Commercial Law (UCC 2), (UCC 3 & 4), (UCC 9)
General Priority Rule
First Secured Party to FILE OR PERFECT *As long as party that filed DID eventually perfect* Perfection--Attachment (signed Security Agreement; Value; RIghts in the collateral) + Filing FS
STEPS AND DEFINITIONS FOR GOING THROUGH ARTICLE 3 ESSAY (IF CHECK INVOLVED)
1. (NEVER) A negotiable instrument is a signed writing that orders or promises payment of money. A check is a draft drawn upon a bank and payable on demand. A check is specifically identified as a negotiable instrument under UCC Article 3. 2. (GONNA) Negotiable instruments are covered by South Carolina Code Title 36, Chapter 3, which is substantially similar to Article 3 of the Uniform Commercial Code (UCC). 3. (NEEDLESSLY) An instrument is negotiated by a transfer of possession by a person other than the issuer to a person who thereby becomes its holder. 4. (HEED) A holder is a subsequent party in possession of bearer paper or order paper, and if order paper it must be the identified payee. An HIDC is a person who takes the instrument for value, in good faith, without notice of defenses.
BARBRI ESSAY 1 (SECURED TRANSACTIONS) Issue concerns a secured party's enforcement of a security interest in goods bought in the seller's ordinary course of business (the seller's inventory)
A buyer who buys goods from a seller engaged in the business of selling those goods takes the collateral free of any security interests in the collateral, unless the buyer knows that the sale violates a security agreement. Note that the buyer must know that it violates one, not that there just is one. Therefore, this will never be an issue but just mention the rule.
BARBRI ESSAY 8 (SECURED TRANSACTIONS) Issue concerns a creditor's right to repossess goods under consignment, since goods on consignement are legally owned by someone other than the debtor.
A consignment is a situation where a cosigner delivers goods to a cosignee for him to sell goods to the public while still retaining title to them. This usually because cosigner is a manufacturer who does not have space to sell the goods. In determining repossession, the issue is whether the consignee's apparent ownership of the goods gave the creditor the rights to repossess. A creditor will have the right to repossess where: (i) consigned goods are worth a total of 1,000 or more; (ii) the cosignee is a person who deals in goods of the kind under a name other than the consignor's; (iii) the cosignor did not use the goods for personal or household purposes; (iv) the cosignee is not an auctioneer; (v) the cosignee is now generally known by his creditors to be selling goods of others.
SABIN ESSAY QUESTION 2 (UCC 2) Issue of how a contract may be formed under the UCC
A contract requires offer and acceptance. Article 2 does not expressly require consideration. A contract is formed even though the acceptance contains additional or different terms, as long as there is a definite and seasonable expression of acceptance and the acceptance is not expressly conditioned on the offeror's assent to the additional or different terms.
BARBRI ESSAY 2 (COMMERCIAL PAPER) When is a check properly payable by a bank?
A drawee bank is the bank whose check is drawn on (the drawer's bank) A drawee bank must honor a check as drawn. This means that it cannot charge the account if there is a forgery of the payee or indorsee's signature.
JESS'S COMMERCIAL ESSAY What liability does the drawer of a check normally have?
A drawer of a check has secondary liability for payment on the check. A drawer only becomes liable after the instrument has been presented to the drawee and the check has been dishonored.
BARBRI ESSAY 2 (COMMERCIAL PAPER) What is an HIDC?
A holder in due course is a party who takes an instrument "in good faith, for value, without notice of defenses or claims". -NOTE that where a promissory note is sold to a person and the date on the note is in the past, the purchaser will be deemed to have NOTICE that the note is overdue and that there is some type of problem with it.
BARBRI ESSAY 4 (SECURED TRANSCATIONS) Will a judicial lien prevail over other creditors' prioty interests?
A person can obtain a lien on property through judicial attachment. Priority of this lien follows the general rule for priority, where the lien will prevail over other interests if it comes into existence before another security interest is perfected (meaning collateral attached and FS filed).
BARBRI ESSAY 1 (SECURED TRANSACTIONS) Issue is how secured party takes a PMSI (meaning will take priority over all others) in collateral that is purchased as inventory of the debtor
A secured party will obtain a PMSI in inventory if: (i) the security interest is perfected (filed) at the time the debtor gets possession of the inventory, AND (ii) other creditors with perfected interests receive authenticated notice of the PMSI before debtor receives possession
JESS'S COMMERCIAL ESSAY What is a transfer warranty?
