Business Law 2 Ch 28-33

Front 1

Holder is due course

Back 1

Takes an instrument:
for value
in good faith
without notice there is anything wrong with transaction

Front 2

shelter provision

Back 2

holder who receives an instrument from a HIDC acquires the rights of the HIDC even though he/she doesn't qualify as a HIDC
(doesnt apply to holder who committed fraud or illegal act)

Front 3

personal defenses (limited defense)

Back 3

defenses that can be used against a holder but not a HIDC of a negotiable instrument

Front 4

Most common personal defenses

Back 4

breach of contract
failure of consideration
lack of consideration
fraud in the inducement
lack of delivery of a NI
payment of a NI

Front 5

Real defenses (universal defense)

Back 5

Can be used against everyone, including HIDC

Front 6

Most common real defenses

Back 6

infancy/mental incompetence
illegality
duress
fraud as to the essential nature of the transaction
bankruptcy
unauthorized signature
material alteration

Front 7

Those that are primarily liable

Back 7

maker of a note
issuer of a cashiers check or other draft in which the drawer and the drawee are the same person
acceptor of a draft

Front 8

presentment

Back 8

demand made by a holder to pay or accept an instrument

Front 9

stale check

Back 9

check presented for payment more than 6 months after the date

Front 10

uttering

Back 10

offering a forged instrument to another person when the offeror and knows it is forged

Front 11

midnight deadline

Back 11

midnight of the next banking day following the banking day on which it receives the relevant item

Front 12

depository bank

Back 12

first bank to which an item is transferred for collection even if it is also the payor bank

Front 13

payor bank

Back 13

bank by which item is payable as drawn or accepted

Front 14

intermediary bank

Back 14

item is transferred in the course of collection

Front 15

collecting bank

Back 15

handling item for collection, except depositary or payor bank

Front 16

presenting bank

Back 16

presenting an item, except a payor bank

Front 17

remitting bank

Back 17

any payor or intermediary bank remitting for an item

Front 18

provisional

Back 18

not final

Front 19

Check 21 act

Back 19

electronic check processing

Front 20

substitute check (image replacement doc)

Back 20

paper reproduction of both sides of org check, can be processed just like org check

Front 21

Insurance

Back 21

transfer of risk of economic loss from insured to insurance company

Front 22

insurer

Back 22

accepts risk of loss in return for a premium insured and the beneficiary

Front 23

indemnify

Back 23

compensate insured against the loss specified in the contract

Front 24

insured

Back 24

party or parties protected by insurance contract

Front 25

policy

Back 25

contract of insurance

Front 26

beneficiary

Back 26

third party to whom payment of compensation is sometimes provided by the contract

Front 27

insurable interest

Back 27

financial interest that a policyholder has in the person or property that is insured

Front 28

subrogation

Back 28

substitution of one person in place of another relative to a lawful claim

Front 29

straight life insurance (ordinary or whole)

Back 29

payment of premiums throughout the life of the insured and pays the beneficiary the face value of the policy upon the insured's death

Front 30

Universal life insurance

Back 30

allows policy owner flexibility in choosing and changing terms of the policy

Front 31

Limited payment life insurance

Back 31

payment of premiums will stop after a stated length of time

Front 32

term insurance

Back 32

insured for a particular period usually 5/10 years

Front 33

endowment insurance

Back 33

combines life insurance and investment so if insured outlives times period of policy face value is paid to the insured

Front 34

annuity

Back 34

guaranteed retirement income purchased by paying either a lump sum premium or making periodic payments to insurer

Front 35

double idemnity

Back 35

accidental death benefit

Front 36

deductible

Back 36

amount of any loss that is to be paid by insured

Front 37

coinsurance

Back 37

insurer and insured share costs after deductible is met

Front 38

homeowners policy

Back 38

protection for all types of losses and liabilities related to home ownership

Front 39

auto insurance

Back 39

bodily injury to others (uninsured/underinsured)
no fault insurance
medical payments
property damage
collision insurance
comprehesive coverage
sub transportation insurance
towing and labor insurance

