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isValid method in its current form doesn't work when the model exists. This is due to the model's validator always being set to create rules.
My PR makes a change, so when isValid is called, "exists" property of the model is checked and then the appropriate rule set is set to the validator. This way the isValid method will work properly in case the model exists in DB or if it does not.
I also applied this fix to the Observer and adjusted the tests as necessary.