Blaw - Keyterms Mid _bs

Chapter 8 bilateral contract

contract

executed contract

executory contract

express contract

formal contract

implied-in-fact contract

informal contract

objective theory of contracts

offeree

offeror

promise

promisor

quasi contract

unenforceable contract

unilateral contract

valid contract

void contract

voidable contract

Chapter 9 acceptance

agreement

counteroffer

course of dealing

mailbox rule

mirror image rule

offer

option contract

revocation

Chapter 10 accord and satisfaction

consideration

covenant not to sue

estopped

forbearance

liquidated debt

past consideration

promissory estoppel

release

rescission

Chapter 11 adhesion contract

blue laws

blue sky laws

contractual capacity

covenant not to compete

disaffirmance

emancipation

employment contract

exculpatory clause

necessaries

ratification

reformation

unconscionable contract or clause

usury

  Chapter 12

scienter Knowledge by the

misrepresenting party that material facts have been falsely represented or omitted with an intent to deceive. bilateral mistake

Mistake that occurs when both parties to a contract are mistaken about the same material fact and the mistake is one that a reasonable person would make; either party can rescind the contract.

material fact A fact to which a reasonable person would attach importance in determining his or her course of action.

unilateral mistake

Mistake that occurs when one party to a contract is mistaken as to a material fact; the contract normally is enforceable.

Chapter 13 collateral promise

integrated contract

parol evidence rule

prenuptial agreement

Statute of Frauds

Chapter 14 anticipatory repudiation

breach of contract

commercial impracticability

concurrent conditions

condition

condition precedent

condition subsequent

discharge

frustration of purpose

impossibility of performance

mutual rescission

novation

performance

tender

Chapter 15 consequential damages

incidental damages

liquidated damages

mitigation of damages

nominal damages

penalty

restitution

specific performance

Chapter 16 alienation

assignee

assignment

assignor

delegate

delegation of duties

delegator

incidental beneficiary

intended beneficiary

oblige

obligor

privity of contract

third party beneficiary

Chapter 28 respondeat superior

agency

apparent authority

disclosed principal

e-agent

equal dignity rule

fiduciary

independent contractor

notary public

partially disclosed principal

power of attorney

ratification

undisclosed principal

vicarious liability

Chapter 29 entrepreneur

franchise

franchisee

franchisor

sole proprietorship

Chapter 30 articles of partnership

buyout price

certificate of limited partnership

charging order

confession of judgment

dissociation

dissolution

family limited liability partnership (FLLP)

general partner

information return

joint and several liability

limited liability limited partnership (LLLP)

limited liability partnership (LLP)

limited partner

limited partnership

partnership

pass-through entity

winding up

Chapter 31 articles of organization

business trust

cooperative

joint stock company

joint venture

limited liability company (LLC)

member

operating agreement

syndicate

Chapter 32 ultra vires

alien corporation

articles of incorporation

bond

bond indenture

bylaws

close corporation

commingle

common stock

corporation

dividend

domestic corporation

foreign corporation

holding company

piercing the corporate veil

preferred stock

private equity capital

retained earnings

S corporation

securities

stock

venture capital

Chapter 33 business judgment rule

inside director

outside director

preemptive rights

proxy

quorum

shareholder’s derivative suit

stock certificate

stock warrant

watered stock

Chapter 34 appraisal right

consolidation

dissolution

merger

parent-subsidiary merger

receiver

short-form merger

takeover

target corporation

tender offer

winding up

Chapter 44

adverse possession

condemnation

constructive eviction

conveyance

deed

easement

eminent domain

eviction

fee simple absolute

fixed-term tenancy

fixture

implied warranty of habitability

leasehold estate

license

life estate

nonpossessory interest

periodic tenancy

profit

quitclaim deed

recording statutes

special warranty deed

sublease

taking

tenancy at sufferance

tenancy at will

warranty deed

Ch. 8: Nature and Classification

2A. What are the four basic elements necessary to the formation of a valid contract?

The basic elements for the formation of a valid contract are an agreement, consideration, contractual capacity, and legality. Defenses to the enforcement of an otherwise valid contract include the lack of genuineness of assent and improper form.

