforce the instrument. All signatures are authentic and authorized. The instrument has not been altered. The instrument is not subject to a defense or claim of any party that can be asserted against the transferor. The transferor has no knowledge of any bankruptcy proceedings against the maker, the acceptor, or the drawer of the instrument.Footnote

A plan of rehabilitation by repayment must provide for the following:

The turning over to the trustee of such future earnings or income of the debtor as is necessary for execution of the plan. Full payment through deferred cash payments of all claims entitled to priority, such as taxes.Footnote Identical treatment of all claims within a particular class. (The Code permits the debtor to list co-debtors, such as guarantors or sureties, as a separate class.)

What are the two kinds of liability associated with negotiable instruments?

The two kinds of liabilities that are associated with negotiable instruments are signature liability and warranty liability.

What are the two methods of negotiation?

The two methods of negotiation are order instruments or bearer instruments.

The EFTA governs financial institutions that offer electronic transfers of funds involving customer accounts.

The types of accounts covered include checking accounts, savings accounts, and any other asset accounts established for personal, family, or household purposes.

cross-collateralization

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

Negotiable instruments must be in written form (but may be evidenced by an electronic record) [UCC 3-103(a)(6), (9)]. Clearly, an oral promise can create the danger of fraud or make it difficult to determine liability.

The writing must be on material that lends itself to permanence. Promises carved in blocks of ice or inscribed in the sand or on other impermanent surfaces would not qualify as negotiable instruments. The UCC nevertheless gives considerable leeway as to what can be a negotiable instrument. The writing must also have portability. Although the UCC does not explicitly state this requirement, if an instrument is not movable, it obviously cannot meet the requirement that it be freely transferable.

What are types of "exclusionary practices?"

There are exclusive-dealing contracts that restrict a buyer from dealing with a competitor and tying arrangements which obligate the buyer of a product to purchase an additional product as well.

Describe the different types of EFT systems.

There are four different types of EFT systems. ATMs are connected online to the bank's computers and allow customers to access their accounts and conduct banking transactions without having to enter the bank. Point-of-sale systems are online terminals that allow consumers to transfer funds to merchants using a debit card issued by the bank Direct deposits and withdrawals are transactions authorized by the customer that allows the bank to allow third parties to make direct deposits into or withdrawals from the customer's account. Internet payment systems permit customers to access their institution's computer system via the internet and direct a transfer of funds between accounts or to pay bills electronically. These transfers or payments may be made either on a one time or recurring basis.

how is a security interest created? (List three elements.)

There are three requirements that need to be met to create a security interest in the collateral of a debtor. First there must be a signed written or authenticated security agreement that clearly describes the collateral subject to the security interest unless the collateral is in the possession of the creditor. Secondly, the secured party must give the debtor something of value. Thirdly, the debtor must have rights in the collateral. Once these requirements are met the creditor's rights attached to the collateral which give the creditor an enforceable security interest.

Describe the different types of drafts and checks, including promissory notes and certificates of deposit.

There are three types of drafts, time drafts, sight drafts and trade acceptances. Time drafts are payable at a definite future date, sight drafts are payable on sight (presented for payment) or on acceptance (promise to pay when it comes due). In a trade acceptance the buyer promises the seller to pay the draft when it comes due. Checks are drafts that order a bank to pay a specific payee and specific amount. A promissory note is a written promise made by one person to pay another a specified amount, it can be made payable at a definite time or on demand and it can be payable to a specific payee or to the bearer. Certificates of deposit (CD) are a type of note issued when a party deposits funds in a bank, and the bank promise to repay the funds, with interest, on a specific date.

Besides proving that he or she has acted with due diligence, an accountant may raise the following defenses to Section 11 liability:

There were no misstatements or omissions. The misstatements or omissions were not of material facts. The misstatements or omissions had no causal connection to the plaintiff's loss. The plaintiff-purchaser invested in the securities knowing of the misstatements or omissions.

The Right to Withhold Delivery In general, sellers and lessors can withhold delivery or discontinue performance of their obligations under sales or lease contracts when the buyers or lessees are in breach.

This is true whether a buyer or lessee has wrongfully rejected or revoked acceptance of contract goods (discussed later in this chapter), failed to make a payment, or repudiated the contract [UCC 2-703(a), 2A-523(1)(c)]. The seller or lessor can also refuse to deliver the goods to a buyer or lessee who is insolvent (unable to pay debts as they become due) unless the buyer or lessee pays in cash [UCC 2-702(1), 2A-525(1)].

Safe4U Lenses, Inc., assures ThruVu Optical Company that Safe4U's lenses will not crack within a certain range of pressure. ThruVu buys the lenses to prescribe to its customers. When cracks develop within the stated range, ThruVu files a suit against Safe4U. The court is most likely to rule in favor of

ThruVu, because Safe4U's statement was an express warranty.

When does title pass between seller and buyer?

Title passes to the buyer at the time and place the seller performs by delivering the goods.

Describe how title to goods will pass to a buyer.

Title passes to the buyer when goods are in existence and identified and are part of a contract.

Small Business Liability Relief and Brownfields Revitalization Act (2002)

To allow developers who comply with state voluntary clean-up programs to avoid federal liability for the properties that they decontaminate and develop.

Merchantable Goods

To be merchantable, goods must be "reasonably fit for the ordinary purposes for which such goods are used." They must be of at least average, fair, or medium-grade quality. The quality must be comparable to quality that will pass without objection in the trade or market for goods of the same description.

Clean Air Act (1963, 1970)

To control air pollution from mobile and stationary sources such as electric utilities and industrial plants. 42 U.S.C. Sections 7401-7671q.

Federal Insecticide, Fungicide, and Rodenticide Act (1947)

To control the use of pesticides and herbicides. 7 U.S.C. Sections 136-136y.

A negotiable instrument must "be payable on demand or at a definite time" [UCC 3-104(a)(2)].

To determine the value of a negotiable instrument, it is necessary to know when the maker, drawee, or acceptor is required to pay.

Federal Water Pollution Control Act (1948)

To eliminate the discharge of pollutants from major sources into navigable waters. 33 U.S.C. Sections 1251-1387.

What is the purpose of State Workers' Compensation laws?

To establish an administrative procedure for compensating workers injured on the job.

Oil Pollution Act (1990)

To establish liability for the clean-up of navigable waters after oil spills. Under this act, any oil facility, oil shipper, vessel owner, or vessel operator that discharges oil into navigable waters or onto an adjoining shore may be liable for clean-up costs, as well as damages. In addition, the polluter can be ordered to pay for damage to natural resources, private property, and the local economy, including the increased cost of providing public services. The party held responsible for the clean-up costs can bring a civil suit for contribution from other potentially liable parties.

Liability for Negligence

To establish negligence, the plaintiff must prove four elements: duty, breach, causation, and damages.

Resource Conservation and Recovery Act (1976)

To establish standards for hazardous waste disposal. The RCRA required the EPA to establish regulations to determine which forms of solid waste should be considered hazardous and to establish regulations to monitor and control hazardous waste disposal.

National Environmental Policy Act (1969)

To limit environmental harm from federal government activities. 42 U.S.C. Sections 4321-4370d.

Procedures under the ADA

To prevail on a claim under the ADA, a plaintiff must show that he or she has a disability, is otherwise qualified for the employment in question, and was excluded from the employment solely because of the disability.

What is the purpose of Section 2 of the Clayton Act?

To prohibit price discrimination agreements

What is the purpose of the Comprehensive Environmental Response, Compensation, and Liability Act?

To regulate the cleanup of hazardous waste disposal sites

Toxic Substances Control Act (1976)

To regulate toxic chemicals and chemical compounds such as asbestos and polychlorinated biphenyls, popularly known as PCBs. The act also controls the introduction of new chemical compounds by requiring investigation of any possible harmful effects from these substances.

To finance the purchase of a house from Sander, Tobias signs an instrument promising to pay to "Uno Mortgage Company" $200,000 with interest in installments with the final payment due July 10, 2044. To be negotiable, this instrument must include the signature of

Tobias.

Toby is an accountant whose clients include Universal Metrics Corporation. Velma is Toby's attorney. Working papers that Toby develops when preparing financial reports for Universal Metrics are owned by

Toby.

Sub's Sandwich shop defaults on a debt to Town Bank, which takes possession of the collateral securing the debt. Town Bank sells the collateral. The proceeds from the sale are applied first to

Town Bank's fees for the sale.

When anticipatory repudiation occurs, the nonbreaching party has a choice of two responses:

Treat the repudiation as a final breach by pursuing a remedy. Wait to see if the repudiating party will decide to honor the contract despite the avowed intention to renege [UCC 2-610, 2A-402].

employment discrimination

Treating employees or job applicants unequally on the basis of race, color, national origin, religion, gender, age, or disability; prohibited by federal statutes.

Finance Bank receives a check drawn on the account of Get-Rich Industries, Inc., one of the bank's customers, at 3 P.M. Friday. Hildy, the presenter of the check, is not one of the bank's customers. The bank uses deferred posting with a 2 P.M. cutoff hour. If it decides to dishonor the check, it must do so by midnight

Tuesday.

Assume that the seller agrees to defend and pay the expenses of an infringement lawsuit pursued against the buyer. What must the buyer then do?

Turn over the control of the ligation to the seller

The Labor-Management Reporting and Disclosure Act creates reporting requirements for .

UNION ACTIVITIES

Explain the term "unconscionability."

Unconscionability is when a contract is so unfair and one sided that it would be unreasonable to enforce it. If the contract is found conscionable then the court can refuse to enforce the contract, enforce the remainder of the contract without the unconscionable part or limit the application of the unconscionable term to avoid an unconscionable result.

Under UCC 2-313 and 2A-210, express warranties arise when a seller or lessor indicates any of the following:

Under UCC 2-313 and 2A-210, express warranties arise when a seller or lessor indicates any of the following: That the goods conform to any affirmation (declaration that something is true) of fact or promise that the seller or lessor makes to the buyer or lessee about the goods. Such affirmations or promises are usually made during the bargaining process. That the goods conform to any description of them. That the goods conform to any sample or model of the goods shown to the buyer or lessee.

Explain how additional terms may affect acceptance of an offer.

Under common law the terms of acceptance must match that of the offer exactly. Under the UCC a contract is formed if the offeree's response indicates a definite acceptance of the offer, even if the acceptance includes additional or different terms.

The U.S. Department of Transportation (DOT) sometimes hears an appeal from a party whose contract with the DOT has been canceled. An administrative law judge (ALJ), who works for the DOT, hears this appeal. What safeguards promote the ALJ's fairness? (See Agency Orders.)

Under the Administrative Procedure Act (APA), the administrative law judge (ALJ) must be separate from the agency's investigative and prosecutorial staff. Ex parte communications between the ALJ and a party to a proceeding are prohibited. Under the APA, an ALJ is exempt from agency discipline except on a showing of good cause.

Time of Contract Formation

Under the CISG, in contrast, a contract is created not at the time the acceptance is transmitted but only on its receipt by the offeror. (The offer becomes irrevocable, however, when the acceptance is sent.)

The Fair Trade movement originated during the 1980s

Under the Fair Trade system, low-income farmers and artisans in developing countries form alliances with importers and marketers in western Europe and North America. Participants must agree to certain basic principles: Producers must receive a stable minimum price for their products. Producers will not use forced or child labor. Production methods will be environmentally friendly.

Interest-Bearing Accounts

Under the Truth-in-Savings Act (TISA)Footnote and Regulation DD, the act's implementing regulation, banks must pay interest based on the full balance of a customer's interest-bearing account each day.

Perfection by Attachment—The Purchase-Money Security Interest in Consumer Goods

Under the UCC, fourteen types of security interests are perfected automatically at the time they are created [UCC 9-309]. The most common is the purchase-money security interest (PMSI) in consumer goods (items bought primarily for personal, family, or household purposes).

Warranties of Title

Under the UCC, three types of title warranties—good title, no liens, and no infringements—can automatically arise in sales and lease contracts [UCC 2-312, 2A-211].

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.

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.

The Statute of Frauds

Under these provisions, sales contracts for goods priced at $500 or more and lease contracts requiring total payments of $1,000 or more must be in writing to be enforceable [UCC 2-201(1), 2A-201(1)]. (These low threshold amounts may eventually be raised.)

Employment relationships have traditionally been governed by the common law doctrine of employment at will.

Under this doctrine, either party may terminate the employment relationship at any time and for any reason, unless doing so violates an employee's statutory or contractual rights.

Mr. B was charged with caring for an elderly aunt who had been declared by a court to be mentally incompetent. The aunt disagreed with the court's decision and insisted that she could manage her own affairs. One day while the aunt was home alone, a salesman came by selling security systems, and the aunt decided to purchase a system. She gave the salesman a check for $3,000 to cover equipment and installation. Mr. B found out about the purchase and stopped payment on the check. What defense did Mr. B apply in this scenario?

Universal defense

Differentiate between universal and personal defenses against liability.

Universal defenses are valid against all holders and include 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 are valid against an ordinary holder (not including holders in due course) and include breach of contract or breach of warranty, lack or failure of consideration, fraud in the inducement, illegality, mental incompetence, ordinary duress or undue influence rendering the contract voidable, discharge by previous payment or cancellation, unauthorized completion of an incomplete instrument and nondelivery of the instrument.

