Business Law Chapters 11-19 Test Answers – Flashcards

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Promisor
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Person making the promise
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Promisee
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Person to whom the promise is made
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Objective Theory of Contracts
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intent to form a contract will be judged by outward, objective facts as interpreted by a reasonable person, rather than by the party's own secret, subjective intentions
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Requirements of a valid contract
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Agreement, Consideration, Contractual Capacity, Legality
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Offeror
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party making the offer
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Offeree
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party to whom the offer is made
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Bilateral Contracts
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promise is given in exchange for a return promise
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Unilateral Contracts
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promise for an act (moment the contract is performed)
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Formal Contracts
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contracts that require a special form or method of creation to be enforceable
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Informal Contracts
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a contract that doesn't require a specified form or formality in order to be valid
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Express Contract
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terms of the agreement are fully and explicitly stated in words, oral or written
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Implied Contract
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contract formed in whole or in part from the conduct of the parties (as opposed to an express contract)
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Executed Contract
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contract that has been fully performed on both sides
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Executory contract
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contract that has not been fully performed by the parties
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Valid Contract
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has the elements necessary to entitle at least one of the parties to enforce it in court
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Voidable Contract
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valid contract but one that can be avoided at the option of one or both of the parties
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Unenforceable Contract
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contract that cannot be enforced because of certain legal defenses against it
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Void Contract
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no contract at all
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Quantum meruit
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"as much as he or she deserves" the extent of compensation owed under a contract implied in law
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Quasi contracts
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Fictional contract imposed on parties by a court in the interests of fairness and justice; to avoid the unjust enrichment of one party at the expense of another
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Extrinsic Evidence
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any evidence not contained in the document itself
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Contract
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a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty
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Agreement
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a meeting of 2 or more minds in regard to the terms of a contract
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Offer
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promise or commitment to do or refrain from doing some specified action in the future
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Revocation
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offeror's act of withdrawing an offer
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Option Contract
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offeror promises to hold an offer open for a specified period of time in return for a payment given by the offeree
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Counteroffer
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rejection of the original offer and the simultaneous making of a new offer
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Mirror image rule
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offeree's acceptance to match the offeror's offer exactly--to mirror the offer
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Mailbox rule
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rule providing that an acceptance of an offer becomes effective on dispatch. Acceptance takes effect, thus completing formation of the contract, at the time the offeree sends or delivers the communication via the mode expressly or impliedly authorized by the offeror
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Forum Selection Clause
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provision in a contract designating the court, jurisdiction, or tribunal that will decide any disputes arising under the contract
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Click-on Agreement
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agreement that arises when a buyer, engaging in a transaction on a computer, indicates his or her assent to be bound by the terms of an offer by clicking on a button that says, for example, "i agree"
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Shrink Wrap Agreement
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terms are expressed inside the box in which the goods are packaged
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Browse-wrap terms
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terms and conditions of use that are presented to an internet user at the time certain products, such as software, are being downloaded but that need not be agreed to before being able to install or use the product.
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E-signature
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electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record
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Partnering agreement
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seller and a buyer who frequently do business with each other agree in advance on the terms and conditions that will apply to all transactions subsequently conducted electronically
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Record
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information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable (visual) form
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Forbearance
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the refraining from an action that one has a legal right to undertake
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Rescission
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the unmaking of a contract so as to return the parties to the positions they occupied before the contract was made
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Past Consideration
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something given or some act done in the past, which cannot ordinarily be consideration for a later bargain
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Accord and Satisfaction
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debtor offers to pay, and a creditor accepts, a lesser amount than the creditor originally claimed was owed
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Liquidated debt
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the amount has been ascertained, fixed, agreed on, settled, or exactly determined
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Unliquidated debt
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amount of the debt is not settled, fixed , agreed on, ascertained, or determined, and reasonable persons may differ over the amount owed
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Covenant not to sue
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the parties simply substitute a contractual obligation for some other type of legal action based on a valid claim
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Promissory estoppel
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a person who has reasonably and substantially relied on the promise of another may be able to obtain some measure of recovery
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Estopped
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barred, impeded, or precluded
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Age of Majority
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The age at which an individual is considered legally capable of conducting himself or herself responsibly (when a person is no longer a minor)
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Emancipation
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The act of being freed from parental control
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Disaffirmance
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the legal avoidance, or setting aside, of a contractual obligation
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Necassaries
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basic needs such as food, clothing, shelter, and medical services
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Ratification
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act of accepting and giving legal force to an obligation that previously was not enforceable
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Usury
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lender who makes a loan at an interest rate above the lawful maximum
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Covenant not to compete
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contractual promise to refrain from competing with another party for a certain period of time and within a certain geographic area
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Unconscionable
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contract or clause that is void on the basis of public policy because one part, as a result of his or her disproportionate bargaining power, is forced to accept terms that are unfairly burdensome and that unfairly benefit the dominating party
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Reformation
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court ordered correction of a written contract so that it reflects the true intentions of the parties
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Exculpatory Clauses
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release a party from liability in the event of monetary or physical injury no matter who is at fault.