A transfer warranty is a warranty a party makes when he transfers the instrument to another party for consideration during its course of negotiation (other than to the final party for payment, in which case that person makes a presentment warranty).
BARBRI ESSAY 12 (PARTNERHIPS AND AGENCY) Issue is whether limited partners have the right to manage the affairs of the partnership?
An LP is a partnership composed of 1 or more GPs and 1 or more LPs. Like a General Partnership, all general partners of the limited partnership hae the rights to manage; and also have the liabilities of partners like those in a GP, including personal liability for the partnership's obligations. Limited partners, on the other hand, do not have the right to manage (but may have the right to vote on specific matters, bring deravitive suits, and obtain info from the partnership). Additionally, while their ability to manage is limited, so is their liability which is limited to their contributions.
BARBRI ESSAY 1 (COMMERCIAL PAPER) Issue here is the effect that releasing a debtor's collateral has on an accommodation party? Similarly, what is an accommodation party?
An accommodation indorser is a person who indorses an instrument for the purposes of lending her name and credit to antoher party to the instrument. Generally, it is like the person enters into a contract that if the instrument is presented to the debtor and not paid, the indorser will pay if timely notified. However, an indorser's contract can be discharged in a number of ways. (1) If the party entitled to enforce the insrtument impairs (releases) collateral securing the instrument, an accommodation party will also be released to the extent of the collateral's release, IF the party enforcing the instrument knew of the accommodation. Generally, a party will be deemed to know of an accommodation if the accommodating party's signature is anomalous (if the instrument is signed by some random person who is not the holder) or if the instrument otherwise indicates that the party signed as a surety.
JESS'S COMMERCIAL ESSAY What liability does the drawer of a check have that was later altered?
An alteration is an unauthorized change in an instrument that purports to modify a party's obligation, or an unauthorized addition to an incomplete instrument relating to a party's obligation. When a check has been fraudulently altered, a party whose obligation is affected is completely discharged, except as to a holder in due course. However, even an HIDC may only enforce the instrument up to its original tenor.
BARBRI ESSAY 4 (SECURED TRANSACTIONS) What are the damages for failure to comply with Art. 9 rules?
An entity is liable for damages in the amount of any loss caused by failure to comply with any of article 9 rules, including losses resulting from the debtor's inability to obtain alternative financing because of a secured party's erroneous financing statement.
JESS'S COMMERCIAL ESSAY What is a mere indorser's liability on a check?
An indorsement is a signature, other than that of a signer as maker, drawer, or acceptor, that, alone or accompanied by other words, is made on an instrument for the purpose of negotiation. Indorsers have secondary liability, and will become liable to pay the instrument after presentment and dishonor AND notice of the dishonor.
SABIN ESSAY 2 (COMMERCIAL PAPER) What does properly negotiated mean?
An instrument is negotiated when there is a voluntary or involuntary transfer of possession by a person other than the issues to a person who thereby becomes its holder.
UCC 2 Anticipatory Repudiation; Adequate Assurances; Retraction of Repudiation
Anticipatory Repudiation--conduct UNEQUIVOCALLY indicating will not perform. Effect of that--The non-repudiating party may: (i) sue immediately; (ii) wait to sue; (iii) treat K as discharged; (iv) urge promisor to perform Retraction of the Repudiation--May be retracted UNLESS the other party has, cancelled the K, materially changed her position, or considered the repudiation final. Adequate Assurance--If party has REASONABLE grounds to believe other party will not perform, she may request ADEQUATE ASSURANCE and suspend her performance until given that assurance. (ie..something like gossip or hearing around town the buyer is insolvent is NOT enough to justify assurance and suspension of performance.)
SABIN ESSAY 2 (UCC 3 & 4) What does art. 3 govern?
Art 3 governs negotiable instruments. A check is a negotiable instrument.
SABIN ESSAY 2 (UCC 3 & 4) What does art. 4 govern?
Art 4 governs relations between customers and banks and also bank transfers.
BARBRI ESSAY 6 (UCC 2) Issue regarding acceptance/rejection of goods.