. Describe the buyer's obligations, as it pertains to payment, inspection, and acceptance.

Unless otherwise agreed upon the buyer is obligated to make payment at the time and place the goods are received. If the sale is made on credit the buyer is obligated to pay according to the specified credit terms. The buyer has a right to inspect the goods before making payment except otherwise agreed upon or for COD. After a reasonably opportunity to inspect the goods, the buyer can accept the goods by indicating (by words or conduct) that the goods are conforming or that they will retain them in spite of nonconformity, the buyer fails to reject the goods within a reasonable time, or if the buyer performs any act inconsistent with the seller's ownership (use or resale of goods) except for testing or inspecting the goods.

What property is exempt?

Up to $22,975 in equity in the debtor's residence and burial plot, interest in a mother vehicle up to $3,675, up to $550 interest of a particular household goods and furnishings, wearing apparel, appliances, books, animals, crops and musical instruments, limited to an aggregate total of $12,250, jewelry up to $1,550, any other property up to $1,225 plus an unused part of the $22.917 homestead exemption up to $11,500, any tools of the debtor's trade up to $2,300, a life insurance contract, other than a credit life insurance contract, owned by the debtor, certain interests in accrued dividends and interest under, or loan value of life insurance contracts owned by the debtor not to exceed $12,250, professionally prescribed health aids, the right to receive Social Security and certain welfare benefits, alimony and support, certain retirement funds and pensions, and education savings accounts held for specific periods of time and the right to receive certain personal-injury and other awards up to $22,975 are exempted.

The UCC permits broad, general descriptions in the financing statement, such as "all assets" or "all personal property."

Usually, if a financing statement accurately describes the agreement between the secured party and the debtor, the description is sufficient [UCC 9-504].

Under the UCC, a contract that contains open terms will be:

VALID IF THE PARTIES INTENDED TO FORM A CONTRACT AND THERE IS A GOOD BASIS FOR THE COURT TO GRANT A REMEDY

The Fair Debt Collection Practices Act requires a collection agency to include a(n) whenever it initially contacts a debtor for payment of a debt or within five days of that initial contact.

VALIDATION NOTICE

Harold owes Soundstage Services for services rendered two years ago for which he hasn't paid. Soundstage's owner calls Harold at home once a week at four in the morning claiming that he is working for a collection agency and asks when payment will be made. The owner of Soundstage is in:

VIOLATION OF THE FAIR DEBT COLLECTION PRACTICES ACT

What are "voidable rights?"

Voidable rights are the grounds that a debtor or trustee can use to obtain the return of the debtor's property such as, fraud, duress, incapacity, and mutual mistake.

Under the UCC the right to replevy goods is usually available to a buyer

WHEN THE BUYER IS UNABLE TO COVER

The Restatement (Third) of Torts states that accountants will be liable to third parties for the negligent acts of accountants:

WHEN THE THIRD PARTY IS A FORSEEN OR KNOWN USER

Bud's Trailers includes in its sales contracts a disclaimer in large boldface type stating "Trailers sold WITH NO WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE." When a customer sues because of losses of merchandise shipped in the trailer purchased from Bud's, the disclaimer will:

WILL BE ALLOWED AND THEREFORE THE CUSTOMER MOST LIKELY WILL NOT PREVAIL

Any copyrighted work created by an employee within the scope of her or his employment at the request of the employer is called a

WORK FOR HIRE

When do warranties arise in sales transactions?

Warranties of title automatically arise in sales contracts and express warranties arise when a seller makes representations concerning the quality, condition, description, or performance potential of the goods.

Define and describe "warranty liability."

Warranty liability is implied when the person presents the instrument for negotiation and does not require a signature. The warranty liability extends to both the signer and nonsigner and a breach of warranty can occur when the instrument is transferred or presented for payment. Both transfer and presentment warranties attempt to shift liability back to the wrongdoer or person who initially dealt with the wrongdoer.

Ursula buys a Verismooth boat from a Watercraft store, which agrees to keep the boat for Ursula until she picks it up. Before Ursula gets the boat, an unforeseen tornado destroys the store and the boat. The loss of the boat is suffered by

Watercraft.

Exporters

Webb-Pomerene Act of 1918—Allows U.S. exporters to engage in cooperative activity to compete with similar foreign associations. Export Trading Company Act of 1982—Permits the U.S. Department of Justice to exempt certain exporters.

Issue

What facts and circumstances brought these parties to court?

Questions to ask when reading a case:

What facts and circumstances brought these parties to court? Are there buzzwords in the facts that suggest an issue? Is the court deciding a question of fact - i.e. the parties are in dispute over what happened - or is it a question of law - i.e. the court is unsure which rule to apply to these facts? What are the non-issues?

Rule

What is the governing law for the issue?

The Right to Resell or Dispose of the Goods

When a buyer or lessee breaches or repudiates the contract while the seller or lessor is in possession of the goods, the seller or lessor can resell or dispose of the goods. The seller can retain any profits made as a result of the sale and can hold the buyer or lessee liable for any loss [UCC 2-703(d), 2-706(1), 2A-523(1)(e), 2A-527(1)]. The seller must give the original buyer reasonable notice of the resale, unless the goods are perishable or will rapidly decline in value [UCC 2-706(2), (3)]. The resale can be private or public, and the goods can be sold as a unit or in parcels. A good faith purchaser at the resale takes the goods free of any of the rights of the original buyer [UCC 2-706(5)].

Suspension of the Drawer's Obligation

When a drawer gives one alternative or joint payee a check, the drawer's obligation on the check to other payees is suspended [UCC 3-310(b)(1)]. The payee who has possession of the check holds it for the benefit of all of the payees. In other words, the drawer has no obligation to make sure that the funds are allocated or distributed among the joint payees.

Discharge by Impairment of Collateral

When a holder "impairs the value" of that collateral without the consent of the parties who would benefit from the collateral in the event of nonpayment, those parties to the instrument are discharged to the extent of the impairment

Lapse of time.

When an agency agreement specifies the time period during which the agency relationship will exist, the agency ends when that time period expires. If no definite time is stated, then the agency continues for a reasonable time and can be terminated at will by either party. What constitutes a reasonable time depends on the circumstances and the nature of the agency relationship.

Occurrence of a specific event.

When an agency relationship is to terminate on the happening of a certain event, the agency automatically ends when the event occurs.

Avoidance

When an agent breaches the agency agreement or agency duties under a contract, the principal has a right to avoid any contract entered into with the agent. This right of avoidance is at the election of the principal.

Emergency Powers

When an unforeseen emergency demands action by the agent to protect or preserve the property and rights of the principal, but the agent is unable to communicate with the principal, the agent has emergency power.

Describe when an agent would have emergency powers.

When an unforeseen emergency demands action by the agent to protect or preserve the property and rights of the principal, but the agent is unable to communicate with the principal.

Describe how prior dealings or customs can affect implied warranties.

When both parties to a sales or lease contract have knowledge of a well-recognized trade custom without evidence to the contrary an implied warranty can be formed.

When a Title Document is Not Required

When no document of title is required and the goods are identified to the contract, title passes at the time and place the sales contract is made. If the goods have not been identified, title does not pass until identification occurs.

Conditional Indorsements

When payment depends on the occurrence of some event specified in the indorsement, the instrument has a conditional indorsement [UCC 3-204(a)]. ex Keenan Barton indorses a check as follows: "Pay to Lars Johansen if he completes the renovation of my kitchen by June 1, 2015, [signed] Keenan Barton." Barton has created a conditional indorsement.

When will an accountant be guilty of constructive fraud?

When she or he is grossly negligent in performing his or her duties.

When is an agent's act considered unauthorized?

When the agent has no authority to contract with a third party on behalf of the principal.

An authorized agent may be held personally liable on a negotiable instrument in the following three situations.

When the agent signs his or her own name on the instrument with no indication of agency status, an HDC can hold the agent personally liable as noted above. When the agent signs in both the agent's name and the principal's name but nothing on the instrument indicates the agency relationship, the agent may be liable. (Thus, in Example 14.6, if Binney signed the instrument "Sandra Binney, Bob Aronson" or "Aronson, Binney," she may be held personally liable because it is not clear that there is an agency relationship.) When the agent indicates his or her agency status in signing a negotiable instrument but fails to name the principal (such as, "Sandra Binney, agent"), the agent may be liable [UCC 3-402(b)(2)].

In which circumstance does a buyer have a priority claim to the collateral perfected by a creditor?

When the buyer purchases the item for personal use and is unaware that the secured creditor has a perfected security interest

A local heating oil distributor purchases a 25% interest in a container of oil. When does risk of ownership take place?

When the oil seller/owner passes title to the local heating oil distributor

Open Payment Term

When the parties do not specify payment terms, payment is due at the time and place at which the buyer is to receive the goods [UCC 2-310(a)]

Differentiate between shipment contracts and destination contracts.

With a shipment contract the seller is only required to deliver the goods to the carrier. The title passes to the buyer at the time of shipment and all risk of loss is the buyers. With a destination contract the seller is required to deliver the goods to a particular destination and the risk of loss remains with the seller until title passes to the buyer when the goods are delivered.

When determining whether or not Rally Motors must provide FMLA benefits, does the number of employees of the company matter?

Yes, Rally Motors must have at least 50 employees for Tony to qualify for FMLA benefits.

Knowing that a third party may use the information that Ray is providing, does Ray owe a duty of confidentiality to Onyx?

Yes, although it may be breached in most states if there is a court order to do so.

If Tony was receiving health benefits from Rally Motors, and he takes leave under FMLA, does he have a right to stay on the health plan during his FMLA leave?

Yes, and Rally motors must continue paying any portion of the benefits that normally pay for Tony.

Assume that Oscar did put the amount of food that "all supermarkets put in a party platter for twenty," is this relevant?

Yes, since trade customs may modify an implied warranty

Techplate Corporation learns that a federal administrative agency is considering a rule that will have a negative impact on the firm's ability to do business. Does the firm have any opportunity to express its opinion about the pending rule?

Yes. Administrative rulemaking starts with the publication of a notice of the rulemaking in the Federal Register. A public hearing is held at which proponents and opponents can offer evidence and question witnesses. After the hearing, the agency considers what was presented at the hearing and drafts the final rul

Avril receives a payroll check from Business Solutions, Inc., and indorses it by signing her name on the back of the check. This is

a blank indorsement.

Vertical Mergers.

a company at one stage of production acquires a company at a higher or lower stage of production. An example of a vertical merger is a company merging with one of its suppliers or retailers

Lenders Loan Company and Mortgage Service Corporation—Nadya's creditors—contract with Nadya for the discharge of her liquidated debts on payment of a lesser sum. This is

a composition agreement.

Rice River Farms offers to sell Sensei Sushi Restaurants, Inc., five hundred bushels of rice. Sensei responds, "We agree to buy five hundred bushels only if the rice is Grade A quality." This statement is

a counteroffer.

Service Employees International Union represents the employees of Business & Commerce Credit Corporation. Potential subjects of collective bargaining between the union and the corporation do not include

a decision to shut down certain facilities.

On drafts and checks,

a drawer's secondary liability does not arise until the drawee fails to pay or to accept the instrument, whichever is required.

For purposes of Chapter 12, A family fisherman is defined as one whose gross income is at least 50 percent dependent on commercial fishing operationsFootnote and whose debts are at least 80 percent related to commercial fishing. The total debt for a family fisherman must not exceed $1,868,200. As with family farmers, a partnership or close corporation can also qualify.

a family farmer is one whose gross income is at least 50 percent farm dependent and whose debts are at least 50 percent farm related. The total debt for a family farmer must not exceed $4,031,575. A partnership or close corporation (see Chapter 4) at least 50 percent owned by the farm family can also qualify as a family farmer.

Hernando, an accountant, helps Industrial Equipment & Supplies Company prepare and file a false federal corporate income tax return. Under the Internal Revenue Code, this is

a felony punishable by a fine and imprisonment.

The UCC for perfection requires that

a financing statement be filed under the name of the debtor

In most states,

a financing statement must be filed centrally in the appropriate state office, such as the office of the secretary of state, in the state where the debtor is located.

Predatory pricing occurs when:

a firm prices sells its products substantially below cost to drive out competition.

Fiscal Credit Corporation asks Global Industries, Inc., to agree to a security agreement that provides for coverage of the proceeds from the sale of after-acquired property. This is

a floating lien

The Uniform Commercial Code (UCC) attempt to provide:

a framework to deal with all aspects of commercial sales transactions

Petro Oil Refinery asks Quality Bank for a loan to increase its oil inventory. Quality requires Robin, Petro's president, sign a personal guaranty to pay the debt if Petro defaults. Meanwhile, to sell fifty barrels of refined oil to Slick Lubricants, Inc., Petro asks its outside accountant Tina to co-sign a credit application. If Tina signs the application only after language is included that requires Petro to exhaust its legal remedies against Slick before looking to her, then Tina is

a guarantor.

