BLAW 2258 | Scott Smith | UTA Exam 3 | Fall '25

Know why most states adopted the UCC

The benefits of lowering the costs of doing business across state lines were so great, however, that most states accepted UCC's provisions on most topics

Know the definition of a good under Article 2 of the UCC.

Manufactured things that are movable and have physical existence. They must also be tangible.

Be able to determine what type of contract is covered by Article 2 of the UCC.

Contracts in which the title is transferred from the seller to the buyer. (excluding Real Estate)

The Court in Erie Ins. Co. v. Amazon.Com, Inc. held that when a company only distributes products for a seller, and does not themselves sell a product, then the distributor is not responsible for product liability like the seller.

This is the answer already.

What is the default provision for when title to goods pass from Seller to Buyer in the UCC?

When the Seller completes all obligations regarding delivery of the goods, or when the seller delivers the title documents, if the goods did not have to be moved.

When a UCC contract does not contain a specific term what happens?

I uses "fill the gap" when a specific term is not specified.

Know the UCC rule about accepting an offer to create a contract.

Under the common law, a contract cannot be formed until an offer is clearly accepted.

Under the UCC a contract can be formed by the way the parties act. (If they act like there is a contract, there is a contract even if there where no express terms.)

This is the answer.

Under the UCC if you leave out a major term like the price, there is still a contract.

This is the answer.

UCC offers can be accepted even if new or different terms are included in the acceptance.

This is the answer.

In a UCC contract a significant change in the contract (agreed to by the parties) does NOT require new consideration.

This is the answer.

Buyers have the right to inspect goods before accepting them. Who bears the cost of the inspection?

The buyer must pay for the expenses associated with the inspection. The expenses can be recovered from the seller as damages if the goods do not conform to the contract.

In Villabos v. Atlanta Motorsports, LLC the court allowed the buyer to try to prove he revoked his acceptance of the good once he learned the value of the good was impaired (meaning the truck was not worth what the Seller said it was worth).

Villalobos had a possible claim for revocation of acceptance due to impairment of value.

Know the three situations an express warranty is created in.

1) A seller provides a sample or model of the good that the buyer relies upon as evidence of what the goods will be like.

2) A seller describes attributes about the goods to the buyer.

3) A seller makes specific oral or written promises to the buyer about the goods that are a part of the basis of the bargain.

The Implied Warranty of Merchantability means a merchant who sells goods must meet the quality comparable to that generally acceptable their industry.

This is the answer.

Know the purpose of warranty disclaimers.

The ability of goods to be sold as is, or with fewer warranty rights that would normally exist, based upon clear communication to the buyer that warranty rights are reduced or eliminated at the time of sale.

• The purpose is to reduce the liability of the sellers.

Know what the court said about warranty disclaimers in Lee v. R&K Marine.

Lee was out of luck because the seller properly disclosed warranties.

Know what incidental damages are

are extra costs (like storage or shipping) caused by the other party's breach.

Sole Proprietorships income is taxed to the individual owner of the business.

This is the answer.

Know the two disadvantages of a sole proprietorship.

1) Unlimited liability.

2) Hardest to raise capital.

Know the things typically found in partnership agreements. ( Especially ownership shares)

1) Know that there's ownership shares.

Know what the court in Norris v. Besel held regarding the wife’s status as a partner.

Shelly was not liable as her limited role in the business did not indicate partnership status.

Know what requires partners to act in good faith toward the partnership

Fiduciary Duty- This fiduciary relationship requires that each partner act in good faith for the benefit of the partnership.

Know the disadvantage shared by sole proprietorships and partnerships.

Unlimited Liability!

Know what the court in Eagles Landing Development, LLC v. Eagles Landing Apartments, LP said about the liability of limited partners for the debts of a limited partnership.

Limited partners aren't liable for the debts of the Limited Partnership.

Know what you do to create a corporation

file articles of incorporation with the state

Know what constitutional rights a corporation does and does not have.

A corporation has the right to enter the courts as an entity that may sue and be sued. Corporations have the rights to many constitutional protections, but does not have the privilege of against self-incrimination under the Fifth Amendment.

Know what the duty of loyalty owed by a director to the corporation means.