Art. 2 follows the perfect tender rule so if the goods or their delivery fail to conform to the contract, the buyer may reject all, accept all, or accept any commercial units and reject the rest. If buyer accepts nonconforming goods, it is entitled to damages for the breach. Buyer may accept by (i) indicating to the seller that he accepts even if they are nonconforming (ii) does anything inconsistent with seller's ownership or (iii) fails to reject the goods within reasonable time. Once buyer accepts, rejection is not possible.
SABIN ESSAY QUESTION 2 (UCC 2) Battle of the Forms Issue of Additional Terms
As between merchants, additional terms in the acceptance will become part of the contract unless: (a) the offer expressly limits acceptance to the terms of the offer; (b) they materially alter it; or **Disclaiming implied warranties is a mat. alteration; Arbitration is a Mat. alteration (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.
UCC 9 Future Advance Clauses (ie.. more $$ loaned) After Acquired Property Clauses (ie..inventory or equiptment)
Both clauses are permitted. Ex of Future interest--Bank loans 50K on Jan 1 for tractor and takes security interest in tractor. The security agreement has a future advance clause. When bank then loans 25K to debtor on May 1, Bank will also have an interest in the tractor for the 25K, and that interest will be perfected on the date bank gives the 25K. Ex. of After Acquired--Bank loans 50K to debtor to buy inventory and the security agreement has after acquired prop clause. Bank will have an interest in all after acquired inventory to secure payment for that 50K.
SABIN ESSAY QUESTION 2 (UCC 2) Battle of the Forms Issue of an Expressly Conditional Acceptance (No K Formation), along with Subsequent Performance
Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act (Gap Fillers).
SALES ESSAY 7 BARBRI; SABIN ESSAY QUESTION 2 (UCC 2) Issue is the Statute of Frauds Rules for Sale of Goods over 500
Contract for Goods Priced at 500 or more must be in writing and signed by the person sought to be bound. *Writing--The SOF does not require a formal writing. It only requires one or more writings, that (1) reasonably identifies the subject matter of the contract (2) indicates that there has been a contract made between the parties and (3) states with reasonable certainty the essential terms of the promises. *Signed--is liberally construed and includes most things that identify the sender including writing with the name and address of the party such as a letter-head, or any mark or symbol with present intent to authenticate. However, there are 4 EXCEPTIONS to this rule which include: When there are specially manufactured goods (with either a substantial beginning in the manufacturing or committments made for their purchase); Admissions in Pleadings or Court; Payment or Delivery of Goods (Enforceable up to the amount paid or accepted); Merchant Confirmatory Memo Rule (Oral Agreement, Written confirmation of that oral agreement sent in reasonable time, memo is sufficient enough to bind the sender, recipient receives and knows of its contents; recipient does not object in writing in 10 days)
ALL UCC 2 QUESTIONS (UCC 2) Governing law issue
Contracts for the sale of goods are goverened by article 2 of the UCC. Goods are all things moveable at the time they are identified to the contract. Here, blah blah blah is moveable and thus is a good.
BARBRI ESSAY 2 (COMMERCIAL PAPER) What is an action for conversion against a bank?
Drawee who pays on forged indorsement is liable to the payee in conversion. Person suing in conversion must have possession of the instrument. No conversion action if check never reaches payee because it was lost in the mail. -Note that receipt of the instrument by agent will be treated as receipt by principal. (Follow the chain of indorsements to determine if the person, or bank, who presents the instrument for payment, was a person who was entitled to enforce).
BARBRI ESSAY 12 (PARTNERHIPS AND AGENCY) Issue is whether limited partners have the right to obtain information about business operations?
Every limited partner has the right, upon reasonable demand from the general parter, to obtain full info respecting the business and financial condition; to inspect and copy parternship records that the partnership is required to maintain (such as certificate of limited p-ship, p-ship agreement, tax returns for the past 3 years, names/addresses of GPs/LPs.
UCC 3 Rule for Fraudulent Alteration
Fraudulent alterations discharge all parties, except that a payor bank, a drawee bank, and an HIDC, may enforce the instrument: (i) according to its original terms, or (ii) in case of an unauthorized completion, according to its terms as completed
BARBRI ESSAY 4 (COMMERCIAL PAPER) Employer's only defense to employee entrusting rule and an unauthorized signature
Generally, an employer will be liable for any fraudulent indorsement made by an employee who was entrusted with responsibility with respect to instruments. However, the only defense the employer may be able to asset is that a person who takes the instrument (bank) and fails to exercise due care in the payment of that instrument may be held liable to the extent of the loss caused by the negligence.
