LE101- exam 2

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UCC

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88 Terms

1

UCC

The Uniform Commercial Code; sale of goods - a willing buyer and a willing seller are going to come to the agreement for the sale of something

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2

What is the predominant purpose test used for?

Determining which law governs hybrid/mixed contracts

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3

What must happen to reach an agreement of a contract?

Offer and acceptance

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4

What are the important elements of a contract?

- Offer and acceptance
- Between 2 or more competent parties
- Supported by legally sufficient consideration
- Based on genuine assent
- Is legal
- In writing (if required by SOF)

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5

Output contract

Exception to stating the quantity in a contract, and meets the criteria for a definite offer
The sellers actual output
Ex. selling all the crops you grow in one season

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6

Common law

Service contracts, real estate, insurance, employment

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7

Hybrid/mixed contracts

Contracts used for both a service and a good (law that governs this type of contract depends on the jurisdiction)

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8

Give an example of when the predominant purpose test is applied.

When a person buys a carpet along with installation services, the purchase of the carpet predominates meaning it will fall under UCC, if the service predominates it will be under common law

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9

What is the Gravamen test used for?

Determining which law governs hybrid/mixed contracts

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10

Give an example of when the Gravamen test is applied.

Whatever part of the contract is breached determines what law will be used.
If it was the part that had to do with the good - UCC
If it was the part that had to do with the service - common law

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11

5 examples of contract law

1. sale of real estate
2. purchase of a vehicle
3. employment contract
4. lease
5. purchasing food/drink

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12

Valid contract

Meets all of the requirements of a contract and is legally enforceable

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13

Void contract

No contract at all, could never be a contract because one of the basic elements is missing

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14

Voidable contract

A contract that may be legally avoided at the option of one or both of the parties. Ex. A minor entering into a contract would be voidable because they can either affirm or disaffirm at the option of the minor.

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15

Bilateral contract

Promise for a promise
Ex. I promise to give you my car if you promise to pay me money.

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Unilateral contract

Promise for an act Ex. I promise to pay you $60 if you mow the lawn

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17

Express contract

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

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18

Implied contract

A contract that comes about simply from actions of the parties.

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19

Executory contract

A contract that has not yet been fully performed.

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20

Executed contract

A contract that has been completely performed by both parties.

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21

Requirements contract

Exception to stating the quantity in a contract, and meets the criteria for a definite offer
Seller agrees to supply the buyer with all the goods they need, and the buyer buys exclusively from them

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22

What does an offer have to be?

Definite in nature

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23

What is a definite contract?

- No ambiguity in the words that are used
- Time of performance
- Who the parties are
- Subject matter
- Quantity (the amount of products you are selling)

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24

What is an open offer terminated by?

- Revocation (offeror revokes the offer before acceptance)
- Rejection/counteroffer
- Lapse of time (expiration)
- Death/incapacity
- Supervening illegality
- Destruction of subject matter
- Acceptance

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25

Option contract

Exception to an open contract where the buyer gives money to the seller to keep the offer open. If the seller sells the product during that time it is a breach of contract. There is a deposit to keep the offer open.

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26

Merchant's firm offer

Exception to an open contract where the merchant is putting into writing that they will hold an offer open for a certain amount of time. Has to involve a signature and a promise to keep the offer open.

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Mirror image rule

A common law rule that requires that the terms of the offeree's acceptance adhere exactly to the terms of the offeror's offer for a valid contract to be formed.

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What changes did the UCC make to the mirror image rule?

If the parties intend to make a contract, then the use of additional or different terms in the acceptance will not prevent the contract from being formed.

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29

Who can accept an offer?

The offeree is the only one that has the power to accept an open offer.

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30

What is consideration?

A bargain for exchange - parties must exchange something of legal value.
Ex. paying your son for not drinking his senior year of high school would not be legal value because he is not of age.

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31

What is not consideration?

Illusory promises, past consideration, preexisting legal duty

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32

What is an illusory promise?

A promise that is so uncertain as to what the terms of the promise is that the promisor has not definitely promised to do anything. Such a promise is unenforceable because it does not constitute consideration.
Ex. saying you will work if you feel like it

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33

What is past consideration?

Promises made in return for actions or events that have already taken place. Cannot be consideration because it came after the action. Ex. saving a friend and after you save them they say they will give you $500.

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34

What is preexisting legal duty?

When a party is legally permitted under a contract to do something for a specific cost, they cannot say they will do something for an additional amount of money.

