Shared Flashcard Set

Details

BLaw
Final Flashcards
45
Business
Graduate
12/15/2013

Additional Business Flashcards

 


 

Cards

Term
Mechanic's lien
Definition
A creditor can place this type of lien when a person contracts for work to be furnished for the purpose of making improvements on real property but does not immediately pay for the improvements. Creates a special type of debtor-creditor relationship in which the real estate itself becomes security for the debt.
Term
Franchise
Definition

Right to grant permission to conduct business within a business's model.

 

An arrangement where the owner of a trademark, trade name, or copyright licenses others to use it


Governed by contract law; Article 2 of UCC applies (usually)

Term
Artisan's lien
Definition
Device created at common law through which a creditor can recover payment from a debtor for labor and materials furnished in the repair of personal property. Is possessory meaning the lienholder ordinary must have retained possession of the property and have agreed to provide the services on a cash (not credit) basis.
Term
FTC Franchise Rule
Definition

A franchiser must disclose certain information to the franchisee.

 

Directed at perceived misrepresentations of the profits of a franchise to the franchisee.

 

Protect from unreasonable demands/bad faith

Term
Judicial Lien
Definition
When a debt is past due, a creditor can bring legal action against the debtor to collect the debt. If the creditor is successful, the court awards the creditor a judgment against the debtor (usu. amount of debt plus interest incurred).
Term

Mac's Shell Services, Inc. v. Shell Oil Products Co.

 

(Constructive Termination Case)

Definition
Franchisee hasn't actually terminated their agreement, they called for constructive termination, basically saying it is impossible to continue their agreement. They file for wrongful termination, but court decides that since there wasn't actually even termination, there can't really even be a wrongful termination trial.
Term
Nexus of Agency Relations
Definition

The parties are each others' agents and each others' principals.

 

They have fiduciary duties to each other, must act in the best interest of both parties.

 

Partnerships are a nexus of agency relationship!

Term
Attachment
Definition
Court-ordered seizure and taking into custody of property prior to the securing of a judment for a past-due debt (in the context of judicial liens). Is normally a prejudgment remedy, occuring at the time of the lawsuit or immediatly afterwards.
Term
Meinhard v. Salmon
Definition

Salmon and Meinhard enter into agreement for a 20 year lease for the Hotel Briston in NYC to convert it into shops n' offices and share the costs and profits 50/50.  Agreement gave Salmon sole power to manage the building. Before lease end, Salmon was approached about a project w/ the building to expand it and he agreed and signed a new contract in the name of his own business w/o telling Meinhard.

Since their agreement is still together (still in joint venture together), they owe each other fiduciary duties. Salmon put his interests above Meinhard's and therefore breached their fiduciary duties.

Term
Seretyship
Definition
Promise made by a third person to be responsible for the debtor's obligation. It is an express contract between the surety (3rd party) and the creditor.
Term
1515 North Wells, LP v. 1515 North Wells, LLC
Definition

The General Partner in this case was a corporation and the other 2 partners are also the only 2 shareholders in that corporation, so they're almost limited and general partners at the same time.

-Can the fiduciary duty be waived through a provision in the partnership agreement?

General partner owes fiduciary duty to all other partners, both general and limited.  A partnership cannot "contract away" the fiduciary duty that a general partner owes to limited partners! A partnership agreement may not eliminate or reduce a partner's fiduciary duties.

 

Term
Partnerships
Definition

Involves 2+ people but doesn't require any formalities to form. The only people that need to be involved are the partners. No legal action required. 

.

UPA (Uniform Partnership Act):

Defines a general partnership as 1) A sharing of profits/losses, 2) a joint ownership of the business, and 3) an equal right to be involved in the management of the business.


All partners share profits/losses evenly unless agreement specifies otherwise. No partner is entitled to special treatment/compensation for more work unless agreement specifies otherwise. Very flexible!

Term
Guarantor
Definition
Can be required to pay the obligation only after the principal debtor defaults, and usually only after the creditor has made an attempt to collect from the debtor.
Term
Right of subrogation
Definition
Any right that the creditor had against the debtor now becomes the right of the surety or guarantor.
Term
Right of reimbursement
Definition
The surety is entitled to receive from the debtor all outlays made on bahalf of the suretyship arrangment.
Term
Right of contribution
Definition
When a co-surety pays more than her or his proportionate share on a debtor's default, she or he is entitled to recover from the other co-sureties the amount paid above that surety's obligation.
Term
Homestead Exemption
Definition
Each state permits the debtor to retain the family home, either in its entirety or up to a specified dollar amount, free from the claims of unsecured creditors or trustees in bankruptcy.
Term
Secured party
Definition
Any creditor who has security interest in the debtor's collateral. Can be a seller, lender, a cosigner, or even a buyer of accounts or chattel paper.
Term
Debtor
Definition
The party who owes payment or other performance of a secured obligation.
Term
Security interest
Definition
The interest in the collateral (such as personal property, fixtures, or accounts) that secures payment or performance of an obligation.
Term
Security payment
Definition
An agreement that creates or provides for a security interest.
Term
Collateral
Definition
The subject of the security interest.
Term
Financing statement
Definition

The document that is normally filed to give public notice to thrid parties of the securied party's security interest. 

 

Referred to as the UCC-1 form

Term

Requirements for a creditor to have an enforceable security interest 

(steps for becoming a secured party)

Definition

1. Unless the creditor has possession of the collateral, there must be a written or authenticated security agreement that clearly describes the collateral subject to the security interest and is signed/authenticated by the debtor. 