After the FTC files a formal complaint, the advertiser may agree either to settle the complaint or to proceed to:

a hearing conducted by the FTC

The UCC requires that

a holder present the instrument to the appropriate party, in a timely fashion, and give reasonable identification if requested

A surety would ordinarily be released from his or her obligation in the event of:

a material modification of the terms of the original contract without the surtey's consent.

Refuse Reuse & Disposal Center operates a recycling plant. Stan and other Refuse Reuse neighbors file a suit, alleging injuries from the plant. To succeed, they must show that the defendant failed to use reasonable care if the suit is based on

a negligence theory.

Dedra signs a check payable to Ember, who indorses the back, gives it to Federal Commerce Bank, and receives cash. The transfer of the check from Ember to the bank is

a negotiation.

Noah transfers an instrument to Olivia in a form and by a means that makes Miguel a "holder." This is

a negotiation.

A blank indorsement does not specify

a particular indorsee and can consist of a mere signature [UCC 3-205(b)].

Under Section 7 of the Clayton Act,

a person or business organization cannot hold stock or assets in more than one business when "the effect ... may be to substantially lessen competition."

Secured Credit, Inc., takes possession of Thom's stock in United Worldwide Corporation to perfect Secured's security interest in the stock. This is

a pledge.

Bodycare Pharma Corporation makes and sells ChemMed, the most prescribed name-brand blood pressure-lowering medication. Deja Vu Drugs, Inc., has the potential to make a generic version of the same drug. Bodycare pays Deja Vu not to sell its product. This is

a price-fixing agreement

Bodycare Pharma Corporation makes and sells ChemMed, the most prescribed name-brand blood pressure-lowering medication. Deja Vu Drugs, Inc., has the potential to make a generic version of the same drug. Bodycare pays Deja Vu not to sell its product. This is

a price-fixing agreement.

Section 1(1) of the Restatement (Third) of AgencyFootnote defines agency

a principal-agent relationship, the parties have agreed that the agent will act on behalf and instead of the principal in negotiating and transacting business with third parties.

Rudi is a minor. In most states, Rudi may not be

a principal.

Two of the most common security interests that are perfected on attachment are

a purchase-money security interest in consumer goods (defined and explained shortly) and an assignment of a beneficial interest in a estate of a deceased person [UCC 9-309(1), (13)].

Paxton agrees to pay QuikChek Lenders a debt that is otherwise dischargeable in bankruptcy. This is

a reaffirmation.

Emily writes and signs a check payable to "Festival Cinema." Georg, Festival's manager, indorses the check "For deposit only." This is

a restrictive indorsement.

Esteban receives a check from Fleet Trucking Corporation. Esteban indorses the check to Garden Valley Bank by writing "pay to Garden Valley Bank only" and signing his name. This is

a restrictive indorsement.

Nena obtains a check payable to her order from Oran. Nena signs the back and gives the check to Patricia. Patricia writes "Pay to Patricia" above Nena's signature. Refer to Fact Pattern 13-A1. When Patricia writes "Pay to Patricia" above Nena's signature, Nena's signature becomes

a special indorsement

The National Security Agency (NSA) wants OmniPhone Company to produce certain records for review. To obtain the records, the NSA will issue

a subpoena.

Petro Oil Refinery asks Quality Bank for a loan to increase its oil inventory. Quality requires Robin, Petro's president, sign a personal guaranty to pay the debt if Petro defaults. Meanwhile, to sell fifty barrels of refined oil to Slick Lubricants, Inc., Petro asks its outside accountant Tina to co-sign a credit application. If Tina signs the application but fails to condition her signature on Petro's agreement to pursue its legal remedies against Slick before looking to her, then Tina is

a surety.

The difference between a time draft and a sight draft is that:

a time draft is payable at a definite future time, whereas a sight draft is payable when it is presented to the drawee.

LNG Corporation and Midstates Utility Company enter a contract for a sale of liquified natural gas. LNG draws a draft unconditionally ordering Midstates Utility to pay $50,000 to LNG's order in sixty days. Midstates Utility signs and dates the draft. This instrument is

a trade acceptance LNG is the drawer

One of the differences between transfer by negotiation and an assignment is that:

a transfer by negotiation can give a holder more rights in the instrument than the prior possessor had.

Jill indorses a check "Payable to Tess, as agent for Jill." Tess is Jill's daughter. Jill has created

a trusted indorsement also know as agency indorsements

Shale Oil, Inc., files a petition in bankruptcy for relief through a reorganization and assumes the role of a debtor in possession. In this role, Shale Oil is similar to

a trustee in a liquidation

Sasha's debt to Tully is past due. Tully brings a legal action against Sasha to collect the debt. To ensure that a judgment in Tully's favor will be collectible, he asks the court to order the seizure of Sasha's property. This is a request for

a writ of attachment.

Main St. Credit Corporation lends funds to Newt, a consumer, to apply to the cost of a motorcycle, which is the collateral for the loan. Newt buys the cycle from Open Road Outfitters. An enforceable security interest requires

a written agreement or Main St.'s possession of the cycle.

TORT

a wrongful act or an infringement of a right (other than under contract) leading to civil legal liability.

Charlton files a petition in bankruptcy in a liquidation proceeding. If the court administers the means test and concludes that Charlton is abusing the bankruptcy process by filing for a liquidation, most likely

a. Charlton will be forced to file for relief through an individual repayment plan

Food & Gift Basket Company currently employs five hundred full-time workers and two hundred part-time seasonal workers. Because business has declined, Food & Gift plans to close a plant that employs more than fifty full-time workers. Advance notice of the layoff must be sent to

affected workers or their union representative

Gigaware employs software designers, all of whom have contracts that give Gigaware the rights to any software they create. Every time Gigaware sells a new piece of software designed by it employees, it creates a warranty .

against infringement

Ira signs a note payable to the order of Jay. Jay indorses the note and gives it to Kim as payment for a debt. Kim presents it to Ira, who pays it. Ira's payment discharges

all of the parties.

Omega Sewing Machines is a nationally known manufacturer, having started in business almost 50 years ago. Omega and Betty's Sewing Store agree that Betty will be the only dealer in her state that will sell Omega machines. This type of agreement is most likely

allowed under the rule of reason to avoid the free rider problem.

Small Business Regulatory Enforcement Fairness Act The Small Business Regulatory Enforcement Fairness Act (SBREFA)

allows Congress to review new federal regulations for at least sixty days before they take effect. This period gives opponents of the rules time to present their arguments to Congress.

The entrustment rule basically

allows innocent buyers to obtain legitimate title to goods purchased from merchants even if the merchants do not have good title.

A secured party can

also assign all or part of the security interest to a third party (the assignee). The assignee becomes the secured party of record if the assignment is filed by use of a uniform amendment form [UCC 9-514, 9-521(a)].

The protections afforded under these laws

also extend to U.S. citizens who are working abroad for U.S. firms or for companies that are controlled by U.S. firms.

The adequate protection doctrine,

among other things, protects secured creditors from losing their security as a result of the automatic stay.

TalkTalk, Inc., offers to buy from Voice Media Corporation (VMC) 100,000 smartphones. Without notifying TalkTalk, VMC timely ships phones of a different quality. With respect to the offer and a possible contract, this shipment is

an acceptance and a breach.

Roberta introduces Steve to her friends as "my associate." Steve purports to act as Roberta's agent in several business transactions with those friends. If Roberta is liable for Steve's actions, it will be because their relationship is

an agency by estoppel.

Mountain States Distribution Inc. hires Norris to work on Mountain States's shipping dock, accepting deliveries, dispatching trucks, and dealing with customers and other companies' drivers. With respect to Mountain States, Norris is most likely

an agent.

Sinto Investments is in the process of developing a 300-mile toll road that will run through federal land. Sinto will likely need

an environmental impact statement.

Aisha is an employee at Bento Food Mart. Aisha is called for jury duty and as a result cannot work her scheduled shift. Bento fires Aisha. With respect to the employment-at-will doctrine, this is

an exception based on public policy.

Farmed Crops Corporation offers to sell its wheat substitute to Gluten-Free, Inc., only if Gluten-Free agrees to buy all of the wheat substitute that it needs from Farmed Crops, even though there are other sellers from whom Gluten-Free could buy. This is

an exclusive-dealing contract.

Blanche, a salesperson for Custom Restaurant Equipment, Inc., shows Dylan, a buyer for Eat n' Dine Company, display items in Custom's showroom, stating that any purchased equipment will match the display. This statement is

an express warranty.

PriceLess Discount Company and Quotidian Stores, Inc., agree to abide by the decisions of Retail Financial Corporation as to their respective levels of production, markets, and prices, effectively reducing competition and increasing profits. This is most likely

an illegal restraint on trade.

Kramer goes to Lawn & Garden to tune up his mower. Martin, the service technician, learns that Kramer's lawn is overgrown and rocky and advises the use of a certain type of oil, plug, filter, and blade. Later, while Kramer is mowing his lawn, the mower breaks down due to the use of the items recommended by Martin. Kramer may recover from Lawn & Garden for breach of

an implied warranty of fitness for a particular purpose.

Sigrud buys spiked mountain-climbing shoes from Rockridge Gear store. Rockridge does not know that Sigrud plans to wear the shoes to climb Tower Mountain. When Sigrud is on the mountain, the spikes come out of the shoes, causing her to fall and be injured. Rockridge breached

an implied warranty of fitness for a particular purpose.

Connie transfers a note by signing it and delivering it to Diana. Diana is

an indorsee.

With regard to promissory notes,

an indorser's secondary liability does not arise until the maker, who is primarily liable, has defaulted on the instrument

Note that for transfer warranties to arise,

an instrument must be transferred for consideration.

Sean draws a check payable to "Team Tickets, Inc." to buy two season tickets to the next year's State College football games. This instrument is

an order instrument

When Patricia writes "Pay to Patricia" above Nena's signature, the check becomes

an order instrument.

Jessie's debt to Kayla is past due. Kayla brings a legal action against Jessie to collect the debt. Kayla asks the court to order Liberty Bank, in which Jessie has an account, to pay a portion of the funds to Kayla. This is a request for

an order of garnishment

Erin draws a check payable to "Foodland" to buy groceries. . Erin's check is most likely

an order to pay.

Sergio makes a gift of a check to Todd who takes it in good faith and without notice of any claim, defense, or defect. With respect to this check, Todd is

an ordinary holder

To obtain dental supplies for Orthodontics Dental Clinic, Piper executes a draft in favor of Quality Supply Corporation. A draft is

an unconditional written order to pay money.

For a bank's violation of the EFTA, a consumer may recover both actual damages (including attorneys' fees and costs)

and punitive damages of not less than $100 and not more than $1,000.Footnote

Unauthorized access to an EFT system constitutes a federal felony,

and those convicted may be fined up to $10,000 and sentenced to as long as ten years in prison. Banks must strictly comply with the terms of the EFTA and are liable for any failure to adhere to its provisions.

Motor Coach Corporation, a U.S. firm, orally agrees to sell six vehicles to National Tours, Ltd., a Canadian firm. Motor Coach fails to deliver and National Tours sues to enforce the agreement. Under the CISG, National Tours can prove the terms by

any means.

The Nuclear Regulatory Commission (NRC) files a complaint against Energy Plant Construction Corporation (EPCC). EPCC may want to settle the dispute, before formal adjudicatory proceedings begin, to avoid

appearing uncooperative.

Article 1, titled General Provisions, sets forth definitions and general principles

applicable to commercial transactions. For instance, there is an obligation to perform in "good faith" all contracts falling under the UCC [UCC 1-304].

The Walsh-Healey Act

applies to U.S. government contracts. It requires that a minimum wage, as well as overtime pay at 1.5 times regular pay rates, be paid to employees of manufacturers or suppliers entering into contracts with agencies of the federal government.

The Worker Adjustment and Retraining Notification Act

applies to employers with at least 100 full-time employees. It requires an employer to provide sixty days' notice before implementing a mass layoff or closing a plant that employs more than fifty full-time workers. A mass layoff is a layoff of at least one-third of the full-time employees at a particular job site.

The Food and Drug Administration (FDA) regulates the distribution of Gensol. The FDA is a federal executive agency. It has rules about off-label marketing of drugs. If Pharzime wants to challenge an FDA rule about off-label marketing, it would have to show that the rule is:

arbitrary and capricious.

GameCraft, Inc., employs four hundred workers at three locations in three states. Workers who lose their jobs with GameCraft have a right to continued health-care coverage under the company's group plan unless they

are fired for gross misconduct.

Goods That Are Part of a Larger Mass

are identified when the goods are marked, shipped, or somehow designated by the seller or lessor as the particular goods to pass under the contract.

The two major wire payment systems

are the Federal Reserve wire transfer network (Fedwire) and the New York Clearing House Interbank Payments Systems (CHIPS).

The general rule regarding the warranty of title in most sales contracts is that the warranty:

arises automatically in most sales contracts.

Actual authority (express or implied)

arises from what the principal makes clear to the agent.

The Uniform Commercial Code article that deals with negotiable instruments is

article 3

Serena files for bankruptcy for her business, and retains her assets and continues to operate the business

as a debtor in possession.

