Business Law Test #7 2026

Donee Beneficiary

a 3rd party who receives a gift when a promisee secures a promise from the promisor for the purpose of making a gift to a 3rd party.

This is a GIFT, think of life insurance.

Creditor Beneficiary

a 3rd party who receives the benefits of a contract made between two contracting parties for the purpose of paying one original parties debt to a 3rd party.

This is to PAY DEBT, think of a person purchasing a store, they now aquire any debts that store owed already.

Conditions Precedent (happens before)

act or event that unless excused must exist or occur before a duty of immediate performance of a promise arises.

Think “this must happen first”.

Ex: This job offer is conditional upon passing a background check.

Passing the background check is the condition precedent.

Conditions Concurrent (happens at the same time)

Where parties exchange performance at the same time.

Ex: The buyer pays cash while the seller hands over the keys and title.

Both sides perform at the same time.

Conditions Subsequent (happens after)

an event that discharges a duty.

Ex: Lease will continue unless the tenant is transferred for work.

If the transfer happens, the lease can end early.

Express Conditions (clearly stated)

specifically set out in contract.

Ex: This agreement is contingent upon the buyer obtaining financing within 30 days.

This condition is expressly stated in the contract.

Constructive Conditions (imposed for fairness)

parties did not consider but which are court imposed to achieve fundamental fairness between the parties.

Ex: An employee is paid wages.

The court assumes the employee must actually perform the work to earn payment.

Exact Performance

when the court requires the contract to be performed as agreed, not just compensated with money.

Ex: Custom Items

• A craftsman agrees to make a custom wedding dress, but refuses to finish.

• Court can order completion of the dress.

Exact performance is usually used when money is not enough to make the injured party whole, often with unique items.

Material Breach

a serious violation of the contract that goes to the heart of the agreement, allowing the non-breaching party to stop performance and sue for damages.

• Major failure to perform

• Non-breaching party is excused from further performance

• Usually entitled to full damages

Ex: A builder agrees to construct a house, but never shows up.

Big Breach= can walk away and sue

Substantial Performance

means you did enough of the contract correctly that the other party must still pay or perform, even if it’s not perfect.

The performance is close enough to what was promised that it would be unfair not to pay.

Ex: A kitchen remodel is finished, but a few cabinet handles are missing.

The contractor has substantially performed and is owed payment minus the cost to fix the issue.

Immaterial Breach

An immaterial breach is a small or minor violation that does not destroy the contract’s main purpose.

• The non-breaching party must still perform, but can claim damages for the minor issue.

Ex: A contractor builds the house, but uses slightly different paint than agreed.

Small breach = must perform, but can claim compensation

Anticipatory Repudiation

before the time for performance there can be no actual breach. However there may be a breach by anticipatory repudiation.

It’s when someone backs out early—before performance is actually due.

Ex: A contractor abandons the project before the agreed start date.

Their actions show they won’t perform.

5 excuses for non performance

1. Hinderance

2. Waiver

3. Impossibility/performance is illegal

4. Frustration of purpose

5. Commercial Impractibility

Debtor/Creditor Relationship

When customer is depositor, customer is creditor.

When customer is borrower, bank is creditor.

• Debtor = the person who owes money

• Creditor = the person or business who is owed money

4 types of negotiable instruments

1. Draft

2. Check

3. Note

4. Certificate of Deposit

Stop Payment Order

customer has right to stop payment on checks drawn on their account, bank must act in reasonable time in complying with stop order. Bank that honors check on which stop order is placed is liable to customer for any loss suffered.

A stop payment order is a request to cancel a check before it’s cashed or deposited.

Ex: You write a check but lose it.

You tell your bank to stop payment so no one else can use it.

EFTs

involves a part who sends funds, a party who receives funds, and a digital banking network that facilitates the transfer of funds.

Ex: ATMs, Apple Pay, Wire transfers, Internet transactions

Payor Bank

Depository Bank

Honor/ Dishonor

Waiver

Release