2. The secured party must give the debtor something of value. (value can include a binding commitment to extend credit and, in general, any consideration sufficient to support a simple contract.

3. The debtor must have rights in the collateral

 

Once these requirements are met, the creditor's rights are said to attach to the collateral.

Term

Attachment

Definition
Gives the creditor an envorceable security interest in the collateral.
Term
Security Agreement
Definition

An agreement that creates or provides for a security interest.

 

Must contain a description of the collateral that reasonably identifies it.

 

If the security agreement is in writing or authenticated, only the debtor's signature or authentication is required to create a security interest.

Term
Authentication
Definition
The act of signing, executing, or adopting any symbol on an electronic record that verifies that the person signing has the intent to adopt or accept the record.
Term
Perfection
Definition

the legal process by which secured parties protect themselves against claims of third parties who may wish to have their debts satisfied out of the same collateral.  Whether a secured party's security interest is perfected or unperfected can have serious consequences for the secured party.

 

Priority to the collateral goes to the first in time to perfect! (NOT ATTACH)

Term
Perfection by Filing
Definition

Most common means of perfection - filing a financing statement (a document that gives public notice to third parties of the secured party's security interest) with the office of the apropriate government official.

 

Must provide the names of the debtor and the secured party (must be filed under the name of the debtor), and must indicate the collateral covered by the financial statement.

 

Communication of the statement to the filing office, with payment of the correct fee, or acceptance of the statement by the filing officer constitutes a filing

Term
Consequences of an Improper Filing
Definition
Any improper filing renders the secured party's interest unperfected and reduces the secured party's claim in bankruptcy to that of an unsecured creditor.
Term
Perfection by Possession
Definition
Obtaining financing under the common law by pledging certain collateral as security for the debt and transfer the collateral into the creditor's possession. When the debt is paid, the collateral is returned to the debtor.  The security agreement need not be in writing to be enfocable if the collateral is transferred to the secured party.
Term

Perfection by Attachment

-the purchase-money security interest in consumer goods-

Definition

Under the UCC, 14 types of security interests are perfected automatically at the time they're created. Most common of these is purchase-money security interest (PMSI).  This is created when a person buys goods primarily for personal, family, or household purposes, and the seller/lender agrees to extend credit for part or all of the purchase prices of the goods.

 

A PMSI in consumer goods is perfected automatically at the time of a credit sales - that is, at the time the PMSI is created.  The seller in this situation doesn't need to do anything more to perfect his/her interest.

Term
Exceptions to Automatic Perfection
Definition

1)Certain types of security interests that are subject to other federal/state laws may require additional steps to be perfected.

 

2)Nonconsumer goods, such as a business's inventory or live-stock, are not automatically perfected

Term
Proceeds
Definition

the cash or property received when collateral is sold/disposed of in some other way.  A security interest in the collateral gives the secured party a security interest in the proceeds aquired from the sale of that collateral.  

 

A security interest in proceeds perfects automatically on the perfection of the secured party's security interest in the original collateral and remains perfected for 20 days after the debtor receives the proceeds.

Term
After-acquired Property
Definition

property that the debtor acquired after the execution of the security agreement.  The security agreement may provide for a security interest in after-acquired property, such as a debtor's inventory.

 

Generally, the debtor will purchase new inventory to replace the inventory sold.  The secured party wants this newly acquired inventory to be subject to the original security interest. After-acquired property clause continues the secured party's claim to any inventory acquired thereafter.

Term
Floating-Lien Concept
Definition
A security agreement that provides for a security interest in proceeds, in after-acquired property, or in collateral subject to future advances by the secured party (or in all three)
Term
General Rules of Priority
Definition

1) A perfected security interest has priority over unsecured creditors and unperfected security interests

 

2) Conflicting perfected security interests - the first in time to perfect (by filing or taking possession of the collateral) has priority.

 

3)Conflicting unperfected security interests - the first to attach (be created) has priority. Also called the "first-in-time" rule.

Term
Exceptions to the General Rules of Priority
Definition
Buyers in the ordinary course of business - a buyer in the ordinary course will have priority even if a previously perfected security interest exists as to the goods.
Term
Release of Financial Statement
Definition
A secured party can release all or party of any collateral described in the financing statement, thereby terminating its security interest in that collateral
Term
Assignment of Security Interest
Definition
A secured party can also assign all or part of the security interest to a third party (the asignee)
Term
Amendment of Financing Statement
Definition
If the debtor and the secured party agree, they can amend the filing - to add or submit new collateral, for example - by filing a uniform amendment form that indicates the file number of the initial financing statement.
Term
Basic Remedies of Secured Remedies for Default by Debtors
Definition

Repossession of the Collateral--The self-help remedy: On debtor's default, a secured party can take possession of collateral covered by the security agreement. Since it can be done without use of judicial process, it's often caled the 'self-help' provision of Article 9.

 

Judicial Remedies:A secured party can relinquish the security interest and use any judicial remedy available, such as obtaining a judgement on the underlying debt, followed by execution and levy.

(Execution and Levy are rarely undertaken unless the collateral is no longer in existence or has decline so much in value that it's super shitty now)

 

 

Term

Execution

Definition
The implementation of a court's decree/judgement
Term
Levy
Definition

The obtaining of funds by legal process through the seizure and sale of nonexempt property, usually done after a writ of execution has been issued.

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