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My CPA-REGmodule27

Notecards I made from Wiley's 2012 CPA Exam Review

QuestionAnswer
What is included under the UCC? contracts for the sale of goods for any dollar amount. (does not include sales of investment securities, accounts receivable, contract rights, copyrights or patents
When would sales of software not be governed by the UCC? software is heavily customized based on services of consultant
Which state hasnt passed article 2 of the UCC into law? Louisiana only pass parts in to law
Unlike the common law, when does UCC imply a contract exists? Where it is intent of parties to create a contract, even though technical element of contract may be missing
Who is a merchant? one who deals in kind of goods being sold or holds self out to have superior knowledge and skills as to goods involved, or simply employs another who qualifies as a merchant
How do common law and the UCC differ when it comes to missing terms of a contract? common law says if terms are missing there is no contract because terms are not definite. UCC fills in missing terms if parties have shown intent to enter into contract
When sales terms are unclear how does course of dealings explain them? usage of trade? 1.if parties have had previous dealings look to see how the unclear was interpreted/acted upon by parties in past 2.how term is typically used in the particular trade
What does the UCC permit to be thought of as an offer that common law doesnt? open price terms, open quantity terms (needed for contracts over $500 tho per statute of frauds, no need to be precise), output contracts are okay(buyer buys all seller produces), requirement contracts to(seller provide all buyer needs)
What is the firm offer rule? promise to hold an offer open even without consideration is irrevocable if in writing and made by merchant, no time specified stay open for reasonable time based on subject, not to exceed 3 months
How does the UCC feel about the mirror image rule accepted in common law? rejects instead UCC focuses on parties intent to be bound
For acceptance, what does battle of forms mean? If not merchants what does happens? 1.additional terms included in acceptance become part of contract unless original offer precludes, new term materially alter original offer, original offeror gives notice of objection w/in reasonable time 2.offeror needs to expressly accept the change
If a seller ships substitute goods because the seller does not have goods ordered by buyer does a contract exist? What if buyer provides notice that the goods are only an accommodation? 1.If buyer accepts substituted goods, ur darn tootin one exists. If reject then no contract exists 2.sellers actions are not viewed as acceptance
Does the UCC need new consideration for a contract to be modified? so long as it is done in good faith, no new consideration is needed (common law requires new consideration on both sides for any modification to occur)
How do legality and capacity differ from the UCC and common law? THEY DONT, Got chyea!
With the UCC and statute of frauds, goods over $500 need to be evidenced by writing, what does sufficient writing include? What if the contract is made between merchants? 1.must contain quantity term, signature of party to be charged, indicate existence of a contract 2.written confirmation is sufficient to serve as writing unless objection made within 10 days of receiving confirmation
What are the exceptions to a writing requirement? IMPORTANT oral contract involving specially manufactured goods if seller mad substantial start, party admits oral contract enforceable up to quality of good admitted, goods paid for or accepted make oral contract enforceable
What is the perfect tender rule? What if rule is broken? What are the exceptions to this rule? 1.sellers goods must conform exactly to terms of contract 2.buyer may reject all goods, accept all, or accept some/reject others 3.parties agree against rule, seller fixes defect, on installment contract buyer may reject installment not entire contract
When is buyers payment due? When doesnt the buyer have right to inspect the goods before paying? 1.at time of delivery 2.if goods shipped COD (cash on delivery)
If a buyer rejects goods because they are defective, what must he do? must disclose nature of defect to seller, either return goods or hold goods with reasonable care
When may a buyer revoke goods if they were accepted before? if seller did not provide promised cure for defective goods, goods contained a hidden defect (could not perceive with reasonable inspection at delivery)
When may a buyer or sellers obligation to perform be excused? goods destroyed, commercial impracticality (too expensive/difficult b/c unforeseen event), assurance of performance(reasonably believe partner wont perform), anticipatory repudiation(1party indicates unwilling perform), cooperation necessary not provided
In assurance of performance, what may the uncertain party do? reasonable basis believe other party wont perform as promised, may make written demand for adequate assurance of performance. Response must be provided within 30 days, failure to respond is evidence of anticipatory repudiation
Is performance on a contract excused when substitute performance is possible? No
What conditions must be met for a consignment arrangement (agent(consignee) is appointed by consignor to sell goods) to occur? All of the following; consignor keeps tittle to goods, consignee not obligated to buy/pay for goods, consignee receives commission upon sale, and consignor receives proceeds of sale
What is a document title? Bill of lading? Warehouse receipt? 1any doc that in reg course of bus accepted as evidence person holding doc entitled to hold/receive/dispose of doc/goods it covers 2doc title issued by carrier in exchange for goods delivered to it for shipment 3doc title issued by person who stores goo