4A. How does a void contract differ from a voidable contract? What is an unenforceable contract?

A void contract is not a valid contract; it is no contract. A voidable contract is a valid contract, but one that can be avoided at the option of one or both of the parties.

An unenforceable contract is one that cannot be enforced because of certain legal defenses against it.

Ch. 9: Agreement

2A. What are some examples of nonoffers?

Nonoffers include expressions of opinion, statements of intent, preliminary negotiations, advertisements, catalogs, and circulars. In an auction, the bidder, not the seller, is the offeror.

4A. What elements are necessary for an effective acceptance?

An acceptance is a voluntary act on the part of the offeree that shows assent, or agreement, to the terms of an offer. The acceptance must be unequivocal and must be timely communicated to the offeror.

Ch. 10: Consideration

2A. What is required for consideration to be legally sufficient?

To be legally sufficient, consideration must be “something of legal value.” This may include (1) a promise to do something that one has no prior legal duty to do, (2) the performance of an act that one is otherwise not obligated to do, or (3) the refraining from an act that one has a legal right to do.

4A. What is an accord and satisfaction?

In an accord and satisfaction, a debtor offers to pay in satisfaction of an obligation, and a creditor accepts, a lesser amount than the creditor originally claimed to be owed. The accord is the agreement to pay and to accept less, and the satisfaction is the execution of the accord.

Ch. 11: Capacity and Legality

2A. Does an intoxicated person have the capacity to enter into an enforceable contract?

If a person who is sufficiently intoxicated to lack mental capacity enters into a contract, the contract is voidable at the option of that person. It must be proved that the person’s reason and judgment

were impaired to the extent that he or she did not comprehend the legal consequences of entering into the contract.

4A. Under what circumstances will a covenant not to compete be enforceable? When will such covenants not be enforced?

If a covenant not to compete is ancillary to an agreement to sell an ongoing business (enabling the seller to sell, and the purchaser to buy, the “goodwill” and “reputation” of the business) or is contained in an employment contract, and is reasonable in terms of time and geographic area, it will be enforceable. A covenant not to compete that is not ancillary to an agreement to sell an ongoing business will be void, because it unreasonably restrains trade and is contrary to public policy.

Ch. 12: Genuineness of Assent

2A. What is the difference between a mistake of value or quality and a mistake of fact?

A mistake as to the value of a deal is an ordinary risk of business for which a court normally will not provide relief. A mistake concerning a fact important to the subject matter of a contract, however, may provide a basis for relief.

4A. Does a party to a contract ever have a duty to disclose information to the other party?

Generally, a party to a contract can keep silent without liability, unless a serious potential problem or latent defect (a crack in a building’s foundation, for example) is known to the seller but would not reasonably be suspected by the buyer. Failure to disclose may constitute fraud in a fiduciary relationship.

Ch. 13: The Statute of Frauds

2A. If it is possible for a contract to be performed within one year, must it be in writing?

If performance of a contract within a year is possible, even if that performance is improbable, the contract need not be in writing to be enforceable.

4A. If a written contract is required, what terms are considered essential and must be contained in the written document?

Under the UCC, to be an enforceable contract, a writing need only name the quantity. Under statutes of frauds covering transactions other than sales of goods, to be enforceable as a contract, a writing must name the parties, the subject matter, the consideration, and the essential terms with reasonable certainty. In some states, a contract for a sale of land must include the price and describe the property with sufficient clarity to allow these terms to be determined without reference to outside sources.

Ch. 14: Performance and Discharge

2A. How are most contracts discharged?

The most common way to discharge, or terminate, a contract is by the performance of contractual duties.

4A. When is a breach considered material, and what effect does that have on the other party’s obligation to perform?

When performance is not substantial, a breach is material. The nonbreaching party is excused from performing and can sue the breaching party for damages caused by the breach.

Ch. 15: Breach and Remedies

2A. What is the standard measure of compensatory damages when a contract is breached? How are damages computed differently in construction contracts?

