EXAM 5

For the seller to exercise its right to cure a faulty shipment received by the buyer, how soon must the seller notify the buyer of its intent to cure?

- Before the time of performance has expired - Timely notice

For what is a bankruptcy trustee accountable?

Administering the debtor's estate.

What is considered a sale under the UCC?

"the passing of title (evidence of ownership rights) from the seller to the buyer for a price."

Does the seller or buyer generally suffer the loss when goods in transit (being shipped from seller to buyer) are destroyed or ruined?

* Depends if it's a Shipment or Destination Contract! 1) The risk of loss in a Shipment Contract passes to the buyer or lessee if the goods are damaged by the carrier. 2) In a Destination contract, the duty is with the seller.

Recognize an example of an offer that is irrevocable for a stated period of time.

- District court granted summary judgement in favor of A, finding that the oral agreement between the parties (A & B) did not have a specific duration and lacked consideration. -- "meeting of the minds" on duration lacked between both parties.

Recognize some examples of when identification has taken place under the UCC.

- Ex: Company A contracts to lease five cars designated by their vehicle identification numbers (VINs), identification has taken place, and A acquires an insurable interest in the cars at the time of contracting.

Types of Bankruptcy Relief (3)

1) Chapter 7 provides liquidation proceedings (the selling of all nonexempt assets and the distribution of the proceeds to the debtor's creditors). 2) Chapter 11 governs reorganizations. 3) Chapter 12 (for family farmers and family fishermen) and Chapter 13 (for individuals) provide for the adjustment of debts by persons with regular incomes.

What will a court generally presume in case of a dispute if some terms in a deal are left open?

1) if the parties have not agreed on a price, the court will determine a "reasonable price at the time for delivery." 2) When the parties do not specify payment terms, payment is due at the time and place at which the buyer is to receive the goods. 3) Quantity of goods must be expressly stated.

Who is considered a Merchant under the UCC?

1) specializes in specific goods (only merchant for that area of expertise) 2) by occupation, has knowledge or skill unique to goods involved in transaction 3) employs a merchant as a broker, agent, or other intermediary has the status of a merchant in that transaction - ex: artist hires broker to sell art for her, artist is considered merchant in the transactiona

What is a court likely to do if it finds the use of Chapter 7 would constitute substantial abuse?

A court can dismiss a debtor's voluntary petition for Chapter 7 relief for substantial abuse or for failure to provide the necessary documents within the specified time.

Why should a lender record a mortgage that it has given a loan on?

A mortgage secures borrowed funds from a financial institution. It gives the creditor a lien on the debtor's real property as security for payment of a debt.

Under Chapter 11, what debtor's obligations are most likely to be discharged?

All claims not protected under the plan.

When does Identification take place?

As long as goods are in existence, identification takes place at the time the contract is made.

What are the options for a buyer who is notified by the seller that delivery of goods will be delayed longer than the terms in the contract?

Buyer can reject the goods only if a material loss or a SIGNIFICANT delay results.

What is the measure of damages for a buyer when the seller fails to deliver goods as contracted?

Buyer can sue for damages. Measure of recovery: difference between contract price and market price of goods at the time the buyer learned of the breach. - can also recover incidental and consequential damages less the expenses that were saved as a result of the breach.

What must a voluntary petition in bankruptcy include? (8)

Debtor files the bankruptcy petition-- NOT forced by creditor. - must include following schedules: 1) creditors + amount of debt owed 2) financial affairs of debtor 3) property owned by debtor 4) current income and expenses 5) certificate of credit counseling 6) proof of payments received from employers within 60 days prior to filing of petition 7) monthly income + how amount is calculated 8) debtor's federal income state tax return on most recent year before filing of petition

Chapter 7 -- Liquidation Proceeding

Debtor turns all assets over to a bankruptcy trustee, a person appointed by the court to manage the debtor's funds. The trustee sells the nonexempt assets and distributes the proceeds to creditors.

Does a Chapter 13 plan allow a debtor to retain possession of his or her assets?

Debtors may keep their assets and, if they are behind on such obligations as mortgage payments, may be able to prevent foreclosure.

Under Chapter 13, after the completion of all payments under the plan, which debts will the court grant a discharge of?

Grants discharge of all debts provided for by the repayment plan.

Under Chapter 7, what may happen to a debtor who fails to appear at the creditors' meeting when required?

If a debtor doesn't show up to their meeting of creditors, their bankruptcy will be dismissed.

What would give a lender the right to foreclose on a mortgage for which it has lent money?

If the homeowner defaults (fails to make the mortgage payments).

Chapter 13 -- Individual Repayment Plan

Individuals with regular income who owes debts not exceeding specified amounts may take advantage of bankruptcy repayment plans.

What is an implied warranty of merchantability?

It applies to a merchant who regularly sells or leases goods of the kind. - their goods are merchantable and fit a particular purpose

What does the Statute of Frauds require for a mortgage involving the transfer of real property or real estate?

Must be in writing to comply with the Statute of Frauds, which contains many provisions.

Does the UCC Article 2 apply to shares of stock?

