Essentials of Business Law - Exam 2

  1. Third-party beneficiary
    A person who is not a party to a contract but is intended by the contracting parties to benefit as a consequence of a contract.
  2. Incidental beneficiary
    A person who will benefit as an indirect consequence of a contract, although that was not the intent of the contracting parties.
  3. Assignment
    The transfer of a contract right to a third party who can receive the benefits of the contract.
  4. Assignor
    The person who transfers his or her rights in an assignment.
  5. Assignee
    The third party to whom rights are transferred in an assignment.
  6. Guarantor
    The party who guarantees the promises assigned.
  7. Personal-service contract
    A contract in which services that require a unique skill, talent, ability, and so forth are provided by a specific person.
  8. Delegation
    The appointment of a third party by a party to an existing contract to perform contractual duties that do not involve unique skills, talents,abilities, and so on.
  9. Bankruptcy
    A condition in which a person or business is legally recognized as unable to pay legitimate debts.
  10. Novation
    A situation in which all parties to a contract agree to a significant change to a contract.
  11. Substantial performance
    When a party to a contract, in good faith, executes all of the promised terms and conditions of the contract with the exception of minor details that do not affect the real intent of their agreement.
  12. Tender of performance
    An offer to perform that is considered evidence of a party's willingness to fulfill the terms of a contract.
  13. Tender of goods
    An offer to provide the goods agreed upon that is considered evidence of a party's willingness to fulfill the terms of a contract.
  14. Tender of payment
    A money offer of payment of obligation.
  15. Impossibility of performance
    When unforeseen circumstances make it impossible to fulfill the terms of a contract; in these cases, the contract is considered void.
  16. Frustration of purpose
    A doctrine that states that where both parties know the purpose of a contract and, through no fault of either party, the reason for the contract no longer exists, the contract is terminated.
  17. Material alteration
    A deliberate change or alteration of an important element in a written contract that affects the rights or obligations of the parties.
  18. Breach of contract
    When a party to a contract refuses to perform as required by the contract or performs in an unsatisfactory manner.
  19. Anticipatory breach
    When a party to a contract announces his or her intention to break the contract in the future.
  20. Mitigate
    The obligation of the injured party to protect the other party from any unnecessary damages.
  21. Promissory note
    A written promise to pay a specified sum of money.
  22. Liquidated damages clause
    A statement wherein damages are explicitly set in the event one of the parties breaches an agreement.
  23. Specific perofrmance
    A court order directing a person to perform --or not to perform-- as he or she agreed to do in a contract.
  24. Restraining order
    A court order prohibiting the performance of a certain act.  In some states, a restraining order is temporary.
  25. Injunction
    A permanent court order prohibiting the performance of a certain act.
  26. Title
    Ownership and the right to possess something.
  27. Bill of sale
    A written statement that the seller is passing ownership to the buyer.
  28. Bill of lading
    A receipt for goods to be shipped, acknowledging that such goods have been received and indicating agreement that the goods will be transported to the destination specified.
  29. Straight bill of lading
    A nonnegotiable receipt for goods to be shipped, acknowledging that such goods have been received and indicating agreement that the goods will be transported to the destination specified.
  30. Order bill of lading
    A receipt for goods to be shipped that is negotiable and is proof of title that can be used to transfer title from one person to another.
  31. Warehouse receipt
    Much like a bill of lading except that the goods are not being shipped but merely stored.
  32. Nonnegotiable warehouse receipt
    A receipt for the goods to be stored.
  33. Negotiable warehouse receipt
    Proof of ownership that can be used to transfer title from one person to another.
  34. Conditional sale
    A sale with contract provisions that specify conditions that must be met by one of the parties.
  35. Conditions precedent
    Conditions in a sales contract that must be met before title passes.
  36. Conditions subsequent
    Conditions in a sales contract that must be met after title has passed.
  37. Estoppel
    A legal bar to using contradictory words or acts in asserting a claim against another.
  38. Remote party
    A person with the right to make legitimate sales as a representative of the owner of the goods, although he or she is not a titleholder.
  39. Wrongful posession
    When property, such as stolen goods, is transferred without permission of the owner.
  40. Fungible goods
    Goods that are generally sold by weight or measure.