In a contract for the sale of goods, the usual measure of compensatory damages is an amount equal to the difference between the contract price and the market price. When the buyer breaches and the seller has not yet produced the goods, compensatory damages normally equal the lost profits on the sale rather than the difference between the contract price and the market price. On the breach of a contract for a sale of land, when specific performance is not available, the measure of damages is also the difference between the contract and the market price.

The measure on the breach of a construction contract depends on who breaches, and when. Recovery for an innocent contractor is generally based on funds expended or expected profit, or both; and for a nonbreaching owner, the cost to complete the project.

4A. When do courts grant specific performance as a remedy?

Specific performance might be granted as a remedy when damages are an inadequate remedy and the subject matter of the contract is unique.

Ch. 16: Third Party Rights

2A. If a contract requires a part to perform personal services, can the right to receive those services be assigned?

A right under a contract that is uniquely personal cannot be assigned (unless it is only a right to receive payment).

4A. What factors indicate that a third party beneficiary is an intended beneficiary?

A beneficiary will be considered an intended beneficiary if a reasonable person in the position of the beneficiary would believe that the promisee intended to confer on the beneficiary the right to bring suit to enforce the contract. Other factors include whether performance is rendered directly to the third party, whether the third party has the right to control the details of performance, and whether the third party is expressly designated as a beneficiary in the contract.

Ch. 28: Agency Relationships in Business

2A. How do agency relationships arise?

Agency relationships normally are consensual: they arise by voluntary consent and agreement between the parties.

4A. When is a principal liable for the agent’s actions with respect to third parties? When is the agent liable?

A disclosed or partially disclosed principal is liable to a third party for a contract made by an agent who is acting within the scope of her or his authority. If the agent exceeds the scope of authority and the principal fails to ratify the contract, the agent may be liable (and the principal may not).

When neither the fact of agency nor the identity of the principal is disclosed, the agent is liable, and if an agent has acted within the scope of his or her authority, the undisclosed principal is also liable. Each party is liable for his or her own torts and crimes. A principal may also be liable for an agent’s torts committed within the course or scope of employment. A principal is liable for an agent’s crime if the principal participated by conspiracy or other action.

Ch. 29: Sole Proprietorships and Franchises

2A. What is a franchise? What are the most common types of franchises?

A franchise is any arrangement in which the owner of a trademark, a trade name, or a copyright licenses others to use the trademark, trade name, or copyright in the selling of goods or services. The majority of franchises are distributorships, chain-style business operations, or manufacturing or processing-plant arrangements.

4A. What terms and conditions are typically included in a franchise contract?

A franchise contract typically covers such issues as the franchisee’s payment for the franchise, any lease or purchase of the business premises, any lease of purchase of equipment, the location of the franchise, the territory to be served, the business organization of the franchisee, quality standards to be met, the degree of supervision and control by the franchisor, pricing arrangements, and termination of the franchise.

Ch. 30: Partnerships

2A. What are the rights and duties of partners in an ordinary partnership?

The rights and duties of partners may be whatever the partners declare them to be. In the absence of partners’ agreements to the contrary, the law imposes certain rights and duties. These include a sharing of profits and losses in equal measure, the ability to assign a partnership interest, equal rights in managing the firm (subject to majority rule), access to all of the firm’s books and records, an accounting of assets and profits, and a sharing of the firm’s property. The duties include fiduciary duties, being bound to third parties through contracts entered into with other partners, and liability for the firm’s debts and liabilities.

4A. What advantages do limited liability partnerships offer to businesspersons that are not offered by general partnerships?

Advantages of limited liability partnerships over general partnerships include that, depending on the applicable state statute, the liability of their partners for partnership and partners’ debts and torts can be limited to the amount of the partners’ investments. Another advantage is the flexibility of these entities in regard to taxation and management.

Ch. 31: Limited Liability Companies and Special Business Forms

2A. How are limited liability companies formed, and who decides how they will be managed and operated?

To form a limited liability company (LLC), articles of organization must be filed with a central state agency (usually the secretary of state’s office). A few states also require that a notice of the intention to form an LLC be published in a local newspaper. The members can decide how to

operate the business. If there is no agreement, the state LLC statute will govern the outcome, and if there is no statute on the issue, partnership law principles apply.

