Business Law Final

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  1. Article 2
    • article of sales
    • applies to goods/things/physical items
  2. What article 2 doesn't apply to
    • service contracts (pay a fee to have something done)
    • sale of real property
    • stock
    • bonds (promise to pay in a later date with a fixed rate of interest)
    • bailment (giving possession/control of personal property to another person)
    • gifts
  3. Bailor
    gives possession
  4. Bailee
    accepts possession
  5. What article 2 applies to
    • oil/gas/minerals
    • crops
    • merchants (in the sale of a product)
  6. Open terms
    in a contract for sales by article 2 if certain terms are missing, article 2 lets you fill in the terms
  7. 2 things that need to present to fill in a contract
    • intended to enter into a contract
    • reasonable way to fill in
  8. What you can fill in a contract
    • fill in the price
    • time of delivery
    • time of payment

    takes place at sellers place of interest if not specified payment is due at the time of the goods
  9. What you can't fill into a contract
  10. Merchant's firm offer rule
    • only if written
    • only applies to merchants
    • merchants must sign
    • if a merchant promises in writing to keep an offer open for a reasonable period of time, he cannot revoke the offer even though he didn't receive consideration (3 months)
  11. Accomodation
    • counter offer
    • sells a different good than the parties agree to
    • trying to encourage commerce
  12. Contract between 2 merchants
    between 2 merchants, the offeree adds additional non-material terms, any such non material terms become part of the contract unless rejected by offeror in a reasonable time
  13. Written confirmation rule
    if one merchant confirms the terms in writing the merchant to receive the confirmation has 10 days to raise the statute of frauds or they cannot raise it as a defense
  14. Specifically manufactured goods
    custom goods
  15. If you get specific goods, cannot use fraud unless
    • goods were made by the buyer
    • can't sell goods to anyone else
    • completed making the goods of have made substantial progress
  16. Free on board (F.O.B)
    • goods damaged before delivery, more responsible
    • risk of loss from seller to buyer when delivered to carrier
  17. F.O.B Destination
    risk of loss passes from seller to buyer when the goods reach a particular destination
  18. Free alongside
    • partial destination contract
    • risk of loss passes when the goods are next to a specific type of transport
    • splits the risk
  19. Goods and being picked up
    merchant+ non-merchant
    when the buyer is going to pick up from merchant, risk of loss goes from merchant to buyer when in the possession of the buyer
  20. Goods and being picked up
    2 non-merchants
    • risk of loss with a non-merchant seller goes from the seller to the buyer when available to be picked up
    • risk on seller
  21. In a contract between 2 merchants, where terms are missing, you can fill in the terms
    • parties must have attended into a contract
    • reasonable way to fill in terms
  22. Identified goods (unique)
    • specific and unique goods
    • if destroyed before delivery, contract is void, get $ back
    • if damaged but no destroyed, the buyer can reject the contract or the parties can agree to a reduction in price
  23. Unidentified goods
    • if destroyed, contract is still enforceable  
    • seller is given the opportunity to provide with another good
    • if damaged, seller has the right to replace them
  24. If stolen goods were stolen by force
    void title
  25. If thief gets them by fraud
    • buyer obtains voidable title, if the goods when received were stolen, got it by fraud
    • victim cannot get the goods back from an innocent buyer
  26. Innocent buyer
    • cannot be charged because the goods were stolen
    • must have bought the good
    • can get back if given as a gift
  27. Merchant intrustment rule
    if goods are given by a person with title to a merchant who sells those goods for a living, a person who purchases the goods from the merchant acquire good title
  28. Conditional sales
    • some condition must be met before selling
    • when is title going from seller to buyer
  29. Sale on approval
    • possession of goods is with the seller
    • title with seller until buyer buys it
    • 1) saying yes
    • 2) not regret in certain time frame
  30. Sale on return
    titles passes to the buyer at the time of the sale but buyer has option to return goods within a certain time frame
  31. Consignment
    • allows a seller to sell the goods but pay the supplier of the goods at a later time when they are sold
    • when goods are delivered to the cosignee, they have title to the goods
    • creditors of the assignee can seize any goods in her possession that satisfy a debt that they owe
  32. Consignor
    provides the goods
  33. Consignee
    receives the goods
  34. Rights the buyer has
    • right to inspect the goods before acceptance
    •             -if goods C.O.D, no right to inspect
    • buyer may reject non-informing goods (different) before acceptance for any defect large or small
  35. How buyer can accept goods
    • communicating to seller
    • sell the goods to someone else
    • alter/change goods
    • delay rejecting them
  36. If you reject
    non-merchant rule
    if rejected, only obligation is to hold/keep the goods with reasonable care for sufficient period of time for the seller to get the goods
  37. If you reject
    merchants rule
    if merchant buyer rejects goods, he must follow the reasonable instructions of the seller including shipping them back or selling them if they going to spoil
  38. Breech of contract under UCC
    4 years
  39. A seller's rights
    has the rights to cure any defect in the goods before the contract expires
  40. When can a seller cancel a contract
    • if a seller learns a buyer cannot pay for the goods, a seller still has possession, can cancel the contract
    • right to cancel but must mitigate
    • seller can refuse to deliver goods to someone who can't pay
    • within 10 days
  41. Commercial Impractability
    • can't be done
    • seller can avoid the obligations of a contract if its impossible to perform based upon events that were impossible to predict before selling
  42. Warranties
    • a promise that goods are sold, meet a certain quality
    • designed to protect the public
    • limit liability
  43. Express warranties
    • specific promise or representation by the seller about the quality of a product
    • can be made before/during/after the sale
  44. Implied warranties
    • warranty of title
    • sellers of goods represent they have valid title and have the rights to sell it
    • breached by people who sell stolen goods
  45. Warrant of merchantability
    • only applies to merchants
    • implied warranty