They have a Fiduciary Duty of loyalty to work in the best interest of the corporation.

Know what corporate dissolution means

Winding up the business. Collecting all the assets, paying off all debts, whatever is left will be distributed to the shareholders within the corporation.

Know what a professional corporation is

A corporation that is created for professionals. ie. Medical Doctors and Lawyers

Know the advantages of a Limited Liability Company.

1) Liability shield of a Corporation.

2) Flow through taxation of a partnership.

Know what must be in a LLC’s articles of organization.

1) They must designate if it's Member Managed or Manager Managed.

2) Company's name (must include "LLC" or Limited Liability Company")

3) Address of the company or its registered agent.

4) Names and addresses of company members.

5) Date upon which the company will be dissolved, if any.

6) Whether any members are to be liable for company debts.

Know the limitations on transferring ownership of an LLC (Normally, you can't sell your membership interest without the consent of the other members.)

You must obtain consent from the other members before transferring.

Know what an LLC operating agreement is.

A contract among members of a LLC setting forth the parties' agreements about funding, development, operations, and other key issues of the LLC. It establishes the company's method of management, allocation of profits and losses among members, restrictions on the transfer of membership interests, and the process to be followed in dissolving the company.

Know what In re 1545 Ocean Avenue, LLC said regarding the requirement for a court dissolve an LLC.

There was not sufficient evidence that the LLC could not effectively operate under the operating agreement so the trial court's decision to grant King's requests for dissolution was not correct.

Limited liability is the advantage of Corporations and LLCs

This is the answer.

Know what the court in State Ex Rel. Yost v. Leonard held regarding piercing the corporate veil when the owner knew of environmental problems the LLC had but did nothing to stop them.

Sliman knew of the problems and failed to act. So, he could be held personally liable as the alter ego of Zerzer.

Someone who receives a promissory note has the option to sell it to another party.

This is the answer.

Know what results when a negotiable instrument is transferred by negotiation.

The transferee accepts the instrument free of any of the transferor's contract obligations. This way, the transferee may have more rights than the transferor.

If an instrument turns out to be nonnegotiable, what law applies to disputes regarding the instrument?

Common Law Contracts Law

Know the requirements to be a holder in due course.

A holder of an instrument who took it for value in good faith without any notice of any claim against the instrument; the holder is free of any claims against the instrument.

Know the four types of negotiable instruments.

1) Certificates of Deposits

2) Checks

3) Notes

4) Drafts

Know what the Whitaker v. Wedbush Securities, Inc. court said regarding the defendant brokerage firm was a bank under the UCC.

Under UCC rule, Wedbush was effectively a bank and was responsible for the loss.

Know the UCC definition of a note

a written promise by one party (the maker) to pay money to another party (the payee) or to bearer; a two-party negotiable instrument.

Know the UCC definition of a draft

a written order signed by a party (the drawer), instructing another party (the drawee, usually a bank) to pay a certain sum of money, on demand, to a third party (the payee)

A draft is a written order to pay, like a check.

What do you call an agreement to provide security in real property?

Mortgage

What do you call a pledge of personal assets as security for the debt of a business?

Surety or Suretyship

Know what the General Electric Business Financial Services v. Silverman court said about asserting defenses based on oral agreements that modified the written guaranty contract.

The court granted the Plaintiff summary judgement because the IL Credit Agreement Act (ICAA) bars affirmative defenses that rely on these allegations.

If a surety pays the principal’s debt, what rights does the surety have against the principal?

Exoneration- A court-ordered right to be reimbursed by reason of having paid money that another person should have paid. This court order requires the debtor to pay. (Indemity)

Know which part of the UCC regulates credit and financing for personal property.

Article 9- Secured Transactions.

Know what perfection means under UCC Art 9.

The validation of the security interest as against other creditors; normally accomplished by filing a statement with some public office or possibly by taking possession of the collateral.

Know how to perfect a security interest

You file the financing statement with the Secretary of State.

Know the holding of Fordyce Bank and Trust v. Bean Timberland about buyers in the ordinary course of business.

Bank gets nothing from Timber Companies. They were not responsible for the Security Interest and breach no duty to the bank.

