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Questions and Answers
What is one of the duties of an agent to the principal?
What is one of the duties of an agent to the principal?
A legally enforceable contract must include mutual agreement, legal capacity, and legal purpose.
A legally enforceable contract must include mutual agreement, legal capacity, and legal purpose.
True
What are the two conditions that must be met for a court to disregard a corporate entity?
What are the two conditions that must be met for a court to disregard a corporate entity?
Purpose to defraud and improper operation of corporation.
A patent gives an inventor control of the sale and use of their invention for about _____ years.
A patent gives an inventor control of the sale and use of their invention for about _____ years.
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Match the elements of negligence to their descriptions:
Match the elements of negligence to their descriptions:
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Which of the following is NOT a requirement of a valid offer?
Which of the following is NOT a requirement of a valid offer?
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The holder of a negotiable instrument who writes 'without recourse' is responsible for payment if it is not paid later.
The holder of a negotiable instrument who writes 'without recourse' is responsible for payment if it is not paid later.
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What is the greatest source of dispute in a commercial agreement?
What is the greatest source of dispute in a commercial agreement?
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What is one way a contract can be discharged by operation of law?
What is one way a contract can be discharged by operation of law?
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An independent contractor acts as an agent for the client.
An independent contractor acts as an agent for the client.
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What does 'rescission' mean in the context of contract law?
What does 'rescission' mean in the context of contract law?
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An agent acts on behalf of the ______.
An agent acts on behalf of the ______.
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Match the following types of contracts with their descriptions:
Match the following types of contracts with their descriptions:
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Which of the following events would NOT lead to the expiration of an offer?
Which of the following events would NOT lead to the expiration of an offer?
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A principal is solely responsible for all acts of their agent.
A principal is solely responsible for all acts of their agent.
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What are the limitations on damages related to a contract?
What are the limitations on damages related to a contract?
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What type of relationship exists between a bank and its depositors?
What type of relationship exists between a bank and its depositors?
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A personal check is guaranteed by the bank.
A personal check is guaranteed by the bank.
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What is a cashier's check?
What is a cashier's check?
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A postdated check is a check that is dated ________ its actual date of issue.
A postdated check is a check that is dated ________ its actual date of issue.
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Match the type of check with its characteristics:
Match the type of check with its characteristics:
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What is subrogation in the context of insurance?
What is subrogation in the context of insurance?
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An insurable interest is required to prevent insurance fraud.
An insurable interest is required to prevent insurance fraud.
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List one purpose of a general partnership agreement.
List one purpose of a general partnership agreement.
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The term ________ refers to when partners in a partnership are individually responsible for the full extent of the debts.
The term ________ refers to when partners in a partnership are individually responsible for the full extent of the debts.
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What best describes a limited liability company (LLC)?
What best describes a limited liability company (LLC)?
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A condominium provides joint ownership only of the specific unit owned.
A condominium provides joint ownership only of the specific unit owned.
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Define what a binder is in insurance.
Define what a binder is in insurance.
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A ________ allows an employee to keep certain information confidential after leaving the company.
A ________ allows an employee to keep certain information confidential after leaving the company.
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What do surface rights refer to in land ownership?
What do surface rights refer to in land ownership?
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Which of the following statements is true regarding a legal person?
Which of the following statements is true regarding a legal person?
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Study Notes
Banking Relationships
- Banking relationships can be contractual, debtor-creditor, agent-principal, or fiduciary.
- Banks act as agents for depositors by selling securities and collecting checks on their behalf.
- Fiduciary relationships involve complete separation of interests, care, loyalty, disclosure, and confidentiality.
Certified Check
- A certified check is a personal check guaranteed by the bank.
- The bank verifies sufficient funds and sets them aside.
- The bank guarantees enough cash for the holder, when they want to use the check.
Cashier's Check
- An issued check by the bank, drawn from the bank's funds.
- Signed by bank employees.
- Bank draws on its own funds payable to a payee.
Personal Check
- Written by a customer without a bank guarantee.
- The bank is liable for alterations or forgeries.
Postdated Check
- A check dated after its issue date.
- Banks are not obligated to honor postdated checks.
Subrogation
- The right of an insurer to pursue a third party responsible for a loss, after the insurer has paid the insured.
Insurable Interest
- The policyholder must suffer a financial loss if an insured item is damaged or destroyed.
- Insurable interest ensures the insured has a compelling reason to insure the items.
- Also prevents fraud and abuse.
Indemnity
- Insurer restores the insured to their financial position before the loss.
- The insured does not gain financially from the claim beyond the actual losses.
Deductible
- Risk must be contingent for insurance coverage.
- Insurance covers uncertain events, not guaranteed events.
Restrictive Indorsements on Negotiable Instruments
- Limits how an instrument can be used.
- Limits who can receive payment/PMT
Employee Control After Termination
- Non-disparagement: employees cannot speak negatively about the company.
- Non-competition: employees cannot work with competitors or start similar businesses.
- Protecting company information: employees must maintain confidentiality.
- Garden-leave: employees remain on payroll but don't work.
Limited Liability Company (LLC)
- Members risk only the invested money, not personal assets in business dealings.
Joint and Several Liability
- Partners are jointly and severally responsible for the risk.
- Each partner is liable for 100% of risk in dealings.