UCC 3 General Rule for Forged Signatures and the Exceptions
Generally, forged signatures valid only as that of the forger. Exceptions--Fictitious payee's signature forged; entrusted employee forges signature; negligence contributes to forgery; failure to discover forgery in reasonable time after receiving bank statement.
UCC 3 Elements of HICD and Shelter Rule
HIDC--Holder, who takes for Value, in Good-Faith, without Notice. --Value included such things as antedecent debt Shelter Rule--Takes rights of transferor if they received the instrument by VOLUNTARY transfer
UCC 3 Holder Elements
Holder--Person entitled to enforce. --If Order paper, will be PETE if they are the identified payee. -- If bearer paper, will be PETE if in possession of blank indorsement
BARBRI ESSAY 1 (COMMERCIAL PAPER) Accommodation party's right to recovery
If an accommodation party pays on an instrument, she will have an action on the instrument against the party accommodated, irrespective of her formal position on the note. Thus, if the party pays, she can recover whatever she did pay. Moreover, even if the party was not an accommodation party, and just an indorser, the maker of the note will still be liable since he is generally liable to any indorser who pays out on the instrument.
BARBRI ESSAY 6 (UCC 2) Issue regarding acceptance of nonconforming goods
If buyer accepts nonconforming goods, buyer may recover damages resulting from the normal course of events from the breach. The measure of damages is the difference between value of the goods as delivered and the value of the goods had they been conforming. (plus incidental and consequential damages) **In order to recover under this, the buyer must notify the seller of the defect within a reasonable time after he discovered or should have discovered the defect.
How to get a PMSI (Super priority over all other creditors including judgment lien creditors that takes precedent regardless of date it was perfected)
If collateral secured party is taking interest in is used as: Consumer Good--Automatically Perfected upon possession by debtor Inventory--Perfected if: (1) notice to all prior creditors AND (2) a Fin. Stat. was filed by the time debtor takes possession Equipment--Perfected if Fin. Stat. filed within 20 days of debtor taking possession
BARBRI ESSAY 3 (SALES) WHen does a seller have the right to cure?
In a single delivery contract, the buyer have the right to "perfect" tender and may reject the goods for any "defect" in the tender, a material breach is not required. When the buyer has rejected goods because of a defect, the seller may within the time originally provided for performance, "cure" by giving reasonable notice of his intention to do so and making a new tender which the buyer must accept. Furthermore, if buyer does then accept, the seller will have a breach of contract claim for refusal to accept after the nonconformity was cured.
BARBRI ESSAY 4 (COMMERCIAL PAPER) The issue here concerns the rule regarding accord and satisfaction.
In general, if a claim is subject to dispute, the claim can be discharged in full if the person against whom the claim si asserts, in good faith, tenders an instrument that conspicuously states that the payment is in full satisfaction of the debt, (such as "payment in full"), and the claimant obtains the payment and deposits the payment. This is known as an accord and satisfaction. If the claimant is an organization, it may require that such instrument be sent to a specific person, place, or office in order for it to be effective, but this notice must be made before the tender of the instrument is made. Defense to accord and satisfaction (Inadvertent Deposit) If a (creditor) claimant inadvertently receives an accord and deposits it without realizing that it is for full satisfaction of the debt, the claimant can preserve his rights by attempting to tender back the amount received within 90 days after obtaining the payment. Note, that this is only where the claimant DOES NOT ReALIZE, and it will not be a defense if obtained by a person who was responsible for the dispute or did know that the check was for payment in full.
SABIN ESSAY 2 (UCC 3 & 4) Issue regarding endorsement of negotiable instrument
Indorsement means a signature, other than that of a signer as maker, drawer, or acceptor, that alone or accompanied by other words is made on an instrument for the purpose of (1) negotiating the instrument, (2) restricting payment of the instrument, or (3) incurring endorser's liability on the instrument. Any unauthorized indorsement of the payee's name or any special endorsee's name is not a valid negotiation and gives subsequent transferees no legal rights, as an HDC or otherwise, regardless of how far removed they are from that transaction.