An order instrument contains the name of a payee capable of indorsing,

as in "Pay to the order of Jamie Fowler." If an instrument is an order instrument, it is negotiated by delivery with any necessary indorsements (indorsements will be discussed shortly).

Music, Inc., sells fifty MP3 players to Noise Stores, Inc. To avoid liability for most implied warranties, in some states Music could simply state in writing that the players are sold

as is.

Agencies' powers include functions

associated with the legislature (rulemaking), the executive branch (enforcement), and the courts (adjudication).

For purposes of Chapter 12, A family fisherman is defined as one whose gross income is

at least 50 percent dependent on commercial fishing operations and whose debts are at least 80 percent related to commercial fishing. The total debt for a family fisherman must not exceed $1,868,200. As with family farmers, a partnership or close corporation can also qualify.

Owen buys a light fixture from an online merchant under a contract covered by the UCC. He first receives an insurable interest in the lamp:

at the moment the goods covered by the contract are identified.

Olga enters into a contract to buy a refrigerator from a Prairie States Appliance store with the price to be paid in monthly installments. After thirty-six months of payments, Olga has paid more than twice the price of a similar stove. Eighteen payments remain due under the contract. Refer to Fact Pattern 16-A1. Under the UCC, the court can evaluate the contract to determine whether it was unreasonably unfair and one sided

at the time it was made.

Vehicle Wholesale Company and Walt's Retail Motors enter into a contract for a sale of used cars. Vehicle Wholesale assures Walt's that it has valid title to the vehicles. Under the UCC, warranties of title arise

automatically in most sales contracts

Good Tire Company and Hiway Auto Service enter into a contract for a sale of tires. Good Tire is a merchant who deals in goods of the kind sold. Under the UCC, an implied warranty of merchantability arises

automatically in sales contracts.

By writing "Pay to Patricia" above Nena's signature, Patricia

avoids the risk of loss from theft of the instrument.

Oliver borrows money from Peerless Loan Company. For Peerless to obtain a writ of execution, Oliver must

be unable or refuse to pay the amount of a judgment.

If the CISG and the UCC conflict, the CISG applies

because it is a treaty of the U.S. national government and therefore is supreme

Administrative agencies occupy an unusual niche in the U.S. legal scheme

because they exercise powers that normally are divided among the three branches of government.

The Federal Communications Commission adopts new regulations to govern Internet-based phone services. Like other administrative agencies' "legislative rules," this rule is as

binding as a law passed by Congress.

There are four main categories of indorsements:

blank, special, qualified, and restrictive.

Section 7 applies to.

both horizontal and vertical mergers, as discussed in the following subsections

Perry tells Jaime that Selena has agreed to allow him to sell her high-end trial bike. Selena is present at the time, hears the conversation, and says nothing. Jaime wants to buy a bike like Selena's so he agrees with Perry to buy her bike. Selena then refuses to sell it. She claims she is not bound by the agreement formed by Perry and Jaime because Perry is not her agent. Selena is:

bound by the contract, under a theory of agency by estoppel.

Fruits n' Veggies Company gives a $3,000 promissory note to Gro-Local Farms for a load of fresh produce. The produce arrives spoiled, rotten, and moldy. If Gro-Local presents the note for payment. Fruits n' Veggies's best defense would be

breach of warranty.

When the debtor has no assets—called a "no-asset case"—creditors are notified of the debtor's petition for bankruptcy

but are instructed not to file a claim. In no-asset cases, the unsecured creditors will receive no payment, and most, if not all, of these debts will be discharged.

The UCC permits acceptance of an offer to

buy goods "either by a prompt promise to ship or by the prompt or current shipment of conforming or nonconforming goods" [UCC 2-206(1) (b)]. Conforming goods accord with the contract's terms, whereas nonconforming goods do not.

Commercial wire transfers are governed

by Article 4A of the UCC, which has been adopted by most of the states. Article 4A uses the term funds transfer rather than wire transfer to describe the overall payment transaction.

Under the UCC, a bailee is a party who—

by a bill of lading, warehouse receipt, or other document of title—acknowledges possession of goods and/or contracts to deliver them. For instance, a warehousing company or a trucking company may be a bailee.

An agency relationship can arise in four ways:

by agreement of the parties, by ratification, by estoppel, and by operation of law.

Sugar & Spice, Inc., and Taste Treats stores enter into a contract for a sale of confections. Sugar & Spice, a merchant who deals in goods of the kind sold, makes express warranties in connection with the sale. Under the UCC, at the time a contract is formed, an express warranty can be disclaimed or modified

by clear, conspicuous language called to the buyer's attention.

Sarbanes-Oxley Act increased government oversight of public accounting practices

by creating the Public Company Accounting Oversight Board, which reports to the Securities and Exchange Commission. The board oversees the audit of public companies that are subject to securities laws.

Federal administrative agencies are created:

by enabling legislation passed by Congress.

An implied warranty is one that the law derives

by inference from the nature of the transaction or the relative situations or circumstances of the parties. Under the UCC, merchants impliedly warrant that the goods they sell or lease are merchantable and, in certain circumstances, fit for a particular purpose. In addition, an implied warranty may arise from a course of dealing or usage of trade.

Consumer fund transfers are governed

by the Electronic Fund Transfer Act (EFTA).

A Chapter 13 repayment plan case can be initiated only

by the debtor's filing of a voluntary petition or by court conversion of a Chapter 7 petition (because of a finding of substantial abuse under the means test, for example). Certain liquidation and reorganization cases may be converted to repayment plan cases with the consent of the debtor.

Chevelle, a server for a Dinner Buffet, Inc., restaurant goes out on strike with the other employees. Dinner Buffet hires replacements for the striking workers. After the strike, Chevelle must be given her job back if the strike was

c. an unfair labor practice strike.

Jeff convinces Kraus, who does not understand English, to sign a $1,000 note that Kraus believes is an application for a credit card. Jeff negotiates the note to Loni. Kraus

can avoid payment on the note even if Loni is an HDC

Dabney, an attorney, allows a statute of limitations to lapse on a claim by Efficient Management Consulting Company, a client. Dabney

can be held liable for malpractice.

Molly, an accountant, is hired to prepare an audit of the tax filings of Jones Industries. During the audit, Molly becomes aware of some illegalities in the way in which the company has filed financial documents with the Securities and Exchange Commission (SEC). Not wanting to reach beyond the scope of her task, Molly does not report the discrepancies to anyone, but merely completes her audit. Molly

can be held liable under the Private Securities Litigation Reform Act of 1995.

An instrument that has no room for indorsements:

can have a separate piece of paper firmly attached to it with an indorsement.

Jordan files for bankruptcy because he has debts of $1 million that he cannot pay. He would like to sign a document to assure his kind aunt Matilda that he will repay all of the $30,000 that she lent him. Jordan could have this debt discharged in the bankruptcy but would rather not. In this situation, Jordan

can sign a reaffirmation agreement.

Damian owns a pick-up truck and a motorcycle. He sells the motorcycle to Eden for $10,000. Eden pays for the cycle with a check, knowing that she had insufficient funds in her account to cover the amount. A week later, Damian files a petition in bankruptcy for relief through a liquidation. Refer to Fact Pattern 22-1A. Regarding the sale of the cycle, the bankruptcy trustee can

cancel it as a fraudulent transfer.

Railroads, insurance companies, banks, savings and loan associations, investment companies licensed by the Small Business Administration, and credit unions

cannot be debtors in a liquidation bankruptcy CH 7

Proceeds are the

cash or property received when collateral is sold or disposed of in some other way [UCC 9-102(a)(64)]. A security interest in the collateral gives the secured party a security interest in the proceeds acquired from the sale of that collateral.

When violations are found, the NLRB may issue a

cease-and-desist order compelling the employer to stop engaging in the unfair practices. Cease-and-desist orders can be enforced by a federal appellate court if necessary. After the NLRB rules on claims of unfair labor practices, its decision may be appealed to a federal court.

TriState Bank agrees to accept a check by setting aside sufficient funds to cover the amount. This check is considered

certified.

PharmaMeds Company is subject to a decision by the Food and Drug Administration. PharmaMeds appeals the decision, arguing that it is arbitrary and capricious. This could mean that the decision

changed the agency's prior policy without justification.

intangible collateral (collateral that consists of or generates rights)

chattel paper, instruments, accounts, deposit accounts an general intangibles

When a stock brokerage firm handles a check for payment or collection, then the:

check is not covered by Article 4.

Where or how to perfect a security interest sometimes depends on the classification or definition of the collateral

collateral is generally divided into two classifications: tangible collateral (collateral that can be seen, felt, and touched) and intangible collateral (collateral that consists of or generates rights)

Acme Products manufacturers and markets Grow Tall, claiming that the product will make users grow a minimum of six inches taller. The FTC will likely find that the ad is:

deceptive and the FTC may issue a cease and desist order

It is important for accountants to retain such records in the event that they need to.

defend against lawsuits for negligence or other actions in which their competence is challenged. The client also has a right to access an accountant's working papers because they reflect the client's financial situation

UsAgainstThem, a nonprofit environmental group, is contesting the EPA's interpretation of a rule that has allowed a refinery to offset an increase in emissions relating to one part of the refinery by reducing emissions in another part of the refinery. In challenging the EPA's interpretation, a court will likely

defer to the agency's interpretation.

Sarbanes-Oxley Act

defines public accounting firms as firms "engaged in the practice of public accounting or preparing or issuing audit reports."

A promissory note can be made payable at a(n)

definite time or on demand.

Gwen signs a check payable to Hart and gives it to him. Hart indorses the back, and transfers the check to Ingrid. To negotiate the check to Jaime, Ingrid must

deliver the check to Jaime.

Ryan negotiates an order instrument to Selina by

delivery with any necessary indorsement.

Wellness Insurance Company offers health and medical insurance to consumers. Under current federal health-care laws, Wellness is prohibited from

denying coverage for preexisting conditions.

Article 4 establishes a framework for

deposit and checking agreements between a bank and its customers .

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.

To generate sales, Goldline Investments, Inc., uses phone solicitation. Under federal law, in soliciting business, Goldline's telemarketers must

disclose all material facts related to a sale.

If the debtor files a Chapter 7 petition, but his or her median income is higher than his or her state's median income under the means testing calculations, the debtor is presumed to have substantially abused the law. Therefore, a bankruptcy court can

dismiss the Chapter 7 petition and convert it to a Chapter 13 repayment plan

-Public employers have some restrictions,

due to the Fourth Amendment, on drug testing. Private employers are not restricted by the Fourth Amendment but are governed by state laws concerning drug testing.

Wages, hours of work, and certain other conditions of employment may be discussed

during collective bargaining sessions. For instance, subjects for negotiation may include workplace safety, employee discounts, healthcare plans, pension funds, and apprentice and scholarship programs.

To be entitled to receive a portion of the debtor's estate,

each creditor normally files a proof of claim with the bankruptcy court clerk within ninety days of the creditors' meeting.Footnote A proof of claim is necessary if there is any dispute concerning the claim. The proof of claim lists the creditor's name and address, as well as the amount that the creditor asserts is owed to the creditor by the debtor.

Additionally, states may restrict

emissions from motor vehicles.

The NLRB has the authority to investigate s.

employees' charges of unfair labor practices and to file complaints against employers in response to these charge

-The Employee Polygraph Protection Act prohibits

employers (except government, some security firms and companies that produce and distribute controlled substances) from requiring a polygraph test to be preformed as a requirement of employment.

The practice of featherbedding involves a union requiring:

employers to hire more employees than necessary.

Congress passed the Securities Exchange Act of 1934, which created the Securities Exchange Commission. This legislation, which created an independent regulator agency, is known as

enabling legislation.

The Food and Drug Administration (FDA) regulates the distribution of Gensol. The FDA is a federal executive agency. The legislation that set up the FDA and gave it its power is known as:

enabling legislation.

National Labor Relations Board

enforces procedures whereby employees may vote to have a union and for collective bargaining

Qiana, an employee of Road Builders, Inc., forges the signature of Sadie, Road Builder's president, on a company check and cashes it at TriState Bank. Sadie would ratify Qiana's actions by

entering into a repayment agreement with Qiana.

A negotiable instrument can be payable to a(n)_______such as a partnership or nonprofit organization.

entity

The University Smyth has an admissions policy that requires a certain number of points to be automatically awarded to minority applicants. This type of policy is likely a violation of the

equal protection clause.

The Clean Air Act requires the major new sources of pollution to use pollution-control ------ that represents maximum achievable control technology to reduce emissions.

equipment

After Patricia writes "Pay to Patricia" above Nena's signature, further negotiation of the check

equires Patricia's indorsement and delivery.

Mr. A pays a debt to Mr. B with a one hundred dollar bill. The police later inform Mr. B that Mr. A. had stolen the money. Is Mr. B a holder in due course?

es; Mr. B acted in good faith, which impacts holder in due course status.

The main focus of Article 4 of the UCC is:

establishing a framework for banking relationships.

A promissory note is not debt, but rather only the

evidence of a debt.

