Chapter 8 - Contracts And The Uniform Commercial Code (Ucc)

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Contract

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An agreement, oral or written, that can be enforced in court.

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Uniform Commercial Code (UCC)

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Orginally drafted by the National Conference of Commissioners on Uniform State Law, it governs commercial trasactions and has been adopted by all states, entirely or in part.

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Offer

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In contract law, an indication of a firm desire to enter into an agreement, sufficiently definite that once accepted a contract is formed.

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Acceptance

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In contract law, an act by the offeree indicating agreement to be bound to the contract.

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Consideration

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Anything of value; it must be present for a valid contract to exist, and each side must give consideration.

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Voidable

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A valid contract that can be set aside at the option of one of the parties.

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Void

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A contract that is invalid even if it is not repudiated by either party.

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Undue influence

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When one party is in a position of trust and misuses that trust to influence the actions of another.

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Adhesion contract

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A contract formed where the weaker party has no realistic bargaining power. Typically a form contract is offered on a "take it or leave it" basis.

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Unconscionable contract

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A contract formed between parties of very unequal bargaining power where the terms are so unfair as to "shock the conscience."

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Warranty

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A guarantee, made by the seller or implied by law, regarding the character, quality, or title of the goods being sold.

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Implied warranty of fitness

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An implied promise that the goods being sold will satisfy a special purpose.

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Express warranty

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An express warranty or promise can be created by an affirmation of fact or a promise made by the seller, a description of the goods being sold (including technical specifications and blueprints), or a sample or model provided.

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Statute of frauds

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A statutory requirement that in order to be enforceable certain contracts must be in writing

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Assignment

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The transfer by one of the original parties to the contract of part or all of his or her interest to a third party.

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Delegation

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The transfer by one of the original parties to the contract of his or her obligations to a third party.

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Third-party beneficiary

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Although not a party to the contract, someone the contracting parties intended to benefit.

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Specific performance

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When money damages are inadequate, a court may use this equitable remedy and order the breaching party to perform his or her contractual obligations.

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Compensatory damages

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Money awarded to a plaintiff in payment for his or her actual losses.

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Mitigation of damages

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The requirement that the non breaching party take reasonable steps to limit his or her damages.

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Consequential damages

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Indirect damages that must be foreseeable to be recovered.

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Nominal damages

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A token sum awarded when liability has been found but monetary damages cannot be shown.

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Liquidated damages clause

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A contract provision that specifies what will happen in case of breach.

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Reformation

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An equitable remedy whereby the court rewrites a contract.

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Commercial paper

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A written promise or order to pay a certain sum of money

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Note

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A promise to pay money; a two-part instrument in which the maker promises to pay the payee.

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Payee

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The person who will receive payment.

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Maker

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On the face of a note, the person who signs, promising to pay.

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Draft

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A three-party instrument in which the drawer order the drawee, usually a bank, to pay money to the payee.

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Drawer

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On the face of a check or draft, the party that is ordered to pay.

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Drawee

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On the face of a check or draft, the party that is ordering payment to be made.

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Check

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A specialized form of a draft in which a bank depositor names a specific payee to whom funds are to be paid from the drawer's account.

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Bearer paper

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Has written on its front a statement that it is payable to cash or payable to the bearer, or has a signature on he back, causing it to be indorsed in blank.

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Indorsement in blank

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When an indorser simply signs his or her name and does not specify to whom the instrument is payable.

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Negotiable instrument

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Commercial paper that can be transferred by indorsement or delivery. It must meet the requirements of UCC 3-104 to be negotiable. If it does not, a transfereree cannot become a holder but gets only the rights along with the liablilites of a contract assignee.

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Holder

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Someone who receives negotiable paper through proper delivery.

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Holder in due course

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Someone who gives value in good faith (a subjective standard) and without notice that the instrument is overdue or has been dishonored or has any claims against it or defenses to it (an objective standard)

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Order paper

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An instrument that is payable to the order of a specific party.

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Secured transaction

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An arrangement whereby a creditor asks for and receives a guarantee of repayment from the debtor in the form of collateral.

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Attachment

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In secured transactions, a process that gives the creditor rights against the debtor when the creditor either possesses collateral from the debtor or has a signed security agreement.

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Perfection

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In secured transactions, a process by which the secured party gives notice of an attached security interest, usually by filing a financing statement, thereby giving the secured party priority to the collateral over the claims of other creditors.

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Perfected security interest

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A creditor's interest in security is perfected if the creditor possesses the security, files a financing statement, or gives money to purchase consumer goods.

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Financing statement

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A public record of a security interest.

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Purchase money security interest

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Arises when a seller gives credit to a debtor so that the debtor can purchase an item.

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Buyer in the ordinary course of business

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Someone who buys a product in good faith and without knowledge that someone else has a security interest in the goods.

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Floating Lien

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A security interest in proceeds or after acquired property.