No because it's not tangible.

Under most circumstances, is a seller presumed to have warranted its title as good and valid to goods it sold to a buyer?

Only if they're a merchant (not just a garage seller) Ex. of merchant: Global Talk Corporation sells phones and other mobile devices.

What is an insurable interest?

Purchasing party has protection against damage, loss, or destruction of goods. However, the party must have sufficient interest (Determined by Insurance Laws) in the insured item to obtain a valid policy.

What can a seller do when the buyer refuses delivery of goods it bought and cancels the contract?

Seller can resell or dispose of the goods. - seller must give original buyer reasonable notice of the rescale, unless the goods are perishable or will rapidly decline in value. - seller can hold the buyer liable for any loss. (difference between resale and contract price).

Identification

Takes place in a contract when specific goods are designated as the subject matter of a sales or lease contract.

What generally determines when risk of loss passes from seller to buyer?

The contract between the parties. - if contract doesn't expressly state when risk of loss happens, the court has to interpret the existing terms to determine whether the risk has passed. - UCC provides special rules to guide courts if there's no statement on this issue in the contract.

Chapter 11 - Reorganization

The creditors and debtor formulate a plan under which the debtor pays a portion of the debts and is discharged of the remainder. Debtor is allowed to continue in business.

Under the Bankruptcy Code, what is the means test used for?

The purpose of the test is to keep upper-income people from abusing the bankruptcy process by filing for Chapter 7. - It forces more people to file for Ch. 13 rather than have their debts discharged under Ch. 7.

What is the measure of damages for a seller who delivers goods to a buyer but then the buyer does not pay for them?

The seller can bring an action to recover the damages sustained. - usually: the amount of damages equals the difference between the contract price and the market price at the time and place of tender of goods. - alternative: lost profits of seller including allowance and expenses.

What is a shipment contract?

The seller is required or authorized to ship goods by carrier, such as a trucking company. - Title passes at time and place of shipment. - All contracts are assumed to be shipment contracts if nothing to the contrary is stated in the contract.

What is a destination contract?

The seller is required to deliver the goods to a particular destination, usually directly to the buyer, but sometimes to another party designated by the buyer. - Title passes to the buyer when goods are TENDERED at that destination.

Does the seller or buyer pay the cost of transport when the seller arranges with the buyer to transport goods as "F.O.B." (from the seller's location)?

This term authorizes shipment by the carrier and indicates that the buyer is to pay the transportation charges.

When does title to goods generally pass from seller to buyer?

Without explicit agreement to the contrary, title passes to the buyer at the time and the place the seller performs by delivering the goods.

Under the UCC, is the payment term in a contract fully enforceable?

Yes, as long as both are true: 1) The parties intended to make a contract. 2) There is a reasonably certain basis for the court to grant an appropriate remedy.

Does Chapter 13 impose on the debtor the requirement of good faith at the time of the filing of the petition and the time of the filing of the plan?

Yes. - There's no definition of "good faith," but if the circumstances indicate bad faith, a court can dismiss the petition.

Under Chapter 13, must a repayment plan provide for the same treatment of each claim within a particular class of claim?

Yes. Identical treatment of all claims within a particular class. (The Code permits the debtor to list co-debtors, such as guarantors or sureties, as a separate class).

Can the homestead exemption sometimes operate to cancel out a portion of a lien on a debtor's real property?

Yes. It exempts: - household furniture - clothing and certain personal possessions - vehicle - certain classified animals - equipment used for business or trade

Is A discharged from an agreement after he co-signs B's credit application and B then agrees to a higher rate of interest without telling A?

Yes. Making any material modification to the terms of the original contract without the surety's consent will discharge the surety's obligation.

If a voluntary petition in bankruptcy is found to be proper, would the court's entry of an order for relief put an automatic stay into place?

Yes. The filing of the petition will itself constitute an order for relief.

If A agrees to sell goods to B under a shipment contract, must A place the goods into the hands of a carrier?

Yes. The seller is required to deliver the goods into the hands of the carrier.

What is considered a lease under the UCC?

a transfer of the right to possess and use goods for a period of time in exchange for payment. -- covered under Article 2A

Under any chapter of the Bankruptcy Code, what can failing to file the necessary documents with the debtor's petition for relief result in?

automatic dismissal of petition

What does UCC Article 2 cover?

contracts for the sale of GOODS -- goods are tangible and moveable

What would require a president's personal guaranty to pay a loan for her business be in writing if the business defaults on the loan?

only after the principal debtor defaults, and usually only after the creditor has made an attempt to collect from the debtor.

What is a writ of execution?

order that directs the sheriff to seize (levy) and sell any of the debtor's nonexempt real or personal property. - land only in geographic jurisdiction - any excess pay goes to the debtor

What is meant by pledging collateral to get a loan?

specific property (such as a car or a house) pledged by a borrower to ensure repayment. - ppl who pledge collateral are called Secured Creditors

What is the primary effect of a discharge under Chapter 7?

to set aside any prior judgment on a discharged debt and to prohibit any action to collect it.