  41. Contract for sale
    A legally enforceable agreement that has as its purpose the immediate transfer of title to personal property in return for consideration.
  42. Existing goods
    Goods that physically exist and are owned by the seller at the time of sale.
  43. Future goods
    Goods that do not exist at the time of the sales transaction but are expected to come into the possession of the seller.
  44. Contract to sell
    An agreement to sell future goods.
  45. Contract for labor and materials
    A sales contract for goods of special design, construction, or manufacture.
  46. Contract for sale with the right of return
    A contract for the sale of goods that gives the buyer both title to the goods and the opportunity to return them to the seller at a later time.
  47. Sale on approval
    A contract for the sale of goods subject to the buyer's approval.
  48. Sale or return
    An agreement whereby the seller will accept the return of goods at the request of the buyer to maintain goodwill, rather than because the seller is legally obliged to accept the returned goods.
  49. Auction without reserve
    One at which the goods must be sold to the highest bidder and may not be withdrawn after bidding has begun.
  50. Auction with reserve
    One that gives the auctioneer the right to withdraw the goods at any time before announcing completion of the sale if reasonable bids are not made.
  51. Conditional sales contract
    A sales contract that includes conditions that must be met either before or after the sale is completed.
  52. FOB shipping point
    Title to goods passes from the seller to the buyer when the carrier receives the shipment and it is understood that the buyer will pay the transportation charges.
  53. FOB destination
    Title passes from the seller to the buyer when the goods are delivered to the buyer.
  54. Stoppage in transit
    When the buyer is insolvent, the right of an unpaid seller to stop goods in transit and order the carrier to hold them for the seller.
  55. Specific performance
    An order that requires the seller to deliver the goods specified in the contract or face being held in contempt of court.
  56. Replevin
    AN action to recover possession of specific goods wrongfully taken or detained by another.
  57. Cover
    When the seller fails to deliver the goods, the right of a buyer to buy similar goods elsewhere to substitute for those not delivered by the seller.
  58. Warranty
    A guarantee or promise made by the manufacturer or seller that the goods or services offered really are what they claim to be, or that goods or services are what a reasonable person has a right to expect.
  59. Express warranty
    An explicit, specifically stated promise.
  60. Implied warranty
    A guarantee suggested or inferred from known facts and circumstances.
  61. Custom of the marketplace
    What a warranty usually means in similar transactions.
  62. Disclaimer
    A denial or repudiation in an express warranty that places specific limitation in the warranty.
  63. Implied warranty of merchantabilty
    The law's assumption that goods sold by a merchant/seller are fit to be sold and are adequate for the ordinary purposes for which such goods are sold.
  64. Merchant
    An individual who deals in goods of the kind being sold in the ordinary course of business, or who presents himself or herself as having the skills or knowledge relating to the goods.
  65. Implied warranty of fitness for a particular purpose
    The law's assumption that goods are fit for their intended use.
  66. Magnuson-Moss Warranty Act
    A federal statute that addresses many different kinds of abuses to consumers relating to warranties.
  67. Interstate commerce
    Trade between two or more states.
  68. Full warranty
    The promise that a defective product will be repaired without charge and within a reasonable time after a complaint has been made.
  69. Limited Warranty
    A written warranty that does not meet the minimum requirements of a full warranty.
  70. Lemon laws
    Statutes that provide remedies to consumers for products such as automobiles that repeatedly fail to meet certain standards of quality and performance.
  71. Agent
    A person authorized to act on behalf of another and subject to the other's control in dealing with third parties.
  72. Principal
    A person who authorizes an agent to act on his or her behalf and subject to his or her control.
  73. Contract of agency
    An agreement between a principal and an agent by which the agent is vested with authority to represent the principal.
  74. General agent
    A person authorized to assume complete charge of his or her principal's business or who is entrusted with general authority to act for the principal in all business-related matters.
  75. Special agent
    A person delegated to act only in a particular transaction, under definite instructions, and with specific limits on the scope of his or her authority.
  76. Power of attorney
    An instrument in writing by which one person, as principal, appoints another person as agent and confers the authority to perform certain specified acts on behalf of the principal.
  77. Attorney in fact
    The person appointed as agent when the power of attorney is exercised.