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Contractual Capacity
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legal ability to enter into a contractual relationship
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Voluntary Consent
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The consent of both parties must be voluntary. If a contract was formed as a result of fraud, undue influence, mistake, or duress, the contract may not be enforceable
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Scienter
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knowledge by the misrepresenting party that material facts have been falsely represented or omitted with an intent to deceive
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Latent Defects
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defects that could not readily be ascertained (found out for certain)
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Negligent Misrepresentation
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any manifestation through words or conduct that amounts to an untrue statement of fact made in circumstances in which a reasonable and prudent person would not have done (or failed to do) that which led to the misrepresentation
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Adhesion contracts
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exclusively written by one party and presented to the other party on a take-it-or-leave-it basis (standard form contract such as that between a large retailer and a consumer, in which the stronger party dictates the terms)
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Innocent Misrepresentation
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person makes a statement that she or he believes to be true but that actually misrepresents material facts
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Condition
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qualification in a contract based on a possible future event
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Condition precedent
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condition that must be fulfilled before a party's performance can be required
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Discharge
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terminate one's contractual duties
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Performance
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fulfillment of one's duties arising under a contract with another; the normal way of discharging one's contractual obligations
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Condition subsequent
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when a condition operates to terminate a party's absolute promise to perfrom
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Concurrent conditions
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when each party's performance is conditioned on the other party's performance or tender of performance (offer to perform)
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Tender
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unconditional offer to perform by a person who is ready, willing, and able to do so
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Breach of Contract
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the nonperformance of a contractual duty
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Anticipatory repudiation
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before either party to a contract has a duty to perform, one of the parties may refuse to carry out his or her contractual obligations
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Mutual Rescission
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the parties must make another agreement that also satisfies the legal requirements for a contract. Must be an offer, an acceptance, and consideration
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Novation
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both parties to a contract agree to substitute a third party for one of the original parties
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Discharge in bankruptcy
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the release of a debtor from all debts that are provable, except those specifically excepted from discharge by statute
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Impossibility of performance
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after a contract has been made, supervening events may make performance impossible in an objective sense. Can discharge a contract
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Commercial impracticability
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a doctrine under which a seller may be excused from performing a contract when 1) a contingency occurs 2) the contingency's occurrence makes performance impracticable and 3) the nonoccurrence of the contingency was a basic assumption on which the contract was made
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Frustration of purpose
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court created doctrine under which a party to contract will be relieved of his or her duty to perform when the objective purpose for performance no longer exists beyond that party's control
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Incidental damages
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expenses that are caused directly by a breach of contract-- such as those incurred to obtain performance from another source
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Nominal damages
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no actual damage or financial loss results from a breach of contract and only a technical injury is involved. Often $1, establish that the defendant acted wrongfully
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Mitigation of Damages
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rule requiring a plaintiff to have done whatever was reasonable to minimize the damages caused by the defendant
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Liquidated damages
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certain dollar amount is to be paid in the event of a future default or breach of contract
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Penalty
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specifies a certain amount to be paid in the event of a default or breach of contract, it is designed to penalize the breaching party, not to make the innocent party whole.
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Restitution
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an equitable remedy under which a person is restored to his or her original position prior to loss or injury, or placed in the position he or she would have been in had the breach not occurred
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Specific performance
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performance of the act promised in the contract
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Waiver
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an intentional, knowing relinquishment (give up) of a legal right
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Consequential damages
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foreseeable damages that result from a party's breach of contract (special damages)
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