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35

What makes an individual competent?

Capacity, age (18 or older), mental capacity to enter into a contract

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36

What kind of contract is created by a minor?

Voidable - has the capacity to become a contract, and a minor could either affirm or disaffirm at their choosing

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37

What kinds of contracts can minors not disaffirm?

- Necessities (food, clothing, shelter)
- Real estate
- Taxes
- Employment contract
- Loans (student)
- Military contracts

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38

What is mental incapacity caused by?

Illness or intoxication

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39

Can mental incompetence case a contract to be void?

Yes - if the court determines someone to be incompetent and they have appointed a guardian, any contract that person signs will be void.

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40

Can mental incompetence case a contract to be voidable?

Yes - if the court determines some to be mentally incompetent but they do not have a guardian, the contract will be voidable.

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41

How would be a contract be based on genuine assent?

If there is a true meeting of the minds - both parties must voluntarily enter into the contract.

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42

What prevents a true meeting of the minds?

Fraud, undue influence, duress

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43

What is fraud?

Prevent true meeting of the minds - Intention to deceive by one of the parties regarding material facts, reliance on that deception of the other party and it causes harm.

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44

What is undue influence?

Prevents true meeting of the minds - When there is a special relationship and a power dynamic where the one with the power influences the other into a contract.
Ex. caretaker who makes their client sign everything over to them

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45

What is duress?

Prevents true meeting of the minds- when someone is threatened into a contract because of fear

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46

What kind of contracts are illegal?

- Agreeing to criminal behavior/acts
- Violation of civil law (ex. violating civil rights)
- Against public policy - any contract that calls for acts of discrimination against groups/individuals (NDAs and adhesion contracts)

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47

What is an NDA?

Non-disclosure agreement - promoting and covering up illegal behavior (type of illegal contract against public policy)

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48

What is the non-compete clause?

A contract clause that restricts competition for a specified period of time, within a certain geographic region, and for specified activities. - can be legal if reasonable

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49

What is an adhesion contract?

Take it or leave it contract between parties that are in unequal bargaining positions, and the party in power is offering a contract to the other party that is grossly unfair. (type of illegal contract)

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50

What type of contracts need to be written under the S.O.F.

- Transfer of real estate or interest in real estate
- Contracts that cannot be performed or completed in one year
- Contracts in consideration of marriage
- Sale of goods $500 and up
- Secondary liability

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51

What is a prenup (ante nuptial agreement)?

An agreement where you keep what you had entering into marriage in the case of divorce (must be in writing)

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52

What is a postnuptial?

Saying what each person will take in the event of divorce (must be in writing)

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53

What types of marriage agreements must be in writing?

Prenup, postnuptial, separation agreement, giving something of value for marriage

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54

What is secondary liability?

Answering for the debt of another. A third party agrees to pay back a loan that another person took out. (must be in writing)

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55

What are the two types of warranties?

Express and implied

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56

What is an express warranty?

A written guarantee, and a buyer relies on the claims created by an affirmation of fact or a promise made by the seller.

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57

What are the two types of implied warranties?

Merchantability and fitness for a particular purpose

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58

What is merchantability?

The product sold will perform basic functions that the product of that general nature do. Ex. buying a coffee machine and expecting it to brew coffee. (a type of implied warranty)

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59

What is fitness for a particular purpose?

Seller knows use and sells goods for that use. Involves communication between the buyer and the seller. Ex. buying indoor/outdoor lights they say can be used outdoors and the first rainstorm they short out. (type of implied warranty)

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60

What types of remedies can be sought by a plaintiff under contract law?

Damages - compensatory and liquidated damages
Specific performance
Injunctions
Recission
Reformation
Restitution

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61

What are compensatory damages?

Monetary awards that compensate the plaintiff for his or her direct losses

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62

What are liquidated damages?

damages specified as a term of the contract, before a breach of contract occurs - if unreasonable it will be a penalty and will be erased from the contract

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63

What is specific performance?

An equitable remedy in which the court (rather than awarding money damages for the breach of contract) orders the parties to perform the contract exactly according to its terms. When money is not sufficient to make the plaintiff hold because of unique items or pieces of property.

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64

What are injunctions?

a court order requiring either that an action stop, a prohibitory order, or that an action starts, a mandatory order.

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65

What is recission?

An equitable remedy by which a contract is terminated and the parties are returned to the positions they occupied before the before the contract was made because it was entered into with fraud or misrepresentation.