Front 40

Medicare

Back 40

people 65 years or older who are covered by social security, federally funded health insurance program

Front 41

Medicaid

Back 41

health care plan for low income people

Front 42

HIPAA (health insurance portability and accountability act)

Back 42

limits use of preexisting condition
no discriminating by denying coverage or charging extra
guarantees small employers
renew coverage despite health conditions

Front 43

adhesion contracts

Back 43

contracts drawn by one party that must be accepted as is on a take it or leave it basis

Front 44

Grounds for cancellation of insurance policies

Back 44

warranty violation
concealment
misrepresentation

Front 45

secured loan

Back 45

creditors have collateral from which they can be paid if debtor doesn't pay

Front 46

security interest

Back 46

right to use the collateral to recover debt

Front 47

unsecured loan

Back 47

creditors have nothing of value they can repossess and sell to recover money owed by debtor

Front 48

mortgage

Back 48

transfer of an interest in property for the purpose of creating a security for a debt

Front 49

mortgager

Back 49

one who borrows money for home

Front 50

mortgagee

Back 50

coveys his/her interest in the property to the lender while retaining possession of the property

Front 51

Types of mortgages

Back 51

fixed rate
variable or flexible
balloon payment
graduated payment
shared appreciation
assumable
seller take back
wraparound

Front 52

variable/flexible rate mortgage

Back 52

interest changes according to fluctuations in index to which it is tied

Front 53

graduated payment mortgage

Back 53

fixed interest rate during life of mortgage but monthly payments made to mortgagor increase over term of the loan

Front 54

reverse mortgage

Back 54

type of loan that allows homeowners over the age of 62 to convert some of the equity in their home into cash while retaining ownership of their home. paid when borrower dies or property sold

Front 55

Freddie Mac (fed home loan mortgage corp.) and Fannie Mae (fed nat'l mortgage assc)

Back 55

fed gov involved in home mortgages through these 2 gov agencies. fed chartered corp with publicly trades stock designed to encourage investment in home mortgages.

Front 56

deed of trust

Back 56

mortgagor coveys his/her interest in the property to a disinterested third party, known as a trustee

Front 57

junior mortgage (second mortgage)

Back 57

mortgage subject to prior mortgage, use property as security for another loan

Front 58

subordination agreement

Back 58

agree to allow mortgage to be reduced in priority to a person holding a second mortgage

Front 59

subordinated

Back 59

placed to a lower order than the second mortgage

Front 60

home equity loan (ex of junior mortgage)

Back 60

outright loan or a line of credit made available to homeowners based on the value of the property over and above any existing mortgage

Front 61

equity of redemption

Back 61

right to pay off mortgage in full including interest and thus discharge the debt in total

Front 62

foreclosure

Back 62

mortgagor defaulted or failed to perform some other agreement in the mortgage, mortgagee has right to apply to a court to have the property sold

Front 63

floating lien

Back 63

obtain security interest, creditor places provision in security agreement that security interest of the creditor also applies to goods debtor acquires at a later time

Front 64

bankruptcy

Back 64

legal process by which assets of debtor are sold to pay off creditors so debtor can make a fresh start financially

Front 65

liquidation

Back 65

system in which debtors are forced to sell much of their property and use the cash to pay their creditors a portion of the amount owed each one

Front 66

disposable income

Back 66

determination requires subtracting certain deductions which vary according to where they live

Front 67

order for relief

Back 67

court's command that the liquidation begin

Front 68

case trustee

Back 68

when an order for relief is issued, trustee schedules meeting of creditors which debtor is required to attend to answer questions about financial matters

Front 69

automatic stay

Back 69

self operating postponement of collection proceedings against the debtor

Front 70

Automatic stay prohibits from beginning or continuing

Back 70

lawsuits
foreclosure sales
collection proceedings
repossession activities

Front 71

homestead exemption

Back 71

allows debtors to keep a maximum of $18,450 in equity in the debtor's place of residence and in property used as a burial ground

