Outsiders/people outside of the contract – may have rights.

They can serve as agents; beneficiaries; assignment; outsider may guarantee the performance

Who are parties to the contract: am I signing in my individual capacity or as president of the company

Business entity – an artificial person

Determine the type of legal entity to determine whether the party is the business or the individual

Sole prop – one-owner business; not a true entity

Employee of a sole prop business may not bind the sole prop

Partnership – has not been traditionally regarded as an entity with liability and rights apart form its owners; each partner is considered as an agent for the promotion of partnership business. 

In some states, statement of authority is filed to determine the contract authority of the partners. If there is none, require all partners to sign.

Limited Partnership – consist of partners with limited authority to make decisions or bind the business and a general partner with authority to bind the business consistent with the terms of the limited partnership.  General partners may be ca corporation.

Corporation – regarded as an entity. Owned by shareholders but do not take control of the business; shareholders elect board of directors -focused on big pictures not daily activities. Corporate officers has the authority to enter into contracts

Limited liability company – maybe managed directly by the members or through a board of managers

Agency – requires consent of the principal and agent.  Not necessarily to be in writing; when covered by statute of frauds. 

Agent – not always an employee. Need not be compensated; main characteristic is control exercised by the principal over the agent.

Agency by operation of law – in case a store clerk orders repair of a store when it was hit by a car

Ratification – when principal starts to use a machine bought by an agent with no authority to buy

Apparent authority – when agent repeatedly orders and principle pays repeatedly never questioning it for several times

Agent may be held directly liable if third parties are not aware of such authority. However the principle can still be held liable by the agent.

Principal’s duties to agent: to cooperate; to indemnify; to communicate and comply with the contract entered into by the agent

Agents’ duties ;  to obey; account for the principal’s money; to keep the principal fully informed ; to exercise reasonable care;

Termination of agency – passage of the agreed time; completion of the purpose; inability of one of the parties to perform; wrongful end like termination but subject to liability

Agency coupled with an interest – principle may not terminate the agency.  Agent has financial stake

Implied Authority

Authority not expressed in writing or spoken words; arises from circumstances

Collateral

Assets pledged by a borrower to secure a loan or other credit, and subject to seizure in the event of default

Springing Power of Attorney

Comes into effect at a later date

Donee Beneficiary

A third-party beneficiary, intended to benefit from contract performance, as a gift

Being a party to the contractPrivity

Foreclose

Take property to satisfy debt

Gratuitous

Done without compensation; a gift

Equal Dignity Rule

Requirement that agency contract be written, if contract to be established by agent must be written

Agent

One who is authorized to act for or in place of another; representative

Instruments

Formal written documents

Purchase Money Security Interest

Lien against property to secure a loan used to acquire that property

Apparent Authority

Principal’s dealings with third parties have given third parties reason to believe that an agent has authority

Indemnification clause

One party agrees to compensate the other for losses arising from the contract; see Hold Harmless Clause

Assignor

One who transfers rights to another

Good Faith Buyer in the Course of Ordinary Business

A buyer who acts honestly, gives value, and has no notice of other claims

Chattel

Moveable items, also called Personal Property

Perfect

To register or record an instrument so that the public is on notice of its terms

Bulk Sale

Sale of major part of inventory, not in ordinary course of business

Attachment

Creation of an enforceable security interest

Express Authority

Authority given by words or conduct

Inventory

Goods held for sale or lease

Creditor Beneficiary

A third-party beneficiary, to whom a contract party is indebted, and who is intended to benefit from the performance of a contract

Joint Several Liability

Co-obligors can be sued together or any one can be liable for the entire obligation

Securities

Evidence of investment in a common scheme

Assignment

Transfer of interest in property or some right (contractual entitlement) to another

Novation

New contract, involving new parties; cancels earlier contract

Principal

Party for whom agent acts

Consumer Goods

Items used primarily for personal, family, or household purposes

Mortgage

Security interest in real estate

Partially Disclosed Principal

Existence of agency is known, identity of principal is not known

Durable Power of Attorney

Creates an agency relationship that remains in effect during the grantor’s incompetency

Lien

An encumbrance against property, typically to secure payment of a debt

Estop

To bar assertion of a claim or right that contradicts what has been said or done before

Power of attorney

Document creating an agency

Operation of Law

Events, including death, insanity, destruction of subject matter, and illegality, may terminate an offer

Ratification

Acceptance of acts by agent after they occur

Agency Coupled with an Interest

Agent has a financial stake in the transaction

Third Party Beneficiary

Not a party to a contract, but benefits from contract

Assignee

One to whom rights are transferred by another

Incidental Beneficiary

A third-party beneficiary, not intended to benefit from contract, does not acquire rights under contract

Real Estate

Also called real property or realty, consists of land and buildings

Fiduciary Relationship

Relationship in which one person is under a duty to act for the benefit of the other on matters within the scope of the relationship

Delegation

Pass contractual obligations to another