Know the definition of mechanic’s lien.

A common lien for work performed on Real Property. A claim under state law to secure priority of payments for the value of work performed and materials supplied in building on or improving land and buildings.

Know what the court in Cit Bank, N.A. v. Heirs said about priority of liens based on perfection.

HOA Lien was old but perfected later so the CIT Lien had priority.

People with higher than average income have to file Chapter 13 instead of Chapter 7 bankruptcies

This is based upon the Means Test.

Know what the In the Matter of Kmart Corp. court held regarding paying some critical-vendor creditors in full while not paying other creditors.

Bankruptcy judge decision that "critical vendors" were to be paid first so the store might stay in business was improper because it violated the payment schedule required in the Bankruptcy Code.

Know the definition of an Agent’s authority.

An agent's authority is the power to change the principal's legal obligations.

Know the factors used to determine a principal’s ratification of an agent’s activities.

Express or Implied Ratification:

1) A principal can ratify agreements only when aware of the key facts.

2) An agreement can be ratified only if the agent purported to act for the principal.

3) The principal must ratify the agreement before the third party involved withdraws.

4) If the agreement between the agent and the third party was required by the law to be in writing, such as a sale of real estate, the ratification must be in writing.

Know what apparent authority is

When a principle creates an impression of authority in an agent that leads a third party to conclude that the agent has authority to act for the principal.

Know what the court in Cove Management v. AFLAC said about an agent’s conduct creating apparent authority

Aflac was not obligated to the lease, because Galgano didn't have Apparent Authority to sign a lease that would bind Aflac.

Know what the Lang v. Lions Club of Cudahy Wisconsin, Inc. held regarding a subagent enjoying the same immunity the Principal enjoys.

Fried was an agent of Lion's Club so he could not be sued.

In Beef Belt, LLC v. Campbell Burgess, what did the court decide regarding an agent who did not negotiate the contract for the principal.

Burgess was not the agent who negotiated the contract. So, he could not be sued personally.

Know what the France v. Southern Equipment Co. Court said regarding a Principal’s liability for actions of an independent contractor when the Principal has no control over the independent contractor.

Southern Equipment was not liable because they did not engage Royalty Builders to the work and they had no control over Royalty Builders.

Know the determinative factor in deciding whether a master-servant relationship exists.

The determinative factor in a Master-Servant relationship is CONTROL.

Know the least determinative factor in deciding if an employer has hired an employee or an independent contractor.

The least determinative factor would be pay or Compensation.

Are employers liable for torts committed by employees in the scope of their employment?

Yes, they are liable for torts committed by any employee while they are at work.

Know that at-will employment means employees can be fired for any reason or no reason. Even if the reason they are fired is a morally wrong one.

this is the answer.

Know what happens when employment at will is limited by an express contract

The employer and employee are agreeing upon employment for a guaranteed amount of time with a signed document. The employer can't fire someone without just cause due to the contract. Doing so would be a breach of contract.

Know what happens when employment at will is limited by an implied contract.

Based on written or oral statement, may restrict grounds for termination or require specific procedures to be followed in a dismissal. This removes the option of "At-will Employment" because of the agreement being made.

Know what Guz v. Bechtel National held regarding firing an employee in violation of an implied covenant of good faith and fair dealing.

Guz had no suit against his employer.

What can employee handbooks do to at will employment?

They can change them with an Express or Implied Contract.

Will signed disclaimers regarding employee handbooks stop employers from making implied contracts that limit at will employment?

Yes, signed disclaimers regarding employee handbooks stop employers from making implied contracts that limit at will employment.

Know the common problems with employee handbooks

Making promises about discipline procedures that are not followed consistently.

Do torts committed by agents outside the scope of their employment create liability for the Principal/Employer?

No, the employer is not liable for an employee committing torts outside their scope of employment.

If a potential employee has a history of problems related to a potential job, does an employer have a duty to not hire them? What is this called?

Yes, the employer has a duty to not hire them. They employer is liable for anyting the employee does because of this. If they do, this is called Negligent Hiring.