Front 72

reorganization

Back 72

qualified debtor creates a plan that alters the repayment schedule

Front 73

debtor in possession

Back 73

Ch 11 debtor keeps possession and control of the assets, continues to run the firm, and performs most of the functions that a trustee perform sin other types of bankruptcy

Front 74

impaired classes

Back 74

those whose creditors receive less than full value of their claims, have the right to vote on the plan by ballot

Front 75

confirmation

Back 75

officially places a plan in operation

Front 76

Chapter 12

Back 76

petition filed voluntarily

sets a $3,275,000 debt ceiling for farming and $1,500,000 for fishing

order for relief/automatic stay trustee appointed

90 days farmer proposes plan (1. fixed all payments to trustees 3yrs 2. all property claims must be paid in full)

45 days confirmation hearing and court reviews plan

may convert to Ch 7

Front 77

Chapter 13

Back 77

voluntary only (petition fixed/individuals/sole proprietorship) along with repayment plan, no input from creditors

unsecured debts cannot exceed $307,675. secured debts cannot exceed $922,975

ordered for rest-automatic stay

debt readjustment plan

3/5 yr plan

plan confirmation (creditors may object)

once $ order plan paid, discharge of remainder of debt

Front 78

Chapter 7

Back 78

voluntary-petition filed-involuntary

order for relief/automatic stay trustee appointed

creditor meeting: trustee reviews assets debtor selects exemptions secured creditors must make selection

assets liquidated/dist of proceeds

discharge

Front 79

Chapter 11

Back 79

voluntary/involuntary

order for relief /automatic appointed

"the plan" any interested party can propose

must designate claims by class, must designate how class to be treated, must specify how business reorganize

creditors vote on plan

court accepts or rejects plan

Front 80

agency

Back 80

legal relationship in which one party, the agent, is authorized to act for and under the control of the second, the principal, in negotiating and making contracts with a third party

Front 81

principal

Back 81

negotiating and making contacts with a third contract

Front 82

third party

Back 82

individual with whom the agent deals for the principal

Front 83

consensual

Back 83

agent must agree to act for the principal

Front 84

gratuitous agency

Back 84

agency relationship does not result from contract and agent is a gratuitous agent

Front 85

master

Back 85

person who has right to control the activities of another person

Front 86

servant

Back 86

person whose activities are controlled

Front 87

independent contractor

Back 87

party who contracts to do a job and retains complete control over methods employed to obtain final completion

Front 88

proprietor

Back 88

party for which an independent contractor works

Front 89

vicarious liability

Back 89

law will hold not only tortfeasor but person who engaged tortfeasor liable for tort

Front 90

respondeat superior

Back 90

let the master or superior respond

Front 91

borrowed servant

Back 91

master loans a servant to another master

Front 92

sovereign immunity

Back 92

doctrine preventing a lawsuit against a government authority without the governments consent

Front 93

disclosed principal

Back 93

identity is known by third parties dealing with that principals agent

Front 94

undisclosed principal

Back 94

agent doesn't reveal existence of an agency relationship but appears to act on his or her own behalf rather than for another

Front 95

partially disclosed principal

Back 95

dealing with third parties reveals existence of an agency relationship but doesn't identify the principal

Front 96

general agent

Back 96

given broad authority to act on behalf of the principal in conducting the bulk of the principal's business activity on a daily basis

Front 97

special agent

Back 97

authorized to conduct only a particular transaction, conduct a series of relation transactions or perform only a specified act for principal

Front 98

factor

Back 98

common merchant is a special agent who is employed to sell merchandise consigned for that purpose

Front 99

del credere agent

Back 99

guarantees the credit of a third party to a principal and guarantees the solvency of the purchaser and performance of the contract

Front 100

power of attorney

Back 100

instrument in writing by which one person, a principal, appoints another as agent and confers authority to perform certain specified acts on behalf of the principal

Front 101

ratification

Back 101

principal approves the unauthorized act performed by an agent claimed to act may either ignore the transaction or affirm it by ratification