UCC 3/9 What is Chattel Paper (random fact/info)
It is a record evidencing both a monetary obligation and a security interest. Basically it is a promissory note given for collateral and a security agreement in that collateral. (ie.. Lexus dealership sells me a Lexus on credit (promissory note) AND they take a security interest in that Lexus (Security agreement).
BARBRI ESSAY 6 (UCC 2) Issue regarding who bears the loss of goods that have been rejected but still in custody of the buyer
Once goods are rejected, the buyer must hold them with reasonable care for a time sufficient for the seller to remove them. If the goods are damaged in a fire during that time, the seller will bear the loss, provided that they were held with reasonable care, because buyer did not take ownership of them.
UCC 2 Option K. v. Firm Offer
Option K--Offeree gives consideration for promise not to revoke Firm Offer--Given by a MERCHANT, in WRITING, that gives ASSURANCE the offer will be held open, then offer cannot be revoked *If there is no consideration given in firm offer, the period may not exceed 3 moths, but if firm offer is supported by consideration then the limitation does not apply.
BARBRI ESSAY 1 (SECURED TRANSACTIONS) Issue is generally how to go through a problem asking the order of priority over specific collateral
Start off by saying how one generally gets priority over collateral versus other secured parties. Secured parties gain priority by attaching and perfecting a security interest. To attach, (1) there must be existence of an authenticated (signed) security agreement, (2) the debtor must have rights in the collateral, and (3) the creditor gives value. --Under (1), the security agreement must describe the collateral, and must be more than generally saying "all of debtor's personal property". Furthermore, it can state "inventory now owned or after acquired" because these after acquired clauses are permitted. Once attached, a secured party will generally perfect by filing a financing statement. If at the end of the problem, multiple parties have attached and perfected, then the general rule of prioerity is that the first party to either FILE OR PERFECT prevails. However, with that being said, look out for any parties that may have a PMSI (Buying the good on credit AND the seller makes those goods collateral) because they will get super priority over all others regardless of the time of filing or perfection. A party may get a PMSI in consumer goods, inventory, or equiptment but the way to obtain the PMSI is different. (See below for the specific rules)
BARBRI ESSAY 5 (SECURED TRANSACTION) (Has a UCC 9 and UCC 2 issue) Issue is regarding a secured party's rights on default when the secured party took an interest in accounts or instruments
Start off essay by saying secured party obtained a properly perfected security agreement in debtor's accounts (meaning accounts receivable) or instruments (such as promissory notes). Then say, with non-goods collateral such as accounts and instruments, if the debtor defaults then the secured party can notify the person owing the money to the debtor to make payment to the secured party. Upon notification, the account debtor MUST PAY the secured party rather than the debtor.
BARBRI ESSAY 4 (SECURED TRANSACTIONS) What must be done for proper filing of a financing statement?
THe debtor must authorize the filing of the statement (it is automatically authorized once the debtor signs the security agreement); and it must be recorded, but does not have to be signed by the debtor.
BARBRI ESSAY 12 (PARTNERHIPS AND AGENCY) What interests are assignable in a partnership?
THe only interest of a partner that is assignable to a 3rd party is the partner's rights to distributions (AKA profits). A partner's interest in specific partnership property and any rights as a partner are not assignable, UNLESS (1) the partnership agreement provides, or (2) all partners consent. Note, that this limitation does not apply to a partner's interest in partnership proprety when assigning to co-partners.
BARBRI ESSAY 4 (SECURED TRANSACTIONS) What if a financing statement covers more collateral than the security agreement?
That does not affect perfection of what collateral the security agreement covers. It merely means that the financing statement will only perfect the collateral in the security agreement, and not any extra collateral listed.
SABIN ESSAY 2 (COMMERCIAL PAPER) Issue is the effect of unauthorized signatures and the employee exception rule.
The general rule is that an unauthorized signature is wholly ineffective as the person whose name is signed. However, if an employer entrusts an employee (including independant contractor) with responsibility of an instrument and that employee makes a fraudulent indorsement, the indorsement is effective. This is true whether the employee draws a check on behalf of the employer, or whether he indorses a check made out to the employer. Look at p. 44 in the Comm outline for two examples.
When a check is made payable to cash,
To negotiate a check payable to cash, the holder does not need to specially indorse it and transfer possession. An instrument is bearer paper if it states that it is payable to cash or otherwise does not name a payee. Bearer paper is negotiated by delivery alone; a special indorsement naming a payee is unnecessary. Anyone coming into possession of bearer paper is a holder. A holder may create a bearer instrument by indorsing a check in blank, or create order paper by specially indorsing a check (e.g., "Pay to Jo Doe").