    • goods that are sold are fir for ordinary purpose
    • applies to new/used goods
    • to show a breech: not fit for intended purpose
  46. Warranty fit for particular purpose
    when you buy a good,you rely on the expertise of the salesperson
  47. Disclaimer of warranty
    • steps taken to forbid implied/express warranties that cannot disclaim a warranty after a sale
    • must be obvious to disclaim a warranty
    • statute of limitations: 4 years, parties can reduce to 1 year
  48. Product liability
    arises when a person suffers an injury to themselves or their property as a result from a defect from a product
  49. Defects in a product
    • design
    • manufacturer
    • packaging 
    • fair to warn
  50. Promissory note
    • 2 parties
    • 2 party negotiable instrument that is unconditional written promise by one party to pay money to another party
  51. Maker
    • 1 party
    • promises to pay
  52. Payee
    • person who gets paid
    • receives the note/paper
  53. Time note
    payment due at a specific time every month
  54. Demand note
    must be paid whenever asked for
  55. Draft
    • 3 parties
    • 2 party instrument which is an unconditional written order by one party that orders a 2nd party that pays a 3rd party

    • 1)draft
    • 2)drawee
    • 3)payee
  56. Certified check
    makes sure you have enough money
  57. Cashier's check
    • issued by the bank
    • bank is both the drawer and drawee
    • cannot issue stop payment order
  58. Beerer paper
    • payable by anyone who has physical possession of the paper when its time for it to be paid
    • can be transferred by one party without a signature
    • must say cash or beerer paper 
    • transfer it by delivery
  59. Order paper
    • instrument that is payable to a specific payee or endorsed to particular person
    • must say order paper
    • cannot be transferred without the signature of the person whose name appears on the draft
  60. Instrument
    promissory note or draft
  61. Accommodation party
    person who lends their name and credit to another party to the instrument
  62. Special endorsement
    • designed to provide protection
    • signature of the person signing the check needed
    • must list the person whom the check is payable to
  63. M.U.S.T S.O.W
    • Money
    • Unconditional
    • Sum
    • Time

    • Signed (drawer/maker)
    • Order/bearer paper
    • Writing
  64. Guarantee of payment
    • person who signs with you guarantees payment of the negotiable instrument
    • either party reliable for their debt
  65. Guarantee of collection
    accommodation in party, if maker defaults, must make effort to get money from you first then accommodation party
  66. Blank endorsement
    • doesn't indicate who it is 
    • order ---> bearer
  67. Special endorsement
    signed over to someone else
  68. Holder to collect
    • must reduce instrument
    • promissory note needs signature
    • if draft, must contain signature of drawer
    • signed by maker or drawer
  69. Holder in due course
    • law gives holder in due course certain rights which protect them from certain defenses
    • reduce the number of defenses
  70. How to become a holder in due course
    • must take the negotiable instrument for value
    • must take it in good faith
    • make take it without knowledge that its overdue, dishonored or subject to a defense
    • must have paid consideration
    • cannot be a gift
    • must have acted honestly
    • must have known it was old
    • cannot be turned down before
  71. Real defense
    • against holder and holder in due course
    • 1)if you are a minor, only pay the rule of necessity
    • 2)duress
    • 3)judicially declared incompetent
    • 4)bankruptcy
    • 5)fraud in fact (where a person is tricked or deceived into signing a negotiable instrument thinking its something else)
    • 6)forgery
    • 7)alteration 
    • 8)illegality (if instrument is void by law at the time it is executed, defense can be raised by any holder)
  72. Personal defense
    • mental illness 
    • breach of warranty
    • fraud in the inducement (makes a false statement to get a person to enter into a contract)
  73. Signature liability
    • a person cannot be held liable on an negotiable instrument unless his signature appears on it
    • only appears to order paper
  74. Stop payment order
    • oral- 14 days
    • written- 6 months
  75. Payor bank
    bank that issues checks
  76. Stale check
    check that is over 6 months old
  77. Payee bank
    bank that cashes check
  78. Post dated check
    cannot case check until date that appears on check
Card Set
Business Law Final
Blaw final
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