Private communications between the ALJ and any party to the agency proceedings are known as ______________________communications.

ex parte

The main difference between independent regulatory agencies and executive agencies is that:

executive agencies are subject to the authority of the president to a greater degree than are independent regulatory agencies

Generally, implied warranties of merchantability and fitness are disclaimed by a(n)________ , such as "as is."

expression

The Fair Labor Standards Act (FLSA)

extended wage-hour requirements to cover all employers engaged in interstate commerce or in producing goods for interstate commerce, plus selected other types of businesses. T The FLSA, as amended, provides the most comprehensive federal regulation of wages and hours today.

Transfer of an order instrument by indorsement and delivery

extends warranty liability to any subsequent holder who takes the instrument in good faith. The warranties of a person who, for consideration, transfers without indorsement (by delivery of a bearer instrument), however, will extend only to the immediate transferee

The EPA passes a proposed a rule change to the Clean Air Act related to the discharge of emissions by factories. The EPA's action would be considered arbitrary and capricious for all of the following reasons except:

failed to provided the required time for notice and comment

The UCC preserves the perfect tender doctrine. It states that if goods or tender of delivery

fails in any respect to conform to the contract, the buyer or lessee may accept the goods, reject the entire shipment, or accept part and reject part [UCC 2-601, 2A-509].

A seller can create an express warranty by making representations concerning good title.

false

Conditional language that appears on the back of an instrument has the same effect as conditional language that appears on the front of an instrument.

false

Mortgage lenders typically require a statement that the borrower will obtain insurance to cover the personal property that he or she plans to keep in the home.

false

State exemption statutes usually include only personal property.

false

The common law of contracts and the Uniform Commercial Code are exactly the same.

false

To create an express warranty, a seller must formally use the words warranty or guarantee.

false

Whenever an instrument payable to two or more persons does not clearly indicate whether it is payable in the alternative or payable jointly, then the instrument is payable jointly.

false

Bankruptcy proceedings are held in

federal bankruptcy courts

The Federal Trade Commission receives deceptive advertising complaints from many sources EXCEPT:

federal judges

Resourced Forestry Corporation and the Service Employees International Union are sued by plaintiffs alleging job discrimination in violation of Title VII of the Civil Rights Act of 1964. This law applies to employers and labor unions with at least

fifteen employees or members.

The payment of Delta's debt to Eddy is guaranteed by Delta's personal property. To give public notice of his interest in Delta's property, Eddy is most likely to

file a financing statement with the appropriate authority.

Home Remodelers, Inc., and Imogen enter into a contract for a sale of cabinets and countertops. Home Remodelers, a merchant who deals in goods of the kind sold, notes that its goods come with an implied warranty of merchantability. Under the UCC, this means that the goods are reasonably

fit for the ordinary purpose for which such goods are used.

A financing statement is effective after the date of filing for

five years

Differentiate between fixed-rate and adjustable-rate mortgages.

fixed-rate mortgage has a fixed rate of interest, so the payments remain the same for the duration of the loan with adjustable-rate mortgage the initial interest rate is a relatively low fixed rate for a specified period, such as a year or three years, after that time the interest rate adjusts annually or by some other period.

A security agreement that provides for a security interest in proceeds, in after-acquired property, or in collateral subject to future advances by the secured party (or in all three) is often characterized as a

floating lien.

Article 3 sets forth the requirements

for all negotiable instruments, including checks.

Section 7 is the statutory authority

for preventing mergers that could result in monopoly power or a substantial lessening of competition in the marketplace.

National Pollutant Discharge Elimination System (NPDES),

for regulating discharges from "point sources" of pollution, which include industrial, municipal (such as pipes and sewage treatment plants), and agricultural facilities.

IRAC (Issue, Rule, Analysis, and Conclusion)

forms the fundamental building blocks of legal analysis. It is the process by which all lawyers think about any legal problem. The beauty of IRAC is that it allows you to reduce the complexities of the law to a simple equation.

Gillian writes a check to Harris as payment for a video game player but soon discovers the player is broken. She goes to the drawee bank and orally authorizes Ilene, a bank officer, to stop payment on the check. This order is valid for

fourteen days.

Executive agencies are often referred to as the

fourth branch of government

Farley, an accountant, intentionally misstates a material fact to mislead Global Industries, Inc., a client. Global Industries justifiably relies on the misstatement to its detriment. Farley is most likely liable for

fraud.

HandiTools, Inc., sells power tools, power tool parts, and related supplies under "full" warranties. Under the Magnuson-Moss Warranty Act, this means that HandiTools must provide

free repair or replacement of any defective part.

Gold Medical Supply Company and Home & Hospice Care, Inc., enter into a contract for a sale of health care equipment and supplies. Under either a shipment contract or a destination contract, the seller must

give the buyer any necessary documents of title.

Title VII of the Civil Rights Act of 1964 also prohibits

government employers, private employers, and unions from discriminating against persons because of their religion. Employers cannot treat their employees more or less favorably based on their religious beliefs or practices and cannot require employees to participate in any religious activity (or forbid them from participating in one).

Article 9 of the Uniform Commercial Code (UCC) .

governs secured transactions in personal property. Personal property includes accounts, agricultural liens, and chattel paper (any documents or records evidencing a debt secured by personal property). It also includes commercial assignments of $1,000 or more, fixtures (certain property that is attached to land), instruments, and other types of intangible property, such as patents

The surety or guarantor

has a right of reimbursement from the debtor. Basically, the surety is entitled to receive from the debtor all outlays made on behalf of the suretyship arrangement. Such outlays can include expenses incurred as well as the actual amount of the debt paid to the creditor.

the indorsements "For deposit only" and "For collection only"

have the effect of locking the instrument into the bank collection process.

Electronic payments (e-payments)

have the potential to replace physical cash—coins and paper currency—with virtual cash in the form of electronic impulses.

Forrest Products is a mill that has resisted unionization. Several workers would like to unionize it, so their first step is to:

have workers sign authorization cards.

The Regulatory Flexibility Act has helped reduce record-keeping burdens for Mountain Gems & Jewels Company and other small business firms in the area of

hazardous waste management.

In general, the rule is that whenever a conflict arises between a common law contract rule and the state statutory law based on the UCC, t

he UCC controls. Thus, when a UCC provision addresses a certain issue, the UCC rule governs. When the UCC is silent, the common law governs.

What are two requirements for creating a security interest?

he secured party gives to the debtor something of sufficient enough value to support the contract. The security agreement contains a description that reasonably identifies the collateral.

When merchants are involved in commercial sales transactions, they are held to certain standards because of their presumed commercial expertise. When nonmerchant buyers or sellers are involved:

hey are held to less demanding standards than merchants.

A trustee may avoid fraudulent transfers if:

hey were made within two years prior to the filing of the petition or were made with actual intent to hinder or defraud a creditor.

An employer who violates the law by

hiring an unauthorized worker is subject to substantial penalties. The employer can be fined up to $2,200 for each unauthorized employee for a first offense, $5,000 per employee for a second offense, and up to $11,000 for subsequent offenses.

If the original indorsee pays or applies the proceeds consistently with the indorsement, the indorsee is a(n)

holder .

Delagation doctrine

holds that Article I section 8 of the US constitution grants Congress the authority to delegate some of its power to make and implement laws to administrative agencies.

In a sale or lease of any other future goods,

identification occurs when the seller or lessor ships, marks, or otherwise designates the goods as those to which the contract refers.

Oscar refuses to pay Petra $500 in cash on their contract to repair Oscar's washing machine, which Petra still possesses at her repair shop. Petra's lien on the machine will terminate

if Petra voluntarily surrenders possession.

An authorized agent binds a principal on an instrument

if the agent clearly names the principal in the signature (in handwriting, or by some mark or symbol). In this situation, the UCC presumes that the signature is authorized and genuine

Under the ECOA, a creditor may not require a cosigner on a credit instrument

if the applicant qualifies under the creditor's standards of creditworthiness for the amount and terms of the credit request.

Construction Products Company and Dante enter into a contract for a sale of bricks and stones. Construction Products knows the purpose for which Dante will use the goods. Under the UCC, an implied warranty of fitness of a particular purpose arises

if the buyer is relying on the seller to select suitable goods.

In addition, the state homestead exemption is available only

if the debtor has lived in a state for two years before filing the bankruptcy petition. Furthermore, a debtor who has violated securities laws, been convicted of a felony, or engaged in certain other intentional misconduct may not be permitted to claim the homestead exemption.

Goods Not Represented by a Document of Title Unless otherwise agreed,

if the goods are not represented by a document of title, title and risk pass as follows: Title passes on the formation of the contract [UCC 2-401(3)(b)]. Risk of loss passes to the buyer or lessee: a.if the seller or lessor is a merchant, risk passes on the buyer's or lessee's receipt of the goods. b.If the seller or lessor is a nonmerchant, risk passes to the buyer or lessee on the seller's or lessor's tender of delivery of the goods [UCC 2-509(3), 2A-219(2)(c)].

Goods Represented by a Document of Title Unless otherwise agreed,

if the goods are represented by a document of title, title and risk pass to the buyer when any of the following occurs: The buyer receives a negotiable document of title for the goods. The bailee acknowledges the buyer's right to possess the goods. The buyer receives a nonnegotiable document of title or a writing (record) directing the bailee to hand over the goods, and the buyer has had a reasonable time to present the document to the bailee and demand the goods [UCC 2-503(4)(b), 2-509(2)].

To avoid these problems, the UCC dispenses with the mirror image rule. Under the UCC, a contract is formed

if the offeree's response indicates a definite acceptance of the offer, even if the acceptance includes terms additional to or different from those contained in the offer [UCC 2-207(1)]. Whether the additional terms become part of the contract depends, in part, on whether the parties are nonmerchants or merchants.

Vacation Tours Inc. faxes ads to Workaday Products & Services Corporation and other businesses without the recipients' permission. This is

illegal

The IRCA makes it

illegal to hire, recruit, or refer for a fee someone not authorized to work in this country

Lenora signs a note "payable to the order of Medical Account Collection Agency." Unless Lenora has a valid defense against payment, Lenora's liability on this note is

immediate.

Section 11 of the Securities Act of 1933

imposes civil liability on accountants for misstatements and omissions of material facts in registration statements.

Before any interest in specific goods can pass from the seller or lessor to the buyer or lessee, the goods must be

in existence and identified as the specific goods designated in the contract [UCC 2-105(2)].

The Food and Drug Administration (FDA) regulates the distribution of Gensol. The FDA is a federal executive agency. It has rules about off-label marketing of drugs. If Pharzime was to be accused of violating one of the FDA rules, Pharzime's first formal hearing would be:

in front of an administrative law judge.

To notify the public of a proposed rule, the Federal Emergency Management Agency, like other federal agencies, publishes the proposal

in the Federal Register.

The secured party in a secured transaction is the party:

in whose favor there is a security interest.

Instruments that are payable on demand

include those that contain the words "Payable at sight" or "Payable upon presentment."

a five-day hold is permitted on all deposits,

including cash deposits, made at nonproprietary ATMs.

Those who knowingly violate the act may be subject to criminal penalties,

including fines of up to $1 million and imprisonment for up to two years (for false statements or failure to report violations). Corporate officers are among those who may be subject to these penalties.

The result of the trust indorsement is that the legal rights in the instrument are transferred to the original

indorsee .

The fiduciary restrictions—restrictions mandated by a relationship involving trust and loyalty—on the instrument do not reach beyond the original

indorsee.

A merchant-seller warrants that the buyer takes the goods free of from any copyright, trademark, or patent claims of a third person

infringements

List five transactions subject to Regulation Z.

installment loans retail and installment sales car loans home improvement loans real estate loans less than $25000.00

The UCC replaces the common law concept of title with all of the following

insurable interest. risk of loss. identification.

Digital Systems Corporation files a suit against Ethan, its former accountant, alleging constructive fraud. Digital Systems need not prove

intent to deceive

Elise and many other consumers complain to the Federal Trade Commission (FTC) that a Faux Diamonds Company ad is deceptive. The FTC's first step is to

investigate.

Ratification

involves a question of intent, and intent can be expressed by either words or conduct. The act of accepting and giving legal force to an obligation that previously was not enforceable.

The Food and Drug Administration (FDA) regulates the distribution of Gensol. The FDA is a federal executive agency. Its power to regulate Gensol:

is allowed by the delegation doctrine

A horizontal restraint

is any agreement that in some way restrains competition between rival firms competing in the same market.

Loyalty

is one of the most fundamental duties in a fiduciary relationship. Basically, the agent has the duty to act solely for the benefit of his or her principal and not in the interest of the agent or a third party. For instance, an agent cannot represent two principals in the same transaction unless both know of the dual capacity and consent to it.

an instrument is dishonored when the required payment or acceptance

is refused or cannot be obtained within the prescribed time.

the basic obligation of the seller or lessorThe basic obligation of the buyer or lessee is to accept and pay for conforming goods in accordance with the contract [UCC 2-301, 2A-516(1)].

is to transfer and deliver conforming goods.

Although a stop-payment order can be given orally over the phone,

it is binding on the bank for only fourteen calendar days unless confirmed in writing

When a draft orders the buyer's bank to pay,

it is called a banker's acceptance. Banker's acceptances are commonly used in international trade.

