Business Law & Regulation (CPA REG Review)

Comprehensive vocabulary flashcards covering CPA Regulation (REG) review topics: contract formation and defenses, UCC sales, agency, suretyship, secured transactions, bankruptcy, federal employment regulations, and business entity structures.

Legally Enforceable Contract Elements

The three required elements are agreement (offer plus acceptance), consideration, and lack of defenses.

Express Contract

A contract formed by oral or written language.

Implied-in-Fact Contract

A contract formed by conduct.

Implied-in-Law (Quasi) Contract

Not a true contract; an equitable remedy designed to prevent unjust enrichment.

Unilateral Contract

A promise exchanged for performance; the contract forms when performance is completed.

Bilateral Contract

A promise exchanged for a promise; the contract forms when the promises are exchanged.

UCC Sales Article

The statutory body of law governing contracts for the sale of goods.

RISE

A mnemonic representing contracts governed by common law: Real estate, Insurance, Services, and Employment.

Termination of an Offer

The three main methods of termination are revocation, rejection/counteroffer, or operation of law (death, insanity, destruction, or illegality).

Mailbox Rule

A rule stating that acceptance is generally effective upon dispatch, unless the offeror opts out by requiring acceptance to be effective upon receipt.

Consideration

Legal value arising from a bargained-for exchange.

Preexisting Duty Rule

The rule that performing an action one is already legally obligated to do does not constitute adequate consideration.

Fraud (in Contract Law)

A defense consisting of material misrepresentation, scienter (intent to deceive), intent to induce reliance, reasonable reliance, and damages.

Innocent Misrepresentation

A misstatement of fact that contains the elements of fraud but lacks scienter (intent to deceive).

Physical Duress

Unlawful physical compulsion used to force entry into a contract, rendering the contract void.

Economic or Social Duress

Improper economic or social pressure used to induce a contract, rendering the contract voidable.

Undue Influence

The abuse of a position of trust or confidence to take unfair advantage of another party.

Mutual Mistake

A defense that makes a contract void if both parties are mistaken as to the existence of the subject matter.

Unilateral Mistake

A mistake by only one party that is generally not a defense, unless the other party knew or should have known of the mistake.

Covenant Not to Compete

An agreement restricting competition that is generally valid when reasonably needed and reasonable as to time and geographic distance.

Minor Disaffirmance and Ratification

A minor may disaffirm during minority and within a reasonable time after reaching majority; ratification can occur after reaching majority via express statement, retaining benefits, or failing to timely disaffirm.

Adjudication of Mental Incompetency

A judicial ruling of mental incompetence that renders any contract entered into thereafter completely void.

MY LEGS

A mnemonic for contracts requiring a writing under the Statute of Frauds: Marriage, Year, Land, Executors, Goods ($\$500$ or more), and Surety.

One-Year Statute of Frauds Rule

Contracts that cannot, by their terms, be performed within $1\text{ year}$ must be evidenced by a writing signed by the party against whom enforcement is sought.

Accord and Satisfaction

An accord is an agreement to substitute one performance/contract for another; satisfaction is the performance of that accord, which discharges the original contract.

Novation

The substitution of a new party into a contract, with all parties agreeing to release the original party.

Parol Evidence Rule

Prohibits prior oral or written evidence and contemporaneous oral statements that contradict a fully integrated written contract, with exceptions for fraud, duress, mistake, and subsequent modifications.

Material Breach (Common Law)

A major breach of contract that entitles the nonbreaching party to be discharged from performance and recover damages.

Minor Breach (Common Law)

A breach that entitles the nonbreaching party to damages only, but does not discharge the obligation to perform.

Perfect Tender Rule

A UCC rule allowing a buyer to reject goods for any nonconformity.

Compensatory Damages

Damages designed to put the nonbreaching party in the position they would have occupied had the contract been performed.

Consequential Damages

Damages resulting from special circumstances beyond the contract itself that are recoverable only when reasonably foreseeable.

Specific Performance

An equitable remedy requiring performance of the contract, generally available for contracts involving land and unique items.

Liquidated Damages

Pre-agreed contract damages that are enforceable when reasonable and not designed as a penalty.

UCC Merchant

Someone who deals in goods of the kind sold or has special knowledge regarding those goods.

Merchant's Firm Offer

A written offer by a merchant that remains irrevocable without consideration for the stated time or a maximum period of $3\text{ months}$.

Prompt Shipment Offer Acceptance

An offer for prompt shipment of goods that may be accepted either by a promise to ship or by prompt shipment of conforming or nonconforming goods.

Auction with Reserve

The default auction type where the bid is the offer, acceptance occurs at the fall of the hammer, and the seller may withdraw the goods before acceptance.

Auction without Reserve

An auction format where the seller cannot withdraw the goods and must accept the highest bid.

UCC Statute of Limitations

The statutory deadline for bringing a lawsuit for breach of a sales contract under the UCC, which is $4\text{ years}$.

SWAP

A mnemonic for UCC Statute of Frauds exceptions (sales of goods for \\$500 or more without a writing): Specially manufactured goods, Written confirmation, Admission in court, and Performance.

UCC Impracticability

A standard that excuses contractual performance when it becomes significantly more difficult than anticipated, without requiring strict impossibility.

Risk of Loss (Noncarrier Contracts)

In noncarrier sales, risk of loss passes upon the seller's tender if the seller is a nonmerchant, or upon actual delivery to the buyer if the seller is a merchant.

Shipment Contract

A contract where risk of loss passes from the seller to the buyer upon delivery of the goods to the carrier.

Destination Contract

A contract where risk of loss passes to the buyer once the goods reach the specified destination.

Sale on Approval

A sales arrangement where risk of loss remains with the seller until the buyer gives approval.