4A. What is a joint venture? How is it similar to a partnership? How is it different?

A joint venture is an enterprise in which two or more persons or business entities combine their efforts or their property for a single transaction or project, or a related series of transactions or projects. Generally, partnership law applies to joint ventures, although joint venturers have less implied and apparent authority than partners because they have less power to bind the members of their organization.

Ch. 32: Corporate Formation and Financing

2A. What steps are involved in bringing a corporation into existence? Who is liable for preincorporation contracts?

The steps to bring a corporation into existence are (1) preliminary organizational and promotional undertakings and (2) the legal process of incorporation.

A promoter (one who takes the preliminary steps in organizing a corporation) is liable on preincorporation contracts unless the other contracting party agrees not to hold the promoter liable or the corporation assumes the contract by novation.

4A. In what circumstances might a court disregard the corporate entity (“pierce the corporate veil”) and hold the shareholders personally liable?

Generally, when the corporate privilege is abused for personal benefit or when the corporate business is treated in such a careless manner that the corporation and the shareholder in control are no longer separate entities, a court will require an owner to assume personal liability. Commingled

assets, fraud, noncompliance with corporate formalities, and thin capitalization are among the circumstances that may justify piercing the corporate veil.

Ch. 33: Corporate Directors, Officers, and Shareholders

2A. Directors are expected to use their best judgment in managing the corporation. What must directors do to avoid liability for honest mistakes of judgment and poor business decisions?

Directors and officers must exercise due care in performing their duties. They are expected to be informed on corporate matters. They are expected to act in accord with their own knowledge and training. Directors are expected to exercise a reasonable amount of supervision when they delegate work to others. Directors are expected to attend board of directors’ meetings. In general, directors and officers must act in good faith, in what they consider to be the best interests of the corporation, and with the care that an ordinarily prudent person in a similar position would exercise in similar circumstances. This requires an informed decision, with a rational basis, and with no conflict between the decision maker’s personal interest and the interest of the corporation.

4A. If a group of shareholders perceives that the corporation has suffered a wrong and the directors refuse to take action, can the shareholders compel the directors to act? If so, how?

The shareholders cannot compel the directors to act to redress a wrong suffered by the corporation, but if the directors refuse to act, the shareholders can act on behalf of the firm by filing what is known as a shareholder’s derivative suit. Any damages recovered by the suit normally go into the corporation’s treasury, not to the shareholders personally.

Ch. 34: Corporate Acquisitions, Takeovers, and Termination

2A. What are the four steps of the merger or consolidation procedure?

First, the board of directors of each corporation involved must approve the merger or consolidation plan. Second, the shareholders of each corporation must approve the plan, by vote, at a shareholders’ meeting. Third, the plan (articles of merger or consolidation) is filed, usually with the secretary of state. And fourth, the state issues a certificate of merger to the surviving corporation or a certificate of consolidation to the newly consolidated corporation.

4A. What actions might a target corporation take to resist a takeover attempt?

To resist a takeover, a target company may make a self-tender, or resort to one of several other tactics, which have colorful names, including “taking” a poison pill, selling a crown jewel, imposing a lobster trap on shareholders, using a Pac-Man defense, practicing a scorched earth policy, amending its articles to add shark repellent, or soliciting a merger with a white knight. Among other things, these involve selling company assets, restricting the conversion of corporate stock, attempting a takeover of the acquiring firm, and merging with a firm that offers a more favorable price for stock.

Ch. 44: Real Property and Landlord-Tenant Law

2A. What are the requirements for acquiring property by adverse possession?

The adverse possessor’s possession must be (1) actual and exclusive; (2) open, visible, and notorious, not secret or clandestine; (3) continuous and peaceable for the statutory period of time; and (4) hostile and adverse.

4A. What is a leasehold estate? What types of leasehold estates, or tenancies, can be created when real property is leased?

A leasehold estate is property in the possession of a tenant. Leasehold estates include tenancies for years, periodic tenancies, tenancies at will, and tenancies at sufferance.