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Flashcards in REG Deck (400)
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1

What is Agency Law?

Agency Law deals with someone's ability to bind you to a contract with a third party

2

What is required for Agency to exist?

Both parties must consent to the relationship and intend for an Agency relationship to exist

Agent owes Principal fiduciary duty

Principal doesn't owe Agent fiduciary duty

A contract is NOT required and an Agency agreement is not based on Contract Law; Exception - If duties cannot be performed within a year; a signed writing is required

3

What is Actual Authority in an agency?

Actual Authority is what is expressly granted or is implied by the duties you expect the Agent to perform and is necessary to carry them out

4

What is Implied Authority in an agency?

When authority is expressly granted; it is implied that the agent has the authority to carry out the duties

Does not include authority to sell or alter a business

5

What is Apparent (Ostensible) Authority in an agency?

Apparent Authority is based on the third party's perspective - they believe that the Agent has the
authority to enter into a contract based on:

*Prior dealings with agent
*Agent's title leads the third party to believe they can enter into a contract
*The Principal hires the Agent to carry out duties that normally carry with them the rights to enter into contracts

6

How is an Agency terminated?

*Both Agent and Principal agree to terminate
*Principal fires Agent
*Agent fires Principal
*Agent breaches their contract by doing something like violating their obligation to act as a fiduciary to Principal

7

How do you terminate Apparent Authority?

*Let the public know
*Let the people or entities that the Agent previously interacted with know
*In cases of death; or Principal is otherwise not competent to contract; ALL authority is revoked

8

What is an Agency Coupled with an Interest?

Agent acquires an ownership interest in the Agency

Can only be terminated early (before the interest expiration date) by the Agent

Unless the Agency has a specific time limit spelled out in a contract; the Agent's authority is irrevocable
by the Principal

9

When is an employee an Agent; and when does this make the employer liable?

Employees are agents while acting within the scope of their duties.

For employees who injure third parties while acting within the scope of their duties; both Employee and Employer are liable

10

When are Agents liable for torts (civil wrongs) they commit?

Agents are liable for torts (civil wrongs) committed whether they had authority or not

11

Are Agents who act outside of their authority liable?

Agents who act outside of their authority will be liable for the act

Exception - Principal ratifies the contract which relieves Agent of liability

In order to ratify; Principal must know all of the facts and must ratify before third party cancels agreement

If Principal keeps the benefits of the contract; ratification is implied

Contract must be 100% ratified or there is no contract

12

What is an Agent's liability when acting for an undisclosed principle?

*Agent liable to third party even if acting within authority
*Third party can sue both Principal and Agent if Principal becomes disclosed
*Agent can then sue Principal

13

What are the requirements for a Power of Attorney (POA)?

Must be in writing

Must be signed by person granting the POA

Ends upon death of Principal

General POA - Agent authorized to handle all affairs

Special POA - Agent authorized to handle only specific affairs

14

What are the basic actions that occur in a bankruptcy?

Bankruptcy gives creditors protection from their creditors and stops them from either permanently (Chapter 7) or temporarily (Chapter 11 or 13) collecting a debt. The filing halts collection activity; grants automatic stay (with certain exceptions), and stops creditors from suing debtor.

15

For what debts does bankruptcy NOT stop collections?

Student Loans
Income taxes from previous 3 years
Alimony & Child Support
Debts/judgements resulting from drunk driving
Pension obligations
Debts relating to SOX violations
Debts arising from illegal activities
Debts not listed in the bankruptcy filing

16

How does bankruptcy of a corporation affect the owner's ability to file bankruptcy?

It doesn't; because the corporation is a separate legal entity.

Under bankruptcy; corporations are dissolved

Under bankruptcy; individuals are discharged

17

What key action will cause a bankruptcy discharge to be denied?

If a debtor fails to keep good records or falsifies documents; a discharge will be denied

18

What are the basic characteristics of a Chapter 7 bankruptcy (liquidation)?

Discharges all non-exempt debt

Can only be filed every 8 years from previous Chapter 7 filing

Voluntary or involuntary filing

Certain businesses are disallowed from Chapter 7 bankruptcies - Railroads; Banks; Insurance companies; Savings & loans (think: 7th inning RBIs)

19

What are the requirements for a voluntary bankruptcy filing under Chapter 7?

Must pass means test

Your income must be below the median income for your state (Note - median; i.e. middle; not mean; i.e. average)

Credit card companies made it harder for people to declare Chapter 7 when they lobbied Congress in 2005

20

What are the requirements for an involuntary bankruptcy filing under Chapter 7?

In some cases; your creditors can force you into Chapter 7 or Chapter 11 BK

Creditors must be able to prove that they are not being paid on time (i.e. debtor is insolvent) or that within the past 120 days the debtor assigned a custodian of the secured property

If 12+ unsecured creditors - at least 3 must file; claims must be in excess of $15325

If less than 12 unsecured creditors - only 1 must file; claim(s) must be in excess of $15325

Upon filing; a judge will declare an order for relief unless the debtor protests

21

What entities are disallowed from involuntary Chapter 7 bankruptcy filings?

Charities

Farms

22

How can a debtor reclaim possession of their property from the interim bankruptcy under Chapter 7?

If the debtor pays the court-assigned bond to keep a property in an involuntary BK; they can
reclaim possession of their property from the interim BK trustee

23

What are the basic characteristics of a Chapter 11 bankruptcy (business repayment) filing?

Allows a business a reprieve from creditors
Creates a payment plan for the debt
Business remains in operation
At least 2/3 of each debt class of creditors must consent to reorganization
Ch. 11 Involuntary petitions are allowed

24

What are the basic characteristics of a Chapter 13 bankruptcy (personal repayment) filing?

Similar to Chapter 11; but for individuals

Gives individuals a reprieve from creditors

Creates a payment plan for the debt

Ch. 13 Involuntary petitions are not allowed

25

What are the duties and abilities of a bankruptcy trustee?

Represents the bankruptcy estate

Can sue or be sued

Oversees bankruptcy and watches for preferential creditor payments

Oversees priority transfer of assets to creditors

26

How and when is a bankruptcy trustee appointed?

Optional - Creditors decide

Can be elected by creditors or can be appointed by the court

27

What actions can a bankruptcy trustee take with respect to preferential creditor payments in a bankruptcy?

Trustee can void payments on antecedent (past) debts that occur within 90 days of a BK filing

A Trustee cannot void a payment made to a creditor that is an even swap (contemporaneous exchange) and for new value

A voidable preference must be on an old debt where the debtor is basically picking and choosing which creditors they send money to (AKA a voidable preference)

28

When can preferential transfers be voided by a bankruptcy (BK) trustee?

Made within One Year of BK to insider - Corporate officers/directors; Partners; Relatives

Made within 3 Months of BK non-insider

Creditor receives larger payment than BK liquidation would have granted

29

What is the treatment of a secured creditor in a bankruptcy?

Superior to claims of other types of creditors

Can take either collateral or cash proceeds from the sale of an asset

If collateral doesn't satisfy amount owed; Secured Creditors become a general creditor for the difference.

30

What is the order of priority given to unsecured creditors in a bankruptcy?

1. BK Trustee and Attorney fees get paid before all other unsecured credit cards
2. Salaries required to continue business once BK proceedings begin
3. Any claims filed resulting from business operations that occur after involuntary BK is filed
4. Wages owed to employees
5. Retirement contributions within last 6 months
6. Consumer deposits for undelivered goods
7. Child Support & Alimony
8. Taxes
9. Other general unsecured claims