If a party having voidable title to goods transfers goods to a good faith purchaser for value, can the transactions with the 3rd party be void? No even though goods were originally obtained with a dishonored check, fraud mistake duress or undue influence, from a minor. THIEVES DONT COUNT THEY HAVE VOID TITLE
What happens if a person entrusts goods to a merchant dealing in these goods and the merchant subsequently sold the goods? unless person buying from merchant knew the merchant didnt own the goods, the person obtains title to the goods
When can sale of goods take place? When does identification occur? What does it give the buyer? 1.once goods exist and have been identified to the contract 2.goods are shipped, marked or otherwise designated as such 3.an insurable interest in the goods, right to demand goods upon offering full contract price (other conditions must be satisfied)
When does title generally pass? What if the seller has no duty to move the goods? 1.when seller completes his performance with respect to physical delivery. Destination contract title passes at destination, shipping point contract title passes once in hand of carrier 2.upon deliver of documents of title
In a shipment contract, who bears risk of loss? Destination contract? What if no shipping terms are specified? 1.buyer cause title passes once in hand of carrier 2.seller until buyer is in possession of goods 3.presume it is a shipment contract
In a trial sale, when sale is on approval, when does the sellers title and risk of loss pass to the buyer? when buyer approves or accepts sale
In a trial sale, when thought of as sale or return, when is sale final? Who has risk of loss and title? Can a buyers creditors get at the goods? 1.if goods not returned during specified period 2.buyer until goods are returned 3.yes while goods are in buyers possession unless notice of sellers interest is posted or filed
Whats the last line of defense, so to speak, in regards to who bears risk of loss when the seller is a merchant? Nonmerchant? 1.transfer risk of loss when buyer takes physical possession of goods 2.transfer risk of loss to buyer upon tender
Who has risk of loss if goods are held in warehouse and seller has no right to move them? the buyer once proper negotiation of negotiable document of title, or warehouseman acknowledges buyers rights to goods if no document of title
Who has risk of loss if the seller breaches the contract? Buyer breaches? 1.seller until cure deficiency or acceptance by buyer to extent of buyers deficiency in insurance coverage -title passes under original terms despite delivery of nonconforming goods 2.risk passes to buyer to extent of sellers deficiency in insurance
When is a buyer allowed an insurable interest? Seller? 1.when goods are identified to the contract 2.as long as he has title or a security interest
What are the three general ways a manufacturer or seller may be held liable for a defective product that causes injury? Warranties(warranty of title, express warranties, implied warranties, disclaimers), Negligence, strict product liability
Under the warranty of title product liability, what does the seller warrant? The merchant? 1. good title, rightful transfer and freedom from any security interest or lien the buyer has no knowledge of (buyer completely owns) 2.goods to be free infringement claim(patents/trademark), unless buyer gave specifications to seller to manufacture goo
Does the phrase 'as is' protect a seller or merchant from warranty of title claims? No, to protect themselves must use specific language that give buyer reason to know they are receiving less than full title
What are express warranties? Do have to be written? Do advertisements read by the buyer form part of the basis of bargain?In an express warrant does the seller need to use the words warranty or guarantee? 1.seller affirms fact/promise to buyer that becomes part of basis of bargain. Goods should conform to fact/promise 2.No may be oral 3.Yes 4.No
What are the two implied warranties and what does each apply to? Warranty of merchantability-goods fit for ordinary purpose & properly packaged/labeled(seller must be merchant,warranty not modified/excluded) Warranty of fitness for particular purpose-seller KNOW of particular use, buyer relies on seller skill/judgemen
Do the implied warranties of merchantability and fitness for a particular purpose extend to parties other than the purchaser w/o privity of contract? Yes, extends to buyer's family and guests who may reasonably be expected to use/ be affected by the goods and are injured by them
What is the purpose of a disclaimer? In what form are they allowed? Must they include anything? 1.allows merchants/sellers to escape or modify warranty liability 2.May be written(clear and conspicuous) or oral 3.Yes must use the word 'merchantability', unless disclaim IMPLIED warranties with phrases 'as is' or 'with all faults'
In what ways may implied warranties be excluded or modified? -oral/written state phrase 'as is' or 'with all faults' -course of dealings, course of performance, usage of trade -if buyer had ample opportunity to inspect goods, then lose implied warranty for defects that ought to have reasonably discovered
Are limitations on the consequential damages for personal injuries allowed? No presumed to be unconscionable and thus unenforceable on consumer goods
In a case of product liability do to negligence, what must be proved? Is privity of contract needed? 1.duty of manufacturer exercise reasonable due care to injured party, Breach duty of reasonable care(insufficient instructions count), breach caused injury (neg start unbroken chain events counts), there was injury/damages 2.No suit not based on contract
What are the defenses to negligence in a product liability case? Contributory negligence (plaintiff helped cause accident, complete bar to recovery-must states use comparative negligence and allocate based on relative fault), Assumption of risk
What is strict product liability? manufacturer/seller/lessor normally deal in product liable to users of products w/o proof of fault/lack of reasonable care if product defective when sold, defect unreasonably dangerous, product reaches user w/o significant changes, defect caused injury
