Regulation Exam

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mmantle536
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190494
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Regulation Exam
Updated:
2012-12-24 10:43:55
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CPA Regulation Exam
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Flash cards over contract and sales business law
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  1. Unilateral contract
    One promise given in exchange for performance
  2. Bilateral contract
    A promise is exchanged for a promise
  3. Executory contract
    Duties still remain to be performed under the contract
  4. Executed contract
    All of the duties under the contract have been performed
  5. RISE
    • Real Estate
    • Insurance
    • Services
    • Employment
  6. Contract elements
    • An agreement made up of an offer and an acceptance
    • An exchange of consideration (something of legal value)
    • A lack of defenses
  7. Elements of an offer (can be express or implied)
    • Was there a manifestation of intent to contract (advertisements are not considered offers)?
    • Was there definitieness and certainty in the essential terms?
    • Was there communication of the above to the offeree (no knowledge, no acceptance e.g. reward for finding dog)?
  8. Offer terms
    • UCC: only needs quantity
    • RISE: (1) identity of the offeree and the subject matter, (2) price to be paid, (3) time of performance, (4) quantity involved, and (5) nature of the work to be performed
  9. Ways to terminate an offer
    • Revocation by the offeror (options and merchant firm offers are irrevocable)
    • Rejection by the offeree (includes counteroffer and silence, but not a mere inquiry)
    • By operation of law (includes death/incompetency, destruction of subject matter, illegality)
  10. Acceptance (can be express or oral)
    • Only the offeree can accept
    • Can be any reasonable method; could be specified in contract
    • RISE req's the mirror image rule (any changes result in a counteroffer)
    • Effective on dispatch (unless opted out)
  11. Elements of consideration
    • Should constitute either a detriment to the promisee or a benefit to the promisor
    • Should be a bargained-for exchange (a promise/act induced a promise/act)
  12. Detrimental reliance or promissory estoppel
    Exception to the requirement of consideration; a promise made by one party and reasonably and detrimentally relied upon by another can be enforced without consideration
  13. Fraud = MAIDS
    • M: Misrepresentation of material fact by the defrauding party
    • A: Actual and justifiable reliance by the victim on the misrepresentation
    • I: The defrauding intended to induce the victim to rely on the misrepresentation
    • D: Damages
    • S: Scienter (knew it was false or recklessly disregarded the truth)
  14. Fraud in the execution vs in the inducement
    • In the execution = Void
    • In the inducement = Voidable
  15. Innocent misrepresentation
    Fraud without scienter (essentially MAID)
  16. Duress (two types)
    • Harm threatened is physical force = Void
    • Harm threatened is economic or social = Voidable
  17. Undue influence
    Takes advantage of a relationship by abusing a position of trust or confidence (e.g. a spouse, trustee, guardian, attorney, etc.)
  18. Mutual mistake
    Both parties are mistaken as to a material fact regarding the contract
  19. Unilateral mistake
    Generally not a defense unless as to a material fact and the other party knew or should have known of the mistake (e.g. an extremely low bid)
  20. Illegality
    Results in the contract becoming void
  21. Two types of licenses
    • License for protection of the public: failure means void contract
    • License to raise revenue: failure means contract is still enforceable
  22. Elements of a legal promise not to compete
    • The promise must be reasonably needed to protect a legitimate business interest
    • The promise must be reasonable in duration
    • The promise must be reasonable as to distance
  23. Minors
    Generally able to disaffirm contracts (unless for food, clothing or shelter) and the minor can only be bound upon reaching the age of majority and ratifying the contract
  24. Mental Incompetency
    Generally this makes the contract voidable, but if the party has been adjudicated mentally incompentent, the contract becomes void
  25. Statute of limitations (RISE)
    Generally 4-6 years from date of breach
  26. Statute of frauds: MYLEGS
    • M: Contracts where the consideration is marriage
    • Y: Contracts which by their terms cannot be performed within the year
    • L: Contracts involving interests in land
    • E: Contracts by executors or similar reps to pay estate debts out of personal funds
    • G: Contracts for a sale of goods for $500 or more
    • S: Contracts to a surety
  27. Accord/Satisfaction
    Accord is an agreement to substitute one contract for another and satisfaction is the execution of the accord
  28. Novation
    Substitution of a new party or an old party in an existing contract; all parties must agree to the release
  29. Prevention of performance
    If one party prevents another from performing their duties, the nonbreaching party is excused from performance
  30. Parol evidence rule
    Prohibits a party ina lawsuit involving a fully integrated written contract from introducing evidence at trial of oral or written statements made prior to the written contract or oral statements made contemporaneously with the written contract that seek to vary the terms of the written contract
  31. What's admissable under parol evidence rule
    • Subsequent modifications to the contract (after = admissable)
    • Evidence to explain ambiguous terms
    • Evidence to show fraud, duress or mistake
  32. Material breach vs minor breach (RISE)
    For a material breach, nonbreaching party is discharged; for a minor breach, nonbreaching party is only entitled to damages
  33. Anticipatory repudiation (three options to nonrepudiating party)
    • Treat the repudiation as a breach and immediately sue for damages
    • Ignore the repudiation, await the time for performance and then sue if they have not performed
    • Cancel the contract
  34. Compensatory damages (riSe)
    Awards the nonbreaching party enough money to obtain substitute performance; also may collect consequential damages
  35. Specific performance (Rise)
    Court order that a breaching party perform or face contempt charges for when interests in land or unique personal property are involved (get this OR compensatory damages)
  36. Liquidated damages
    Specification as to what damages will result if there is a breach; amount must be reasonable in relation to the actual harm done and not a penalty
  37. Punitive damages
    Only available when fraud takes place
  38. Rescission/Cancellation
    Cancels the contract and restores the parties to their former postitions; not available under RISE when the contract has been substantially performed (UCC req's perfect tender, however)
  39. Limitations on Monetary Damages
    • Consequential damages are only awardable for damages that a party could forsee would result from a breach
    • Nonbreaching party cannot recover for damages he did not attempt to mitigate
  40. Third party beneficiaries
    Party that privity has been extended to; only includes intended beneficiaries (one named or specifically described in the contact)
  41. Donee/Creditor Benenficiaries
    Names for an intended third party beneficiary
  42. Assignment vs delegation
    Assignment gives contract rights to a third party, and delegation gives contractual duties to a third party
  43. What may not be assigned/delegated
    • When the assignment will change the obigor's risk (i.e. insurance contracts) or the delegated duty involves specialized personal services (i.e. an audit)
    • Offers (but options can be)