Sale or Return

A sales arrangement where risk of loss passes to the buyer when the seller delivers the goods to the buyer.

Express Warranty (UCC)

A warranty created by a statement of fact or promise, description, sample, or model; it cannot be disclaimed.

Implied Warranty of Title

An automatic warranty promising that the seller has good title and the right to transfer it; it cannot be disclaimed with an 'as is' clause.

Implied Warranty of Merchantability

A warranty made by a merchant seller that goods are fit for ordinary purposes; it can be disclaimed using 'as is.'

Implied Warranty of Fitness for a Particular Purpose

A warranty created when a buyer relies on the seller to select suitable goods for a particular purpose; the seller need not be a merchant.

Anticipatory Repudiation

A clear repudiation before performance is due, allowing the nonbreaching party to sue immediately, cancel, demand written assurances, or await performance.

Entrusting Rule

A UCC rule stating that a buyer in the ordinary course obtains good title when the original owner entrusts goods to a merchant dealing in goods of that kind.

Respondeat Superior

A doctrine holding an employer strictly liable for torts committed by an employee acting within the scope of employment.

Lingering Apparent Authority

Apparent authority that persists after an agency relationship is terminated due to the principal's failure to notify third parties.

Exoneration (Suretyship)

A surety's right to compel the principal debtor to pay the creditor before the surety has made payment.

Subrogation (Suretyship)

The right of a surety, after paying the debt, to acquire all rights and security the creditor held against the debtor.

Reimbursement (Suretyship)

The right of a surety to recover from the debtor any amounts paid on the debtor's behalf.

Contribution (Suretyship)

The right of a paying cosurety to recover appropriate proportionate shares from fellow solvent cosureties who are jointly and severally liable.

Attachment vs. Perfection

Attachment makes a security interest effective against the debtor; perfection makes it effective against third parties with conflicting interests.

Purchase Money Security Interest (PMSI)

A security interest tied to credit or funds used to acquire the collateral; a PMSI in consumer goods is automatically perfected.

60% Consumer Rule

A rule stating that if a debtor has paid at least $60\%$ of the price of consumer goods, the secured party cannot retain the collateral and must sell it.

Automatic Stay

An order that halts most creditor collection actions and litigation immediately upon filing a bankruptcy petition.

Involuntary Bankruptcy Thresholds

May be filed by unsecured creditors if debts are not being paid as due, requiring at least \\$21,050 in debt, with $1$ petitioner needed if fewer than $12$ creditors, or at least $3$ petitioners if $12$ or more creditors.

180-Day Bankruptcy Estate Inclusion Rule

Property received via divorce, inheritance, or life insurance within $180\text{ days}$ after filing enters the bankruptcy estate.

Preferential Transfer Lookback Periods

Transfers made within $90\text{ days}$ before filing for ordinary creditors, or within $1\text{ year}$ before filing for insiders, that can be avoided by the trustee.

WAFTED

A mnemonic for debts not dischargeable in bankruptcy: Willful injury, Alimony, Fraud, Taxes, Educational loans, and Debts undisclosed.

SAG-WEG-CTI

A mnemonic for priority claimants in bankruptcy: Support, Administrative expenses, Gap claims, Wage claims (up to \\$17,150 within $180\text{ days}$), Employee benefit plans, Grain/fisherman claims (up to \\$8,450), Consumer deposits (up to \\$3,800), Taxes, and Intoxicated driver injury claims.

Federal Insurance Contributions Act (FICA)

A federal law funded by both employees and employers (employer portion is deductible; employee portion is not) that funds death, disability, retirement, dependent, and Medicare benefits.

Federal Unemployment Tax Act (FUTA)

An employer-paid unemployment compensation tax of $6.0\%$ on the first \\$7,000 of employee compensation, applying to employers with quarterly payroll \ge \\$1,500 or at least $1$ employee for $20\text{ weeks}$.

Affordable Care Act (ACA) Employer Threshold

An employer coverage threshold applying to employers with $50+$ full-time employees; noncompliance penalties are nondeductible.

Premium Tax Credit (PTC)

A refundable tax credit for purchasing health insurance through the Health Insurance Marketplace, available to households between $100\%$ and $400\%$ of the federal poverty level (married filing separately and dependents generally ineligible).

Foreign Corrupt Practices Act (FCPA)

A federal law prohibiting bribes to foreign officials to obtain or retain business.

General Partnership

An association of two or more persons carrying on as co-owners for profit, characterized by flow-through taxation, equal default management and profit/loss sharing, and joint and several personal liability for obligations.

Limited Liability Partnership (LLP)

A business entity requiring a state filing where partners are generally not liable for partnership contracts or the acts of other partners, but remain liable for their own negligence and negligence under their direct control.

Limited Partnership (LP)

A statutory partnership requiring at least one general partner (with unlimited liability) and one limited partner (whose liability is generally limited to their investment).

Limited Liability Company (LLC)

A state-registered entity where members are not personally liable for company debts, and management can be member-managed or manager-managed with voting power proportional to contributions.

Piercing the Corporate Veil

Disregarding a corporation's separate legal status to reach the personal assets of owners or managers, commonly due to commingling, alter ego/personal use, inadequate capitalization, or fraud.

Shareholder Derivative Suit

A lawsuit brought by a shareholder to redress an injury done to the corporation when the corporate board refuses to act.

Business Judgment Rule

A rule protecting corporate directors from liability for business decisions made in good faith, in the corporation's best interests, and with the care of an ordinarily prudent person.

Short-Form Merger

A simplified merger between a parent corporation and a subsidiary without shareholder approval, permitted when the parent owns at least $90\%$ of the subsidiary.