Know the name(s) of the tort for which an employer may be sued after firing an employee in violation of a public policy exception to at-will employment

Wrongful Discharge or Wrongful Termination

The court in Marshall v. Montaplast of North America, Inc. held that there is no public policy protection from being fired for disclosing your supervisor is a registered sex-offender.

Marshall's act did not violate public policy exceptions to employment-at-will.

Know what the Zambelli Fireworks Mfg. v. Wood court said regarding an employee’s specialized knowledge gained from working for the employer.

Wood's specialized knowledge from working at Zambelli in addition to customer goodwill constituted legitimate business interests that Zambelli had a right to protect through a reasonable restrictive covenant.

Know when workplace drug testing is allowed.

1. Pre-employment screening of job applicants for substance abuse

2. Random drug tests, when announced as a condition of employment

3. Drug tests given because of "reasonable suspicion" of improper usage

4. Workplace Accident

5. Drugs found on the job site.

OSHA health and safety standards have three purposes: 1) Address problems of significant health risk in the workplace. 2) Address problems of safety at the worksite. 3) Eliminate recognized hazards.

This is the answer.

Know what the Manua’s Inc. v. Scalia court held regarding an employer being liable for actions of a contractor when the employer assigned its employees to be involved with the contractor’s workLinks to an external site.

The court upheld the fine against Manua's because its employees were involved.

Know the objectives of workers’ compensation laws.

1) Provide sure, prompt, and reasonable income and medical benefits to work-accident victims or income benefits to their dependents, regardless of fault.

2) Provide a certain remedy and reduce court costs and time delays associated with tort litigation.

3) Prevent public and private charities from incurring the financial strains that would accompany uncompensated accidents.

4) Reduce payment of fees to the lawyers and expert witnesses.

5) Encourage employer interest in safety and rehabilitation of workers through an insurance scheme that bases rates on the accident rating of the employer.

6) Promote open discussion of the causes of accidents rather than encourage concealment of fault, thus helping reduce accidents and health hazards.

Know the exceptions for who is covered by FMLA

To be covered by FMLA, the employee must be employed for one year or 1,250 hours in the last year.

Coverage may be denied for those who are "Key Employees" or those who are among the top 10% paid in the company.

Know what the court in O’Rourke v. Tiffany & Co. said about the requirement for retaliation in a FMLA caseLinks to an external site.

She had no claim for FMLA violation as the change in company structure was not shown to be related to her taking leave.

Know what federal immigration law requires employers to do.

They are required to verify a person's right to work in the US with an I-9.

Know what happens if an employer covered by the WARN act lays off more than 50% of employees without the required notice.

They must give notice of layoff for at least 60 days, or they must pay 60 days worth of pay/benefits.

Know the description and objective of ERISA.

The key legislation regulating private employee retirement plans

Its objective is to guarantee the expectations of retirement plan participants that benefits will be there when they retire.

Know which board was created to monitor labor practices and oversee union elections.

NLRB- National Labor Relations Board created by the National Labor Relations Act.

Know which categories of workers are not covered by the National Labor Relations Act.

Federal, State, and Municipal Employee (the public sector), supervisors, managers, independent contractors, domestic servants, and some agricultural laborers.

Know the examples of employer conduct that violates the NLRA.

-Threatening employees with loss of jobs or benefits if they join or support a union.

-Threatening to close a plant if employees vote for unionization.

-Questioning employees about union activities.

-Promising benefits to employees if they do not support a union.

-Giving employees worse assignments for participating in protected activities.

Know what union organizers may not do

-Threatening employees with a loss of a job if they do not support the union.

-Refusing to help employees with grievances who have criticized union leaders.

-Engaging in picket line misconduct, such as threatening non-strikers.

-Striking over issues unrelated to employment terms and conditions.

THEY CAN'T GO ON COMPANY PROPERTY TO SOLICIT MEMBERS TO JOIN OR VOTE FOR A UNION.

Know what Dolgencorp, LLC v. NLRB case held about a union election after evidence of a union organizer making threats and bribes to employees surfaced.

The NLRB and appeals court held that the vote stands and there would not be another election.

Know what good faith means in union negotiations

An obligation to meet and be willing to present proposals, to listen to and consider the proposals of the other party, and to find common ground.

Know what a lockout is

refusal by an employer to allow employees to work.