  44. Who is liable after a delegation?
    Both parties unless there is a novation
  45. Merchant
    A party who deals in goods of the kind sold or who has special knowledge regarding the goods being sold
  46. Good faith
    UCC imposes an obligation of good faith on both parties to a sales contract
  47. Elements of a merchant firm offer
    • The seller must be a merchant
    • The offer must be in writing and signed by the merchant
    • The offer must give assurances it will be kept open for a certain time (not longer than three months)
  48. Does the mirror image rule apply under the UCC?
    No
  49. Nonconforming goods
    This constitutes both an acceptance and a breach unless there is notice of accomodation
  50. Exception to quantity requirement
    • Output contract: buyer agrees to buy the entire ouput of a seller's facotry for a stated period of time
    • Requirements contract: seller agrees to supply a buyer with all required goods for a stated period of time
  51. Modifications (UCC)
    Enforceable even without consideration as long as sought in good faith
  52. Statute of limitations (UCC)
    4 years
  53. Statute of frauds exception (myleGs): SWAP
    • S: Specially manufactured goods
    • W: Merchant sends another merchant written confirmation of a contract (as long as no objection within ten days)
    • A: Admitted in court
    • P: Contracts that have been performed to the extent that performance has been accepted
  54. What must happen for risk of loss to pass?
    Identification
  55. Noncarrier case
    For a nonmerchant, risk passes on tender of sale. For a merchant, risk passes on actual delivery
  56. Carrier case
    • Shipment contract passes on delivery to carrier (FAS, CIF, FOB-seller)
    • Destination contract passes at destination (FOB-buyer)
  57. If the seller sends nonconforming goods, who has the risk of loss? For a sale on approval? For a sale on consignment?
    Seller, seller, buyer until goods are completely returned
  58. When does a buyer have an insurable interest?
    As soon as the seller identifies the goods to the contract
  59. When does title pass?
    As the parties agree; the default is on delivery
  60. What happens if the buyer rejects the goods?
    The title revests with the seller
  61. Express warranty
    The goods will conform to some statement of fact made by the seller in the contract that played some part in the buyer's decision to buy. They are very difficult to disclaim
  62. Implied warranty of title
    Implied in every contract is the warranty that the seller has good title and the right to transfer that title. It has to be disclaimed by specific language or by circumstances
  63. Implied warranty of merchantability
    In every sale by a merchant it is implied that the goods are fit for ordinary purposes. This can be disclaimed by statement of "as is" or by using the word merchantability
  64. Implied warranty of fitness for a particular purpose
    Arises when the buyer relies on the seller to select goods suitable for the buyer's particular purpose which the seller is made aware of.  It can be disclaimed in an "as is" sale or by a conspicuous disclaimer
  65. Elements of negligence
    • Seller owed a duty of care
    • Seller breached the duty by failing to use due care
    • The plaintiff suffered damages
    • The damages were caused by the seller's negligence
  66. Elements of strict products liability
    • The product was defective when it left the seller's hands
    • The defect caused the plaintiff's injury
    • The defect made the product unreasonably dangerous
    • The seller was a merchant
    • The product reached the user without substantial change in condition
  67. Right to demand assurances if reasonable ground exists (UCC)
    If one party has reasonable grounds that the other will not perform when required, the party may demand assurance of performance and failure to give this assurance in a reasonable amount of time is considered anticipatory repudiation
  68. Seller remedies (UCC)
    • Cancel and sue for damages
    • Withhold delivery and stop goods in transit
    • Resell and sue for damages
    • Regain full contract price if the goods cannot be resold for any price
    • Liquidated damages
  69. Buyer remedies (UCC)
    • Right to reject for any noncomformity (b/c of perfect tender rule)
    • Right to cancel and sue for damages
    • Right to specific performance if the goods are unique and the buyer cannot reasonably cover
    • Right to replevin if goods are identified and the buyer cannot reasonably cover
    • On seller's insolvency, buyer can reclaim goods if they have paid and goods are identified
  70. Two exceptions to recovery of stolen goods from a third party
    • Entrusting: owner entrusts goods to a merchant and merchant sells goods in ordinary course of business
    • Voidable title: owner of goods is defrauded into giving a thief title and the thief sells the goods

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