- Joint venture participants are liable for the project's success or failure (risks).
Legal Persons
- Entities recognized by law with rights and responsibilities.
- Viewed as persons in legal matters.
Condominium Ownership
- Separate ownership of a residential unit, with shared common spaces ownership.
Land Ownership Rights
- Surface rights include rights to fixtures, riparian rights (to water), rights to trees/vegetation.
Leasehold
- Grants tenant temporary use of a building or land.
- It's a possessory interest to use and possess.
Power of Attorney
- A legal document where Alan Johnson authorizes Neal Johnson to sell iPhone.
- Authorization for Neal Johnson to execute a sale of Alan's iPhone.
General Partnership Agreement
- Defines partnership matters.
- Covers expenses, profit/loss distribution, partner roles.
- Explains the managing responsibilities of the partners.
Corporate Entity Disregard
- Court disregards corporate entity based on purpose of the fraud.
- Corporation owners are held liable.
Apparent Authority
- Third parties believe an individual has authority.
- Example includes employee giving discounts as authorized by manager.
Negotiable Contracts
- Written, signed, definite time, fixed amount, and unconditional promise to pay.
Contract Breach, Negligence, & Loss
- Proving negligence requires Duty, violation of duty, resulting loss, and actual loss.
Mitigation of Damages
- Limit financial burdens.
- Prevent unfair losses.
Contract Discharge
- Discharge is the ending of a contract.
- Can be through Performance, agreement, or operation of the law (impossibility, subsequent illegality, bankruptcy).
Agency Contracts
- Agent acts on behalf of principal.
- Agent has authority to enter into contracts.
- Distributors and customers cannot enter into contracts on another party's behalf.
- Independent contractors don't act as agents only providing services.
Option Contracts
- Option holder has the right to buy or sell an asset.
- Other party obligated to keep open during the set period.
Rescission
- Returning parties to initial positions if contract not fulfilled.
Notarization
- Authenticates identities of parties involved in signing a contract.
Damages Limitations
- Foreseeability, certainty, mitigation.
- Fraud/misrepresentation, and reliance with intent to defraud.
Offer Expiration
- Expiration based on stated time period.
- Offer expires after rejection, withdrawal, or counteroffer
Contract Consideration
- Different forms of consideration exist and must be addressed appropriately.
Corporate Board of Directors Duties
- Attend meetings, stay informed, disclose conflicts, avoid self-dealing, and resign if conflicts arise.
- Obligation to be informed and responsible.
Stop Payment Order
- Instruction to bank not to pay a check.
- Must be on time to be effective.
Agency Relationship Creation
- Necessity, law, contract, conduct, ratification.
Insurance Policy
- A contract transferring risks, with compensation if they occur.
Limited Liability Corporations
- A separate legal entity from its owners.
Ordinary Situations where Bank Customer is Creditor
- Customers depositing money in a bank are creditors to that bank.
- Because the bank owes the same amount.
Duress Definition
- Actions depriving free will.
Legal Capacity
- Capacity to enter contracts, must exist to be legally binding.
- Age and mental health can be limiting factors.
Private Wrong (Tort)
- A wrongful act against a fellow citizen causing harm.
Consideration on Contract Formation
- Exchange of something of value is considered valid contract formation.
- Examples include agreement to perform or not to perform actions, money, promises, or even the settlement of a lawsuit.
Limited Liability Company Formation Factors
- Ease, less complexity compared to partnership, minimal liabilities to creditors.
- Lack of shareholder diversification, limited liability protection may affect some creditors.
Businessman Marwan's Affairs
- Separation of owners and entity, ownership transferability without notice, and annual shareholder meetings.
- Establishment of a board of directors to manage the company's assets.
Debit Card
- Immediate deduction from the holder's bank account upon purchase.
Employment Contracts & Covenant Not to Compete
- Contracts including a non-compete clause that is limited in geographic scope are enforceable.
Damages Measure in Tort Cases
- Foreseeable losses resulting from a breach of a contract,
- Not those that were unforeseen.
Intentional Torts
- Intentional violation with physical or other harm.
General Partnership Liabilities
- Partners are liable for the business's liabilities.
Corporate Acquisition
- Acquisition occurs when one corporation purchases stock in another corporation.
Government Taxes on Property
- Taxes on personal property, like luxury goods, can discourage purchases and promote alternative methods.
- Taxes on real property can affect unused land and incentivize property use.
Tort vs. Crime
- Crimes harm the government and torts harm individuals.
Credit Card Transactions Security
- Credit card companies use various methods to ensure security during online transactions.
Sales Tax vs Value Added Tax
- Sales tax is paid once at the sale point by the consumer, while value added tax is paid at each stage of the production/sales process.
Legal Basis of Insurance Compensation
- The legal basis for ensuring compensation for insured losses is known as indemnification.
Offer Expiration
- Silence regarding the time period and expiration,
- Acceptance after expiration invalidates the offer.
Joint and Several Liability
- General partners are jointly and severally liable for partnership debts.
- This means each partner is individually responsible for the entire debt.
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Description
This quiz covers various banking relationships, including fiduciary and agent roles, as well as different types of checks such as certified, cashier's, personal, and postdated checks. Understand the implications and guarantees associated with each type of banking instrument. Test your knowledge of how banks operate and the nature of these financial instruments.