What defenses are allowed for strict product liability? Not allowed? 1.assumption of risk and misuse 2.acting with reasonable care, contributory negligence, comparative negligence, disclaimer, nor lack of privity
What does the American Law Institutes Restatement (Third) of Torts: Product Liability state? What are the three type of defects it established? Is it now the majority rule? 1.those in business of selling defective products are liable for harm to individuals resulting from defect (no require unreasonably dangerous) 2.manufacturing defects, inadequate warnings/instructions, design defects 3.Minority old rules still king
Under the UCC, who may cancel the contract and terminate obligations if a party breaches contract? How does it differ from common law? 1.Non breaching party no matter who it is 2.unlike common law rescission, cancellation does not discharge a claim for damages
Under the UCC, what are a sellers remedies under sales law? right cure nonconformity, resell goods buyer breach before acceptance, insolvent buyer no have doc of title seller may stop delivery of carrier unless buyer pays cash, recover goods of insolvent buyer if demand w/in 10 days of receipt, may recover damages
Under the sellers remedy to right to cure nonconformity under the UCC, what must the seller do to exercise this right? be within original time of contract or within reasonable time if seller believed nonconforming goods would be acceptable. Also, must notify buyer of his intention to cure
Under the sellers remedy to resell goods if buyer breaches before acceptance, under the UCC, what stipulations are there if the sale is private? public? Could the breacher have an right to the goods after sale? 1.must give notice to buyer who breached (otherwise losses cannot be recovered from breacher) 2.may recover any losses on sale from buyer who breached but not responsible to buyer for profits made on resale 3.NO
Is there any way the ten day stipulation for demanding goods back from an insolvent buyer may be extended? Yes if buyer made written misrepresentation of solvency w/in 3 months before delivery
When may the seller recover damages? How much can he recover? When can the seller recover the full contract price? 1.buyer repudiates agreement or refuses goods 2.diff of market price time of tender and contract price (plus incidental damages-expenses saved due to breach) 3.buyer accepted goods, conforming goods destroyed&risk of loss w/buyer, unable to resell goods
What does the uniform computer information transactions act (UCITA) allow for? When is a licensor not permitted to use this remedy? 1.licensor of software may disable software from misuse if licensee specifically agreed to self-help remedy, licensor gives 15 days notice before using and lets know who to contact 2.there is sig risk personal injury/public safety or info to other partie
What are a buyer's remedies under the UCC's sales laws? may reject nonconforming goods in entirety or any commercial unit, UCITA allows for electronic errors when ordering, recover damages of breach,can cover(substitute goods from another seller),specific performance,once goods identified buyer obtains rights
What if the buyer rejects nonconforming goods, but the goods are perishable or threatened to decline in value? What if the buyer is a merchant and the seller gives him instructions? If buyer made partial payments on the goods or already incurred expenses? 1.must make reasonable effort to sell 2.must follow reasonable instructions of seller (ship/sell) have right to indemnity for costs though 3.then has security interest in goods to extent of investment so far and may sell goods to recover payments
What must the consumer do under the Uniform Computer Information Transaction Act (UCITA) once learning of an electronic error in ordering? immediately notify seller he made error, not use or benefit from the info/soft/product ordered, deliver all copies to seller or destroys at sellers request, pay costs of processing/shipping to seller
In a breach of contract what amount may the buyer recover in damages? difference between contract price and market value at time buyer learns of breach plus consequential(result from buyers needs seller was aware from, no recovery if could have reasonably prevented) and incidental damages
If the buyer 'covers' by substituting goods from another seller, does he still have a right to damages? What amount? 1.Yes 2.difference between cost of cove and contract price plus incidental and consequential damages
What does replevin mean? Is it allowed if the buyer can cover? 1. suing for goods wrongfully held by the seller, not allowed if buyer can cover 2. NO
What is the statute of limitations for the sale of goods? Can parties agree to reduce it? extend it? When does the statute start running? 4 years (action for breach must be commenced in this period, parties may agree to reduce the limitations to as little as 1 year but not extend, begins running when contract is breached)
In article 2A governing leases what is the minimum amount for the statute of fraud to apply to the lease? What are the three exceptions to the statute of frauds when leases need not be in writing? 1.$1,000 2.specially manufactured goods not suitable for sale/lease in ordinary course of business, lessor/lessee admits to oral lease in court, part acceptance(lease enforceable up to amount accepted)
What rules do contracts for sales of goods between people or companies of different countries follow? Name area's where this law and the UCC differ? 1.Contracts for the International Sale of Goods (CISG) 2.CISG requires price term to be included (cant be open), contract formed at moment request act is performed, offeror can make offer irrevocable by oral stating so, all contracts can be oral
Created by: Bsantoro on 2012-03-19



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