For a negotiable instrument to operate practically as either a substitute for cash or a credit device, or both,

it is essential that the instrument be easily transferable without danger of being uncollectible

If an instrument is payable to bearer,

it is negotiated by delivery—that is, by transfer into another person's possession. Indorsement is not necessary [UCC 3-201(b)]. The use of bearer instruments thus involves a greater risk of loss or theft than the use of order instruments.

To create an express warranty, a seller or lessor does not have to use formal words such as warrant or guarantee.

it is only necessary that a reasonable buyer or lessee would regard the representation as being part of the basis of the bargain [UCC 2-313(2), 2A-210(2)].

An example of personal property that normally would NOT be exempt from the satisfaction of judgment debts is

jewelry

Any disclaimer of all oral express warranties must be in ________ that is clear and conspicuous and called to the buyer's attention.

language

Article 2A is essentially a repetition of Article 2, except that it applies to

leases of goods rather than sales of goods and thus varies to reflect differences between sales and lease transactions. (Note that Article 2A is not concerned with leases of real property, such as land or buildings.)

Grip-All Tires, Inc., conditions the sale of one of its products on Helpful Vehicle Service Stores agreeing to buy another of Grip-All's products. This deal is

legal, depending on its purpose and the effect on competition

Disposable income is all income received

less amounts needed to support the farmer or fisherman and his or her family and to continue the farming or commercial fishing operation. Completion of payments under the plan discharges all debts provided for by the plan.

Because of the right of subrogation, any right that the creditor had against the debtor now becomes the right of the surety and includes all EXCEPT one of the following:

liabilities of the creditor.

Pat's Pet Houses, Inc., sells shelters for animals under "limited" warranties. Under the Magnuson-Moss Warranty Act, this means that the warranties on the shelters from Pat's

limit the buyers' recourse in some fashion.

The indorsements "for deposit only" and "for collection only" have the effect of_______ the instrument into the bank collection process.

locking t

A promissory note is a written promise

made by one person (the maker of the promise) to pay another (usually a payee) a specified sum.

In 1972, amendments to the FWPCA—known as the Clean Water Act (CWA)—established the following goals:

make waters safe for swimming, protect fish and wildlife, and eliminate the discharge of pollutants into the water.

A blank qualified indorsement ("without recourse, [signed] Jennie Cole")

makes the instrument a bearer instrument, and only delivery is required for negotiation.

Lighter Than Air, Inc., and Mario enter into a contract for a sale of a hang glider. Lighter Than Air, a merchant who deals in goods of the kind sold, makes implied and express warranties in connection with the sale. The Magnuson-Moss Warranty Act was designed to prevent deception in warranties by

making warranties easier to understand.

The EPA conducts meetings to discuss the possibility of creating additional regulations within the next five years. Under the Government in the Sunshine Act, the meetings

may be closed to the public

Stewart grants Julie a security interest in 500 shares of stock in his company in exchange for a loan. Stewart makes his payments on time, and his business is growing and successful. When the loan is nearly repaid, Stewart is in a car accident and is unable to work for a few months. He could sell his company were it not encumbered by Julie's security interest. Julie

may release her interest in the stock by filing an amendment

Some advertisements contain "half truths,"

meaning that the presented information is true but incomplete and therefore leads consumers to a false conclusion.

Natural Resource Investment Company and Mega Bank are secured parties with security interests in property owned by LNG Gas Corporation. Between these security interests, the first to be filed or perfected has priority over other filed or perfected security interests in

most circumstances.

The Consumer Product Safety Commission (CPSC) is investigating reports that Kidtoyz Corporation is marketing potentially harmful playthings. The CPSC's demands for particular documents from Kidtoyz

must be specific and adequately describe the material being sought.

Both the security agreement and the financing statement

must describe the collateral in which the secured party has a security interest. The security agreement must describe the collateral because no security interest in goods can exist unless the parties agree on which goods are subject to the security interest.

An employee alleging discrimination

must file a claim with the EEOC before a lawsuit can be brought against the employer.

Damian owns a pick-up truck and a motorcycle. He sells the motorcycle to Eden for $10,000. Eden pays for the cycle with a check, knowing that she had insufficient funds in her account to cover the amount. A week later, Damian files a petition in bankruptcy for relief through a liquidation. Refer to Fact Pattern 22-1A. Regarding the pick-up truck, Damian

must include it as part of the estate because Eden's check did not cover the cost of the cycle.

Marlene loses her Neighborly Bank access card. She realizes her loss the next day but waits a week to call the bank. Meanwhile, Odell finds and uses Marlene's card to withdraw $3,000 from Marlene's account. Refer to Fact Pattern 28-1A. When Marlene receives her Neighborly Bank statement, she demands that the bank investigate the matter and recredit his account. The bank

must investigate and, if the dispute is not resolved within ten days, recredit Marlene's account (at least until the dispute is resolved).

Silvia prepares federal corporate income tax returns for Trade & Pawn Stores, Inc., and other firms. Under the Internal Revenue Code, with respect to an understatement of a client's tax liability, Silvia may be liable for

negligent or willful misconduct

Oliver signs an instrument that states it is being executed "as per a contract for the sale of a case of apples dated May 1." This instrument is

negotiable

Rosario signs an instrument using an "R" with an oval encircling it. With this mark for a signature, the instrument is

negotiable

Lucas signs an instrument payable to the order of MoneyNow, Inc., that allows a holder to demand payment of the entire amount due, with interest, if Lucas fails to make a payment. This instrument is

negotiable.

On May 1, Miyu signs a check that is payable to the order of Nicole and that is dated July 1. This check is

negotiable.

Umiko files a petition for bankruptcy. Her creditors must file with the court their proof of claims against her assets within

ninety days of the creditors' meeting.

To finance the purchase of an electric guitar and amplifier from Leon's Guitars, Milo signs an instrument promising to pay to "National Lenders" $1,800 with interest in installments with the final payment due August 15, 2014. To be negotiable, this instrument must include on its face

no conditions

Rosanna takes out a student loan from Stability Bank. When she fails to make the scheduled payments for six months, the bank advises her of further action that it will take. This violates

no federal law

On behalf of Bottled Drinks Company, Devlin signs an instrument in which he promises to deliver 100 cases of bottled springwater as payment to Containers & Packaging, Inc., on April 1. This instrument is

nonnegotiable, because cable is not a medium of exchange authorized or adopted by a government as currency

Lara writes on a piece of paper, "I owe you $400," signs it, and gives it to Max. This instrument is

nonnegotiable, because it does not include an express promise to pay

Bence signs a promissory note for $1,500 in favor of Community College. The note is undated but specifies that it is "payable one month after date." This note is

nonnegotiable, because the maturity date cannot be determined from the face of the instrument.

Earthgrown Flora, Inc., is one of many producers of cut flowers. Earthgrown refuses to sell its products to Florist Shops Corporation. Under antitrust law, this refusal is most likely

not a violation.

Coffee Roasters, Inc., sells whole bean and ground coffee to Delicioso Deli under an existing contract. When the cost of coffee beans increases, Delicioso agrees to modifying the contract to increase the price, but later wants to cancel the contract. Delicioso may

not cancel the contract

Odette, an accountant, contracts to perform services for Percy. Odette acts in good faith and conforms to generally accepted accounting principles, but makes a mistake in judgment. Odette is most likely

not liable.

Sun-Hi does not make a payment on her car loan for several months. The dealer, Reputable Auto, repossesses the car by towing it from a public parking lot. Sun-Hi sues Reputable for breach of the peace. Sun-Hi will probably

not prevail, because the repossession was not a breach of the peace.

When a buyer is sued by a third party holding copyright, trademark, or patent rights in the goods, the title warranty of no infringements has been breached. What must the buyer do?

notify the seller of the litigation within a reasonable amount of time

Levy is the

obtaining of funds by legal process through the seizure and sale of nonexempt property, usually done after a writ of execution has been issued

Execution is the implementation

of a court's decree or judgment.

The FDA also has the responsibility

of ensuring that drugs are safe and effective before they are marketed to the public.

Perfection by Possession

one of the most frequently used means of obtaining financing under the common law was to pledge certain collateral as security for the debt and transfer the collateral into the creditor's possession. When the debt was paid, the collateral was returned to the debtor. Although the debtor usually entered into a written security agreement, oral security agreements were also enforceable as long as the secured party possessed the collateral.

An anticipatory repudiation occurs when:

one party communicates to the other an intention not to perform

Note that an agent acting at the principal's direction can be liable as a tortfeasor (

one who commits a wrong, or tort), along with the principal, for committing the tortious act even if the agent was unaware that the act was wrong.

Horace can write checks on his account at InterCity Bank. Jemma steals the checks, forges Horace's signature, and cashes the checks at InterCity. The bank is excused from any liability if, after receipt of the first forged check, Horace fails to report the forgeries within

one year

In a few states, statutes allow the homestead exemption

only if the judgment debtor has a family. If a judgment debtor does not have a family, a creditor may be entitled to collect the full amount realized from the sale of the debtor's home.

Telephone transfers are covered by the EFTA

only if they are made in accordance with a prearranged plan under which periodic or recurring transfers are contemplated.

If the security agreement is in writing or authenticated,

only the debtor's signature or authentication is required to create the security interest. The reason authentication is acceptable is to provide for electronic filing

This is the unique promise of digital cash,

or e-money, which consists of funds stored on microchips in laptops, smartphones, tablets, and other devices.

A secured party can release all

or part of any collateral described in the financing statement, thereby terminating its security interest in that collateral. The release is recorded by filing a uniform amendment form [UCC 9-512, 9-521(b)].

Independent regulatory agencies such as the Federal Trade Commission are

outside the major departments of the government's executive branch.

Any attempt to file a continuation statement

outside the six-month window will render the continuation ineffective, and the perfection will lapse at the end of the five-year period.

Harold Burton writes a check "payable to Debra or Kelsey." On this instrument, Debra and Kelsey are .

payees in the alternative

Lindsey, an accountant for Madison & Monroe, acquires a negotiable instrument from Norma by promising to pay its face value in thirty days. Lindsey acquires the status of an HDC when she

pays the face value due on the instrument.

common law doctrine of nuisance,

persons may be held liable if they use their property in a manner that unreasonably interferes with others' rights to use or enjoy their own property. Courts typically balance the harm caused by the pollution against the costs of stopping it.

In order to execute an artisan's lien, the lienholder must have

posession of the property

a court decides that a mixed contract is

primarily a goods contract, any dispute, even a dispute over the services portion, will be decided under the UCC.

To borrow the money to buy a car, Megan signs a note "payable to the order of Neighborly Financing." Olav cosigns the note to guarantee the repayment of the loan. Olav's liability on this note is

primary.

The Clean Air Act requires the EPA to list all hazardous air pollutions on a ------- schedule.

prioritized

Frozen Confections Corporation makes and sells ice cream under a variety of brand names. Frozen Fruit wants to merge with Grocers Iced Products Company, its main competitor. In weighing a challenge to the deal, a court looks at the relevant product market. This most likely includes ice cream and

products that are reasonably interchangeable.

Malpractice can best be defined as

professional negligence

not correct because only DeMarco's communications with Jessica are privileged.

professional negligence.

Rough-Cut Lumber Company receives a discharge in bankruptcy, even though some creditors hold judgments on overdue debts against it and others filed actions to collect on overdue debts before the bankruptcy. Rough-Cut's discharge will

prohibit actions and void judgments regarding overdue debts.

The Age Discrimination in Employment Act of 1967 and the Americans with Disabilities Act of 1990

prohibit discrimination on the basis of age and disability, respectively.

Title VII of the Civil Rights Act of 1964-3

prohibits both intentional and unintentional discrimination.

-The Genetic Information Nondiscrimination Act

prohibits employers and group health plans and insurers to make decisions concerning an employee due to results from genetic testing.

What is the purpose of the Federal Food, Drug, and Cosmetic Act? FDCA

protects consumers against contaminated and misbranded foods and drugs. The FDCA establishes food standards that specify safe levels of potentially hazardous food additives and provides classifications of foods and food advertising.

The Social Security Act

provides for old-age (retirement), survivors', and disability insurance. The act is therefore often referred to as OASDI

Section 802(a)(1) of the Sarbanes-Oxley Act .

provides that accountants must maintain working papers relating to an audit or review for five years—subsequently increased to seven years—from the end of the fiscal period in which the audit or review was concluded A knowing violation of this requirement will subject the accountant to a fine, imprisonment for up to ten years, or both.

Negotiable paper can be payable to a(n)______ officer.

public

The Securities and Exchange Commission decides to create a new rule relating to the dissemination of material nonpublic information through corporate blogs, tweets, and Web sites. The first step is to

publish a notice of the proposed rulemaking.

Javier buys a large 3D flat-screen TV from West Coast Sales, which agrees to lend him 85 percent of the purchase price. Their agreement is known as a .

purchase money security interest pmsi

The SBREFA also set up the Office of the National Ombudsman at the Small Business Administration to

receive comments from small businesses about their dealings with federal agencies. Based on these comments, Regional Small Business Fairness Boards rate the agencies and publicize their findings.