BARBRI ESSAY 8 (SECURED TRANSACTIONS) Issue concerns the process a consignor must go through to protect his interest against the consignee's creditors.
To protect interest in goods in consignment, the consignor must have a perfected security interest in the goods. A perfected security interest happens upon attachment (authorized security agreement, value given, rights in collateral) AND perfection (filing of a FS). Furthermore, the consignor of inventory can get a PMSI (super priorty) over the goods if he (i) perfects by the time consignee takes possession; (ii) gives the consignee's creditors notice of it by the time consignee takes possession.
UCC 3 Elements of Negotiation
Transfer of possession by someone other than issuer or maker
BARBRI ESSAY 3 (COMMERCIAL PAPER) Issue is transfer warranty and what that warranty protects against.
Transfer warranty arises when the indorser transfers the instrument for consideration (other than to the bank or someone for final payment in which they incur presentment warranty liability). It warrants that the party transferring the instrument: (1) is entitled to enforce, (2) the signatures on it are all authorized and authentic, (3) there are no alterations (4) there are no defenses to payment that would be good against the transferor and (5) no knowledge of insolvency proceedings by the person liable to pay. NOTE that transfer warranty can never be disclaimed on a check. Furthermore, if disclaimed on a note, it must say something liek "without warranty" and cannot jsut say "without recourse".
BARBRI ESSAY 3 (COMMERCIAL PAPER) (UCC 2 and 3 issues) Issue is regarding a merchant's ability to transfer good title to goods that he does not own.
Under UCC 2, generally, a person cannot transfer better title to goods than he has. However, there is an exception to this if the owner of the goods entrusts a merchant (one who regularly deals in goods of the kind), then the merchant may sell the goods to a buyer in the ordinary course of the merchant's business. Thus, the only recourse the actual owner would have would be against the merchant for breach of his duties as a bailee.
SALES ESSAY 7 BARBRI (UCC 2) Issue is whether a contract is formed EVEN with MISSING terms, and if it is formed, what those MISSING terms will be.
Under UCC 2, the fact that there is missing terms does NOT prevent the formation of a contract as long as the parties intended to make a contract, there is an identification of the offeree, and a certain quantity identified (or quantity capable of being made certain). In SC, courts supply a reasonable term for those terms that are missing. The court will provide a reasonble Price (which is reasonable price at time of delivery); Place of Delivery (which is seller's place of business and if none his home); Time of Shipment/Delivery (which is a reasonable time); Time of Payment (which is time and place at which buyer is to receive goods)
SALES ESSAY 7 BARBRI (UCC 2) Issue is how UCC Contracts Can be Modified
Under UCC, modification of terms in good-faith is valid WITHOUT consideration. It can be modified orally, UNLESS, AS MODIFIED, the contract falls within the Statute of Frauds. Under UCC, a contract that states that it may not be modified or rescinded except by signed writing IS effective, UNLESS the contract is between a merchant and non-merchant, THEN the non-merchant must separately sign next to this provision.
BARBRI ESSAY 6 (UCC 2) What is a destination contract?
Under a destination contract, the ROL passes to the buyer only when the goods are tendered at the place of destination. However, to be a destination K, it means more than identifying an address for shipment or stating that seller pays freight charges. To be a destination K, the contract must specifically contain an FOB destination term, or explicitly allocate the ROL to the seller until the goods are tendered. If neither of those are present, it will be presumed a shipment K and the ROL will pass on delivery to the carrier.
UCC 2 Rejection of goods under installment K
Usually, perfect tender is required and buyer may reject any part of a shipment that is not conforming goods if it is a single delivery contract. However, the right to reject is much more limited under installment K. Here, the installment may be rejected only if the nonconformity SUBSTANTIALLY IMPAIRS the value of the installment AND CANNOT BE CURED. Furthermore, the whole contract will only be breAched if the nonconformity SUBSTANTIALLY IMPAIRS the ENTIRE CONTRACT.
BARBRI ESSAY 2 (COMMERCIAL PAPER); SABIN ESSAY 2 (COMMERCIAL PAPER) What is the drawer/obligor's liability on a check?