  78. Durable power of attorney
    An instrument that documents a principal's desire for an agent's authority to remain intact in the event the principal is incapacitated; or to become effective only in the event the principal becomes incompetent.
  79. Agency by ratification
    An agency that results when a principal approves an unauthorized act performed by an agent or approves an act done in the principal's name by an unauthorized person.
  80. Agency by necessity
    An agency that is created when circumstances make such an agency necessary.
  81. Agency by operation of law
    An agency that is created when a court finds the need for an agency to achieve a desired social policy.
  82. Express authority
    An agent's authority that the principal voluntarily and specifically sets forth as oral or written instructions in an agency agreement.
  83. Implied authority
    The authority an agent reasonably assumes he or she has that relates to the express authority granted by the principal.
  84. Apparent authority
    The authority that a third party may reasonably assume an agent possesses, despite the fact that the agent does not actually possess such authority.
  85. Gratuitous agent
    One who acts on behalf of a principal without being paid.
  86. Irrevocable agency
    An agency contract that cannot be terminated by a principal in which the agent has an interest in the subject matter of the agency in addition to the remuneration that he or she receives for services.
  87. Sole proprietorship
    A business owned and operated by one person.
  88. Unlimited liability
    Legal exposure in which an owner of a business is personally liable for all of the debts and obligations of the business.
  89. Partnership
    A business owned and operated by two or more persons.
  90. Winding-up period
    The time after dissolution of a partnership during which there is an orderly liquidation of the partnership assets.
  91. Joint venture
    An activity in which individuals become partners for only a short period of time or for only a single project.
  92. Joint and several liability
    Legal exposure such that a person with a claim against a general partnership can elect to sue either all of the partners together or any individual partner whom he or she chooses.
  93. Limited partnership
    A business in which there are one or more general partners and one or more limited partners.
  94. Limited liability
    Legal exposure in which an owner of a business is not personally liable for all of the debt and obligations of the business.
  95. Corporation
    A business formed as a separate legal entity.
  96. Articles of incorporation
    A document that lists the general powers of a corporation.
  97. Bylaws
    A document that provides rules for the meetings of a corporation.
  98. Quorum
    The minimum number of shares necessary to present at a corporate meeting in order for action to be taken.
  99. Subchapter S corporation
    A corporation that is taxed as a partnership.
  100. Proxy
    A legal document that transfers the right to vote in a corporate election to another person.
  101. Fiduciary responsiblity
    A legal requirement that a person will exercise his or her authority while working under a duty of loyalty and a duty of care.
  102. Duty of loyalty
    A legal and ethical obligation placed upon a director to administer to the affairs of the corporation which personal integrity, honesty, and candor.
  103. Duty of care
    A legal and ethical obligation placed upon a director to act diligently and prudently in conducting the affairs of the corporation.
  104. Limited liability company (LLC)
    A relatively new organizational form available in most states that provides all of the owners with limited liability.
  105. Debtor
    An individual or business that owes money.
  106. Creditor
    An individual or business to which money is owed.
  107. Insolvency
    The state that occurs when as individual's or business's liabilities exceed assets.
  108. Default
    The state in which a debtor fails to meet one or more financial obligations to his or her creditors.
  109. Bankruptcy
    The legal state that occurs when a debtor is insolvent, is in default, and is unable to fulfill his or her obligations to pay back his or her creditors.
  110. Voluntary filing
    A form of bankruptcy that occurs when the debtor himself or herself files a bankruptcy petition.
  111. Involuntary filing
    A form of bankruptcy that occurs when creditors pressure a debtor to file.
  112. Liquidation
    A process in which assets are sold to obtain cash.
  113. Straight or liquidation bankruptcy
    The name given to a Chapter 7 bankruptcy, in which a trustee collects the debtor's nonexempt property, sells it, and dispenses the proceeds.
  114. Secured debt
    A loan for which a specific asset is used as collateral.
  115. Preferential payment
    A transfer of funds in which the debtor gives favorable treatment to one creditor over another.
  116. Fraudulent transfer
    A transaction in which the debtor sells property for an amount far below its market value.
  117. Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
    A federal law that instituted strict rules and eligibility requirements for debtors filing for bankruptcy.