Arnold buys a backhoe from Big Dig Equipment Inc. Arnold is unaware that Credit Collection Company holds a lien against the backhoe when he buys it. If Credit Collection repossesses the backhoe, Arnold can

recover from Big Dig for breach of warranty.

If the creditor's actions

reduce the value of the property used as collateral, the surety is released to the extent of any loss suffered.

decertification.

refers to the process where the National Labor Relations Board (NLRB) allows employees to call for a special election to get rid of the union as their "exclusive representative."

Ocean Vessels, Inc., and Pacific Harbor Company enter into a contract for a sale of a boat. Ocean is a merchant who deals in goods of the kind sold. The goods are defective. Under the UCC, the implied warranty of merchantability is breached

regardless of what Ocean knew or could have discovered.

Hi-Yield Agriculture, Inc., makes a pesticide with a one-in-a-million risk to people of developing cancer from exposure. This substance must be

registered before it is sold.

The Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) of 1947regulates pesticides and herbicides. Pesticides and herbicides must be

registered before they can be sold, certified and used only for approved applications, and used in limited quantities when applied to food crops.

The Securities Act of 1933 requires

registration statements to be filed with the Securities and Exchange Commission (SEC) prior to an offering of securities (see Chapter 7).

States may also

regulate the disposal or recycling of other wastes, including glass, metal, plastic containers, and paper.

Luciano is a surety for a loan that Darmin does not pay. Luciano pays it in full. If Darmin does not declare bankruptcy, Luciano has a right of

reimbursement

Kelvin is an agent for Lookout Mountain Accountants, Inc. On Lookout Mountain's behalf and at its request, Kelvin pays Nerdlinger for custom software designed for the management of Lookout Mountain's services. Kelvin's right to obtain the amount of those payments from Lookout Mountain arises under the principal's duty of

reimbursement.

The Consumer Product Safety Commission (CPSC) determines that a Barbie Jeep is unsafe for children to ride in it. The CPSC has the power to .

remove all Barbie jeeps from the market

Asian Noodle Company contracts to sell 1,000 cases of rice noodles to Bob's Bistros, Inc., but later refuses to deliver. Due to a rice shortage, Bob's Bistros cannot obtain the noodles elsewhere. The buyer's right to recover the goods from the seller is the right of

replevin.

Daily Bread Bakeries, Inc., contracts to buy all of its ingredient requirements for bread making, at a certain minimum per year, from Enriched Flour & Grain Corporation for six years. After three years, Daily Bread tells Enriched that it plans to sell its assets to Flat Bread Shops, Inc. Flat Bread refuses to assure Enriched that it will continue Daily Bread's contract.

repudiation of the contract.

The RCRA also

requires all producers of hazardous waste materials to label and package properly any hazardous waste to be transported.

To establish a breach of contract

requires an enforceable contract, substantial performance by the nonbreaching party, a breach by the other party, and damages

The Davis-Bacon Act

requires contractors and subcontractors working on federal government construction projects to pay "prevailing wages" to their employees.

A vertical restraint of trade

results from an agreement between firms at different levels in the manufacturing and distribution process. In contrast to horizontal relationships, which occur at the same level of operation, vertical relationships encompass the entire chain of production.

On a client's request, an accountant must

return any of the of the client's records or journals to the client, and failure to do so may result in liability.

Ashley agrees to act as a surety for Roshan. Roshan defaults on his loan and Ashley repays the bank because Roshan declared bankruptcy. Ashley now has a(an)

right of subrogation

In most sales, sellers warrant that the transfer of title is

rightful .

Consumer protection laws regulate all of the following except

secured transactions

If the nonprevailing party refuses to pay the judgment after a lawsuit, the prevailing party may

seek a writ of execution

Express warranties can be found in a

seller's or lessor's advertisement, brochure, or promotional materials, in addition to being made orally or in an express warranty provision in a sales or lease contract.

Exclusionary Practices Under Section 3 of the Clayton Act,

sellers or lessors cannot sell or lease goods "on the condition, agreement or understanding that the ... purchaser or lessee thereof shall not use or deal in the goods ... of a competitor or competitors of the seller." In effect, this section prohibits two types of vertical agreements involving exclusionary practices— exclusive-dealing contracts and tying arrangements.

Article 2 of the UCC applies to the sale of goods.

sets forth the requirements for sales contracts, as well as the duties and obligations of the parties involved in the sales contract.

When a co-surety pays more than her or his proportionate share on a debtor's default,

she or he is entitled to recover from the other co-sureties the amount paid above that surety's obligation. This is the right of contribution. Generally, a co-surety's liability either is determined by agreement or, in the absence of agreement, is set at the maximum liability under the suretyship contract.

Generally, all contracts are assumed to be

shipment contracts if nothing to the contrary is stated in the contract.

TO PROVE A PRIMA FACIE CAS

show that: member of a protected class. applied and was qualified for the job in question. was rejected by the employer. The employer continued to seek applicants for the position or filled the position with a person not in a protected class.

Normally a seller can disclaim title warranties only by including language in the contract.

specific

A promissory note can name a(n)

specific payee or be payable to bearer.

Danko sells new and used sports equipment to persons who come into his store, Eyes on the Prize. One afternoon, Danko sells a used display shelf to Felipe. At a garage sale at his home, Danko sells a used flat-screen TV to Faye. Under the UCC, Danko is a merchant of

sports equipment only

What type of law governs the procedures that must be followed to create a mechanic's lien?

state law

The professional conduct of attorneys is governed by:

state rules governing the professional conduct of attorneys.

Healthcare Device, Inc., has exclusive control over the market for its product. Healthcare Device's market power is most likely

subject to further evaluation.

Raoul is a surety for Suzu's loan from Turnkey Credit, Inc. Raoul's right to "step into the shoes" of Turnkey, after paying Suzu's debt, and exercise any of the Turnkey's rights against Suzu is the right of

subrogation.

An action qualifies as "major" if it involves a

substantial commitment of resources (monetary or otherwise). An action is "federal" if a federal agency has the power to control it.

Most of the statutory and judicially created exemptions to the antitrust laws apply in

such areas as labor, insurance, and foreign trade

Whether a vertical merger will be deemed illegal generally depends on several factors

such as whether the merger creates a single firm that controls an undue percentage share of the relevant market. the merger results in a significant increase in the concentration of firms in that market, barriers to entry into the market, and the apparent intent of the merging parties.

Gill loans Sully funds to purchase a new ski boat and they agree that Gill will have a security interest in that boat until Sully repays the loan. They need to file a financing statement under the name of .

sullty

When a drawer gives one alternative or joint payee a check, the drawer's obligation on the check to other payees is .

suspended

The official forms must be completed accurately, in bankruptcy

sworn to under oath, and signed by the debtor. To conceal assets or knowingly supply false information on these schedules is a crime under the bankruptcy laws.

In a dispute over a sale involving a restored 1937 Ford Roadster, Garth argues that for the purpose of the sale, Hoyt's Pawn Shop, where Garth bought the auto, is a merchant. A court may determine whether Hoyt's is a merchant by assessing whether

t holds itself out by occupation as having knowledge or skill unique to the auto in the transaction.

A bailment is different from a gift because

temporary delivery of personal property, without passage of title, into the care of another, called a bailee.

The National Environmental Policy Act (NEPA) requires:

that an environmental impact statement be prepared for major federal actions that significantly affect the environmental quality.

If an agent signs his or her own name on a check

that is payable from the account of the principal, and the principal is identified on the check, the agent will not be personally liable on the check [UCC 3-402(c)].

public-policy exception to the employment at will doctrine may apply to an employee who is discharged for whistleblowing—

that is, telling or threatening to tell government authorities, upper-level managers, or the media that her or his employer is engaged in some unsafe or illegal activity. It may also apply if the employee is asked to do something illegal and refuses and adverse employment action is taken against him or her.

A sight draft (or demand draft) is payable on sight—

that is, when it is presented to the drawee (usually a bank or financial institution) for payment. A sight draft may be payable on acceptance.

An acceptor is a drawee, such as a bank,

that promises to pay an instrument when it is presented later for payment, Once a drawee accepts a draft (usually by writing "accepted" across its face and signing it), the drawee is obligated to pay the draft when it is presented for payment

Other federal agencies with authority for regulating specific environmental matters include

the Department of the Interior, the Department of Defense, the Department of Labor, the Food and Drug Administration, and the Nuclear Regulatory Commission.

For violations of emission limits under the Clean Air Act,

the EPA can assess civil penalties of up to $25,000 per day. Additional fines of up to $5,000 per day can be assessed for other violations, such as failure to maintain the required records.

To penalize those who find it more cost-effective to violate the act than to comply with it,

the EPA is authorized to impose a penalty equal to the violator's economic benefits from noncompliance.

The primary federal agency regulating environmental law is

the Environmental Protection Agency (EPA), which was created in 1970 to coordinate federal environmental responsibilities.

as the speed of check processing increases under Check 21,

the Federal Reserve Board will reduce the maximum time that a bank can hold funds from deposited checks before making them available to the depositor.

With some exceptions, every portion of every meeting of the Veterans Health Administration and other federal administrative agencies must be open to public observation under

the Government in the Sunshine Act.

the most important laws affecting the employment relationship are

the Immigration Reform and Control Act (IRCA) of 1986 and the Immigration Act of 1990.

At the national level, antitrust legislation began when Congress passed

the Interstate Commerce ActFootnote in 1887, followed by the Sherman Antitrust Act in 1890 In 1914, Congress passed the Clayton Act and the Federal Trade Commission Act to further curb anti-competitive or unfair business practices.

The National Labor Relations Board.

the NLRA also created the National Labor Relations Board (NLRB) to oversee union elections and to prevent employers from engaging in unfair and illegal union activities and unfair labor practices.

If Robin is a guarantor, then the guaranty is required to be in writing because of

the Statute of Frauds.

Teri borrows $10,000 from USA National Bank to remodel a room in her home. This transaction is subject to

the Truth-in-Lending Act.

The NCCUSL developed the Uniform Commercial Code (UCC) to serve that purpose. First issued in 1949,

the UCC facilitates commercial transactions by making the laws governing sales and lease contracts clearer, simpler, and more readily applicable to the numerous difficulties that can arise during such transactions.

Orlando's Organic Pizza restaurant declares bankruptcy, idling Orlando's new delivery car. The court can compel Orlando's to make periodic cash payments to a creditor with a secured interest in the vehicle to offset the depreciation in its value. This is

the adequate protection doctrine.

agency coupled with an interest,

the agent has some legal right to (an interest in) the property that is the subject of the agency.

Agent's Duties to the Principal

the agent owes the principal five duties—performance, notification, loyalty, obedience, and accounting.

If the seller does not make a reasonable contract for transportation or notify the buyer of the shipment,

the buyer can reject the goods, but only if a material loss or a significant delay results.

Under Article 49 of the CISG,

the buyer is permitted to avoid obligations under the contract if the seller breaches the contract or fails to deliver the goods during the time specified in the contract or later agreed on by the parties.

An implied warranty of fitness for a particular purpose normally will NOT arise when:

the buyer never indicated any special purpose, nor was that special purpose obvious.

the common law of contracts also applies to sales contracts. In other words,

the common law requirements for a valid contract—agreement, consideration, contractual capacity, and legality—are also applicable to sales contracts.

Even if a company takes every possible precaution, if someone is injured as a result of ultra hazardous activities (such as chemical hauling),

the company will be strictly liable for the harm.

HomeBaked Bread Company hires Ike to sell the company's products in a certain area. HomeBaked Bread agrees to pay Ike a salary, plus commission, for a trial period. They also agree that Ike can sell using any methods and during any hours that seem appropriate. The key factor in whether Ike is HomeBaked Bread's employee is

the control HomeBaked Bread has over the details of the work.

Once these requirements have been met,

the creditor's rights are said to attach to the collateral. Attachment gives the creditor an enforceable security interest in the collateral

To effectively perfect a security interest, a financing statement must contain

the debtor's signature, the debtor's and creditor's addresses, and a description of the collateral by type or item.

LNG Corporation and Midstates Utility Company enter a contract for a sale of liquified natural gas. LNG draws a draft unconditionally ordering Midstates Utility to pay $50,000 to LNG's order in sixty days. Midstates Utility signs and dates the draft. On this instrument, LNG is

the drawer

under the doctrine of respondeat superior,

the employer can be liable for intentional torts that an employee commits within the course and scope of employment.

If the debtor's name changes,

the financing statement remains effective for collateral the debtor acquired before or within four months after the name change.

anti-trust laws

the laws that regulate economic competition in the United States today

When we say that an artisan's lien is possessory, we mean that:

the lienholder must retain possession of the personal property.

Signatures For an instrument to be negotiable, it must be signed by

the maker if it is a note or a certificate of deposit or the drawer if it is a draft or a check [UCC 3-103(a)(3) , (5)].

For an instrument to be negotiable, the UCC requires that it be signed by .

the maker or the drawer

If a horizontal merger creates an entity with a significant market share,

the merger may be considered illegal because it increases market concentration.

the four Major Differences between the CISG and the Uniform Commercial Code.

the mirror image rule, irrevocable offers, the Statute of Frauds, and the time of contract formation.