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66

What is reformation?

a court-ordered correction of a written contract so that it reflects the true intention of the parties. Something went wrong when taking agreement from words to writing.

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67

What is restitution?

The defendant was unjustly enriched at the expenses of the plaintiff. Reversed by restoring the benefit to the plaintiff.

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68

What are the types of business organizations?

sole proprietorship, partnership, corporation, LLC, LLP

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69

What is a sole proprietorship?

A small business owned by one person with employees (most common)

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70

Advantages of a sole proprietorship

Easiest to start
Least regulated
Single owner keeps all the profits
Taxed as an individual Not much paperwork

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71

Disadvantages of Sole Proprietorship

Limited to what you have and what you can borrow
When you dies, the business ends
Unlimited liability - all assets ares subject to creditors (house, property, etc.)

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72

What is a general partnership?

Where there are two or more persons who agree to engage in a business and agree to share in in the profits and losses.

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73

What is a limited partnership?

A partnership with at least one general partner AND at least one limited partner that are investors and do not manage the day-to-day business.

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74

How do you start a partnership?

Partnership must be in writing if it is for over a year. If they are missing a contract but still act as a partnership, the law can find them as partners.

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75

What is the UPA?

Uniform Partnership Act - fills in any gaps to determine each partner's responsibility and rights, if they have a contract they will fill in what they are missing.

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76

What are the essential elements of an offer?

Serious intent - all parties intend for it to be an actual offer. The court judges intent by reasonable persons standard and how the reasonable person would interpret a statement
Definite terms - words can be defined in the contract, parties need to be identified, subject matter, consideration, time of performance
Communication of terms and conditions - offeree needs to be aware of the offer to accept it

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77

Advantages of a partnership

- individual taxation - each individual is taxed on an individual basis
- more partners, more money
- sharing the work and engaging in management
- each party brings their own skill sets
- sharing losses

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78

Disadvantages of a partnership

- unlimited liability - joint and several liability, if someone files a lawsuit they can sue all the partners, one, or two, etc. and their personal assets are at risk
- loss of decision-making power
- sharing profits
- if a partner dies, the partnership dissolves

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79

How is a corporation created?

Articles of incorporation must be filed to the secretary of state, or some state department. Check that your name is not like another corporate name. Your name must include something that indicates that you are a corporation. Need officers, board of directors, must be formal and there must be meetings. Must name a registered agent for service (when the corporation is being sued, this person accepts this service)

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80

Advantages of a corporation

- separate legal entity, separate from owners
- Limited liability for the owners
- owners are shareholders, you buy into the corporation through shares
- easier to raise lots of money because of all the shareholders

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81

Disadvantages of a corporation

- lots of paperwork, disclosures
- articles of incorporation
- name must indicate that you are a corporation
- formal, complicated, costly
- double taxation - the corporation is taxed first and then the owners are taxed on dividends

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82

What is piercing the corporate veil?

If the corporation or the LLC has not organized properly and if there is commingling of personal and corporate/LLC assets the court can come in and pierce the corporate veil meaning the court can come in and seize their legal assets (only the ones who have engaged in the bad behavior), they will lose limited liability

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83

What is a LLC and how is it created?

Limited liability company
Created by filing paperwork with the secretary of state, created according to the statue. Create through articles of organization, and you need to identify that it is an LLC in its name

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84

Advantages of LLC

- limited liability - owners cannot have personal assets taken if creditors come after them
- single or individual taxation
- separate legal entity
- owners are members
- if members die, the LLC still stands

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85

Disadvantages of LLC

- If you do not keep your personal assets and the LLC assets separate, the court can come in and piercing of the veil (liability can become limited if there is fraud/comingling)
- Lots of paperwork (not as much as corporations)
- Must pay fees to file paperwork
- Not every type of business can operate as an LLC

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86

What is an LLP and how is it created?

Limited liability partnership
Created by filing paperwork with the secretary of state, created according to the statue. Create through articles of organization, and you need to identify that it is an LLP in its name

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87

Advantages of an LLP

- Owners are partners (multiple individuals)
- individual taxation for the partners
- limited liability - limited to what the LLP owns

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88

Disadvantages of an LLP

- guided by statutes so you must follow the rules within the state
- designating a name that has LLP in it
- paperwork but less than LLC and corporation
- not all states permit LLCs.
- limits on the type of business that you can operate as an LLP if permitted

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