WHen an obligor gives an instrument, such as a check, for payment of an obligation, the obligation is suspended until the instrument is either paid or dishonored. If paid, the obligation is discharged, and if dishonored, then the obligation is reinstated. To determine liability, determine if the party asserting the claim is an HIDC or takes rights of an HIDC. If one of those are met, then that person is only subject to the drawer's real defenses of duress (must be physical and not economic), material alteration, fraud in the factum (which exists where the signer of a check signs after being fraudulently lied to as to what exactly he is signing), forgery, illegality, intoxication, infancy, and insanity. An HIDC is not exposed to the drawer's defenses of mistake, unconscionable of the underlying transaction, failure of consideration, failure of condition precedent or subsequent, and fraud in the inducement.
UCC 2 What are implied warranties and what can recover if breached?
Warranty of title--ANY SELLER of goods warrants that good title is transferred, and no liens or encumbrances. of which the buyer is unaware. (implied) Warranty of Merchantability--MERCHANT who deals in GOODS OF THE KIND warrants that "fit for the ordinary purpose". (implied) Warranty of Fitness for Particular Purpose--ANY SELLER who has REASON TO KNOW of the PARTICULAR PURPOSE goods are being used, the buyer is relying on the seller's knowledge, and does in fact rely. (implied) Express Warranty--Any fact/model/sample/etc. that forms the BASIS OF THE BARGAIN, meaning that at the time it was made the buyer COULD HAVE RELIED on the statement when she entered into the K. Disclaiming--(i) warranty of title cannot be disclaimed; (ii) Merchantability one must mention "merchantability" and conspicuously; (iii) Fitness for Particular Purpose must be only conspicuous; (iv) "AS IS" also disclaims these above two warranties. Damages--(i) generally, it is the difference between value of goods as accepted and value as warranted; (ii) If title warranty is breached then the true owner would have reclaimed the goods and the buyer may rescind the K and the damage is the value of goods as warranted (purchase price really).
BARBRI ESSAY 5 (SECURED TRANSACTION) (Has a UCC 9 and UCC 2 issue) Issue is regarding a buyer's damage rights for non-conforming goods.
When a buyer accepts nonconforming goods from a seller, the buyer may seek damages for the nonconforming goods. Buyer make seek damages for the difference between the contract price and the price of the goods as nonconforming, SO LONG AS buyer gives seller proper notice. Specific issue to this problem--This rule above is true even if the seller assigned his rights to the payment to a 3rd party, because an assignee cannot acquire any more rights than the seller has under a contract.
JESS'S COMMERCIAL ESSAY What is an indorser's liability on a check when he writes "without recourse"?
When an indorser writes "without recourse" as part of his indorsement, his indorsement liability is disclaimed. (contract liability is disclaimed but this is separate from warranty liability discussed below). However, he may have made a transfer warranty if he indorsed the check and gave it to someone else (other than to the bank for presentment, which he would in that case be making a presentment warranty). If that is the case, then he may be liable for breach of a transfer warranty, because transfer warranties cannot be negated ON CHECKS See below for transfer warranty liability. Note that transfer warranties may be disclaimed on other insrtuments such as a note but has to specifically state something like "without warranties" and CANNOT just state "without recourse".
BARBRI ESSAY 3 (SALES) What damages can seller collect when buyer wrongfully rejects goods?
When buyer repudiates or refuses to accept goods, seller can recover either the difference between (i) the contract price and FMV of the goods, or (ii) the difference between the contract price and the resale price, plus incidental damages (ie. the cost of shipping, storing, returning, reselling). If the seller chooses the difference between the contract and resale price, he must act in good faith and the sale must be commercially reasonable. In the case of a private sale, the buyer must be given notice of the intention to sell.
SABIN ESSAY QUESTION 2 (UCC 2) Battle of the Forms Issue of Differing Terms
Where two parties' writings are in conflict with regard to terms a contract is still formed. However the rule operates to reject both parties' terms if there is a disagreement between the forms exchanged. On the inconsistent item, the parties' conflicting terms are knocked out of the contract and replaced by gap filler standard terms such as implied warranties.
UCC 3 Elements of Negotiable Instrument
Written; Unconditional promise to pay; To bearer or Order (specified payee); For fixed amount of $$; On demand or at specified time; No other undertaking