Immigration Act of 1990 placed caps on

the number of visas (entry permits) that can be issued to immigrants each year.

drawer

the party that initiates a draft (writes a check, for example), thereby ordering the drawee to pay.

Section 8—Interlocking Directorates

the practice of having individuals serve as directors on the boards of two or more competing companies simultaneously. Specifically, no person may be a director for two or more competing corporations at the same time if either of the corporations has capital, surplus, or undivided profits aggregating more than $28,883,000 or competitive sales of $2,888,300 or more. The Federal Trade Commission adjusts these threshold amounts each year.

Ken invents a nifty small flashlight. He borrows $10,000 from Scott and $20,000 from Erika so that he can buy the components to make the flashlights. Scott and Erika each perfect a security interest in Ken's finished products. Erika's security interest in Ken's fully assembled flashlights is

the proportion of flashlights that represents the ratio of raw materials that her loan was used to purchase.

The Bureau of Land Management uses notice-and-comment rulemaking. This involves a period during which

the public is asked to comment on a proposed rule.

Destination Contracts

the risk of loss passes to the buyer or lessee when the goods are tendered to the buyer or lessee at the specified destination

Over the course of a year, Discount Market Company sells goods from its inventory and also sells one of its warehouses. In exchange, Discount receives checks, which Discount uses to repay a loan from Evermore Credit Inc. Article 2 of the UCC governs

the sale of the goods

Banquet Furnishings, Inc., and Christina enter into a contract for a lease of tables, chairs, and items for a wedding reception. Banquet Furnishings, a merchant who deals in goods of the kind sold, generally describes the goods, details technical specifications, and shows a sample. Under the UCC, if these are inconsistent

the sample takes precedence over the general description

Fiona borrows $1,000 from Garden State Bank, using her recreational vehicle (RV) motor home, which she purchased at Hugo's RV Sales & Service, as collateral. To perfect its security interest, the bank must file its financing statement with

the secretary of state.

Similarly, under Article 64, under the CISG

the seller can avoid obligations under the contract if the buyer breaches the contract, fails to accept delivery of the goods, or fails to pay for the goods.

Under shipment contract,

the seller is required only to deliver the goods into the hands of a carrier and title passes to the buyer at the time and place of shipment.

Shipment Contracts

the seller or lessor is required or authorized to ship goods by carrier, but is not required to deliver them to a particular destination. The risk of loss in a shipment contract passes to the buyer or lessee when the goods are delivered to the carrier

Benny files a suit in a federal district court against the state of California, alleging employment discrimination under the Age Discrimination in Employment Act. The state asks the court to dismiss the suit. The court is most likely to rule that

the state is immune from the suit

Like the FOIA, the Sunshine Act contains certain exceptions. Closed meetings are permitted when

the subject of the meeting concerns accusing any person of a crime, an open meeting would frustrate the implementation of agency actions, or the subject of the meeting involves matters relating to future litigation or rulemaking. Courts interpret these exceptions to allow open access whenever possible.

Alex files a petition for bankruptcy under Chapter 7. He owes $2.37 million to assorted creditors. Two months before filing, he sold his beach house, which was valued at $600,000, to his brother Jonah for $150,000. If the trustee objects to the sale, most likely

the trustee will avoid the transfer and take back the house as part of Alex's estate.

For unsecured debtors, the plan must be confirmed if either

the value of the property to be distributed under the plan equals the amount of the claim or the plan provides that all of the debtor's disposable income to be received in a three-year period (or longer, by court approval) will be applied to making payments.

Perfection is the legal process by which secured parties protect:

themselves against the claims of third parties who want their debts satisfied out of the same collateral

Because the FDA must ensure the safety of new medications,

there is always a delay before drugs are available to the public and this sometimes leads to controversy.

Financing statements are filed publicly so that:

third parties can learn of a secured parties interest in the debtor collateral.

An exception occurs when the collateral consists of

timber to be cut, fixtures, or items to be extracted—such as oil, coal, gas, and minerals [UCC 9-301(3) and ((4), 9-502(b)]. In those circumstances, the financing statement is filed in the county where the collateral is located.

A portion of the United States Code that contains the bankruptcy code is

title 11

In destination contract situations,

title passes to the buyer when the goods are tendered at that destination.

The seller is required to deliver the goods

to a particular destination in a destination contract, usually directly to the buyer .

The basic obligation of the buyer or lessee is

to accept and pay for conforming goods in accordance with the contract [UCC 2-301, 2A-516(1)].

If the debtor and the secured party agree, they can amend the filing—

to add or substitute new collateral, for example—by filing a uniform amendment form that indicates the file number of the initial financing statement [UCC 9-512(a)]. The amendment does not extend the time period of perfection, but if new collateral is added, the perfection date (for priority purposes) for the new collateral begins on the date the amendment is filed [UCC 9-512(b), (c)].

FSMA also requires owners and operators of facilities

to analyze and identify food safety hazards, implement preventive controls, monitor effectiveness, and take corrective actions.

Advertising that appears

to be based on factual evidence but is not reasonably supported by some evidence will be deemed deceptive.

The RCRA was amended in 1984 and 1986

to decrease the use of land containment in the disposal of hazardous waste and to require smaller generators of hazardous waste to comply with the act.

The FTC has sole authority

to enforce violations of Section 5 of the Federal Trade Commission Act. FTC actions are effected through administrative orders, but if a firm violates an FTC order, the FTC can seek court sanctions for the violation.

Under the ADEA

to establish a prima facie case, the plaintiff must show that she or he was a member of the protected age group, was qualified for the position from which she or he was discharged, and was discharged because of age discrimination. Then the burden shifts to the employer.

Civil Rights Act of 1866 .

to protect the rights of freed slaves, prohibits discrimination on the basis of race or ethnicity in the formation or enforcement of contracts

In 2011, Congress enacted the Food Safety Modernization Act (FSMA)

to provide greater government control over the U.S. food safety system. The FSMA gives the FDA authority to directly recall any food products that it suspects are tainted (rather than relying on the producers to recall items).

AuthenticationT

to sign a record, or with the intent to sign a record, to execute or to adopt an electronic sound, symbol, or the like to link with the record. A record is retrievable information inscribed on a tangible medium or stored in an electronic or other medium.

If a creditor surrenders the collateral

to the debtor or impairs the collateral without the surety's consent, these acts can reduce the obligation of the surety.

Making any material modification

to the terms of the original contract—without the surety's consent—will discharge the surety's obligation. (

If a seller of goods is both the drawer and the payee of a draft, the drawer has created a

trade acceptance

An instrument is not negotiable unless it is payable to order or to bearer at the time it is issued or first comes into the possession of the holder.

true

Artisan's liens usually take priority over other creditors' claims to the same property.

true

Assignment of a promissory note does not affect the maker's obligation to pay the note as promised.

true

In an online ad, any disclosures should be placed as close as possible to the claim being qualified or be included within the claim itself.

true

In sales law, a warranty is an assurance or guarantee by the seller about the quality and features of the goods being sold.

true

Nearly any symbol executed or adopted by a person with the intent to authenticate a written or electronic document can be a signature under the UCC.

true

When an instrument is made payable to two or more persons jointly (by use of the word "and"), all of the payees' indorsements are necessary for negotiation.

true

Factors That Do not Affect Negotiability

undated, Antedating or postdating Handwritten terms outweigh typewritten and printed terms (preprinted terms on forms, for example), and typewritten terms outweigh printed terms [UCC 3-114]. Words outweigh figures unless the words are ambiguous [UCC 3-114]. This rule becomes important when the numerical amount and the written amount on a check differ. When an instrument simply states "with interest" and does not specify a particular interest rate, the interest rate is the judgment rate of interest [UCC 3-112(b)]. The judgment rate of interest refers to the rate of interest fixed by statute that applies to a monetary judgment awarded by a court. A check is negotiable even if there is a notation on it stating that it is "nonnegotiable" or "not governed by Article 3." Any other instrument, however, can be made nonnegotiable by the maker's or drawer's conspicuously noting on it that it is "nonnegotiable" or "not governed by Article 3" [UCC 3-104(d)].

Antonio, an accountant, is preparing a registration statement for his client, Best Foods. Some of the documents contain misstatements and Antonio omitted some material facts. Antonio can be held liable

under section 11 of the 1933 securites act

Irrevocable Offers

under the CISG, an offer can become irrevocable without a signed writing. Article 16(2) of the CISG provides that an offer will be irrevocable if: The offeror states orally that the offer is irrevocable. The offeree reasonably relies on the offer as being irrevocable. In both of these situations, the offer will be irrevocable even without a writing and without consideration.

Both civil and criminal liability may be imposed on accountants

under the Securities Act of 1933, the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995.

The second warranty of title, called no liens, protects buyers who purchase goods that are subject to a creditor's security interest.

unknowingly

The National Labor Relations Board uses notice-and-comment rulemaking. The final rule in such a proceeding has binding legal effect

unless a court overturns it.

By contract, Oil Shale Corporation forbids Petro Refining, Inc., a wholesale buyer of Oil Shale's products, from purchasing the products of its competitors. This exclusive-dealing contract is allowed

unless its effect is to substantially lessen competition.

A trade acceptance is a type of draft that is frequently

used in the sale of goods. In a trade acceptance, the seller of the goods is both the drawer and the payee. The buyer to whom credit is extended is the drawee. Essentially, the draft orders the buyer to pay a specified amount to the seller, usually at a stated time in the future.

Indorsements to pay only a named payee do not destroy the negotiability of the paper to the holder so long as the holder gives

value .

Fanny signs a note "payable to the order of Guaranty Bank." Guaranty indorses the note in blank and negotiates it to Haji, who sells it to Iona. Liability associated with the transfer of the note from Haji to Iona is

warranty.

The Labor-Management Relations Act (LMRA or Taft-Hartley Act) of 1947

was passed to proscribe certain unfair union practices, such as the closed shop. A closed shop is a firm that requires union membership as a condition of employment.

Kurt is 52 years old and has worked for a company covered by the Age Discrimination in Employment Act (ADEA) of 1967. He wants to bring a claim of age discrimination against his employer because he was replaced by a younger, lower-paid worker. To make out a prima facie case of age discrimination, Kurt does not have to establish that he

was replaced by someone who was below the age of 40

the purpose of antitrust legislation

was—and still is—to foster competition. Behind the laws lies our society's belief that competition leads to lower prices, better products, a wider selection of goods, and more product information

Fraudulent Transfers The trustee may avoid fraudulent transfers or obligations if they

were made within two years prior to the filing of the petition or were made with actual intent to hinder, delay, or defraud a creditor.

A certificate of deposit (CD) is a type of note issued

when a party deposits funds with a bank, and the bank promises to repay the funds, with interest, on a certain date [UCC 3-104(j) ]. The bank is the maker of the note, and the depositor is the payee.

Discharge can also occur

when a party's right of recourse is impaired If the holder has adversely affected the indorser's right to seek reimbursement from these other parties, however, the indorser is not liable on the instrument (to the extent that the indorser's right of recourse is impaired)

commercial impracticability

when something happens that makes performance of a contractual duty excessively burdensome, unbearably difficult, or extremely expensive, for the party committed to such performance.

An instrument is also dishonored

when the required presentment is excused (as it would be, for instance, if the maker had died) and the instrument is not properly accepted or paid

An indorsement is required .

whenever an order instrument is negotiated

The UCC's Good Faith Provision

which can never be disclaimed, reads as follows: "Every contract or duty within this Act imposes an obligation of good faith in its performance or enforcement" [UCC 1-304]. Good faith means honesty in fact.

The CISG also allows for specific performance as a remedy under Article 28,

which provides that "one party is entitled to require performance of any obligation by the other party." Nevertheless, a court may grant specific performance under Article 28 only if it would do so "under its own [national] law."

prove scienter,

which requires a fraudulent action or deception, reliance, materiality, or causation.

The public-policy exception may apply to an employee

who is discharged for whistleblowing—that is, telling government authorities, upper-level managers, or the media that her or his employer is engaged in some unsafe or illegal activity.

FSMA requires any person (There are some exceptions for small farmers.)

who manufactures, processes, packs, distributes, receives, holds, or imports food products to pay a fee and register with the U.S. Department of Health and Human Services.

A bailee is someone:

who temporarily cares for your personal property without passage of title.

Congress has established a "fast-track" Chapter 11 procedure for small-business debtors

whose liabilities do not exceed $2.49 million and who do not own or manage real estate. The fast track enables a debtor to avoid the appointment of a creditors' committee and also shortens the filing periods and relaxes certain other requirements. Because the process is shorter and simpler, it is less costly.

Title VII applies to employers

with 15 or more employees, labor unions with 15 or more members, labor unions that operate hiring halls (to which members go regularly to be assigned jobs as they become available), employment agencies, and state and local governing units or agencies.

Article 4 governs the relationships of banks

with one another as they process checks for payments.

Francis performs a contract with Genie to add a garage to Genie's property, but Genie does not pay. Francis can file a lien on Genie's property if, from the last date labor or materials were provided, he acts

within 60 to 120 days.

Norris-LaGuardia Act

íthis act declared a national policy permitting employees to organize.