  118. Means test
    A complex formula that measures an individual's income relative to the median income of the people in the state where he or she resides.
  119. Reorganization bankruptcy
    The name given to a Chapter 13 bankruptcy, in which the debtor agrees to pay back all or a portion of his or her debts over a period of 3-5 years.
  120. Priority debts
    Debts deemed sufficiently important under Chapter 13 of the bankruptcy law that they must be paid in full.
  121. Endorsement
    When the holder of commercial paper signs his or her name, with or without words, on the back of an instrument to transfer ownership to another.
  122. Endorser
    The person who signs his or her name to a negotiable instrument.
  123. Endorsee
    The person to whom a negotiable instrument is transferred.
  124. Blank endorsement
    An endorsement in which the name of the payee is written by the payee on the back of a negotiable instrument.
  125. Bearer instrument
    An instrument that is payable to anyone who is in possession of it.
  126. Special endorsement
    An endorsement in which the payee specifies the person to whom, or to whose order, it is to be paid.
  127. Restrictive endorsement
    An endorsement with a signature to which words have been added restricting further endorsement of the instrument.
  128. Qualified endorsement
    An endorsement in which the endorser avoids liability for payment even if the maker or drawer defaults on the instrument.
  129. Without recourse
    A phrase used to indicate a qualified endorsement.
  130. Holder in due course
    A holder who has taken a negotiable instrument in good faith and for value, before maturity, and without actual or constructive notice of any defects in the instrument.
  131. Personal defense
    A defense against payment of commercial paper that may be used against any party except a holder in due course.
  132. Real defense
    A defense against payment of commercial paper that claims the instrument was void from the beginning.
  133. Counterclaim
    When the maker of a note or other drawer or acceptor of a bill of exchange may deduct from the amount demanded by an immediate party any amounts owed him or her by the payee.
  134. Material alteration
    A deliberate change or alteration of an important element in a written contract that affects the rights or obligations of the parties.
  135. Presentment
    When the holder of a note tenders it to the maker and demands payment, or shows drafts to the drawer and requests its acceptance or payment, on  or after the maturity date at the place stated in the instrument.
  136. Dishonored
    When a negotiable instrument is not accepted when presented for acceptance, it is not paid when presented for payment for payment at maturity, presentment is excused or waived, or the instrument is past due and unpaid.
  137. Real property
    The ground and everything permanently attached to it, including land, buildings, trees, and shrubs; the airspace above and the ground below the land also are included.
  138. Personal property
    Tangible and intangible property that is not real property.
  139. Inter vivos gift
    A gift between the living that meets all of the legal requirements for a gift.
  140. Gift in causa mortis
    A gift, given by a living person who expects to die from a known cause, that meets all of the legal requirements for a gift.
  141. Accession
    The right of an owner of property to any increase in the property.
  142. Severatly
    Ownership of a particular piece of property that is held by one person.
  143. Joint tenancy
    When two or more persons own equal shares of personal property with right of survivorship.
  144. Tenancy by the entirety
    A form of joint ownership of property by husband and wife in which both have a right to the entire property and the right of survivorship.
  145. Tenancy in common
    A form of joint ownership of property by two or more persons in which any owner's interest can be sold, transferred, or inherited.
  146. Community property
    Property acquired during marriage that, in some states, belongs to both husband and wife.
  147. Easement
    A right or interest in land granted to a party to make beneficial use of the land owned by another.
  148. Freehold estate
    An estate in which a person owns the land for life or forever.
  149. Leasehold estate
    An estate in which a person has an interest in real property that comes from a lease.
  150. Fee simple
    When an owner of a freehold estate holds it absolutely.
  151. Life estate
    A freehold estate in which a person has an ownership interest only for his or her lifetime.
  152. Deed
    The instrument, or document, that conveys an interest in real property between parties.
  153. Condemnation
    The legal process that occurs when property is taken by the government against the will of the property owner.
  154. Eminent domain
    When ownership of real property is taken by the government and the previous owner is compensated at the fair market value of the property.
  155. Adverse possession
    When title to land is acquired by a person's exclusive, continuous, open, known, and hostile use of the property over a period of time.
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Essentials of Business Law - Exam 2
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