BLAW 4203 Final

What makes UCC laws different from Traditional Law

1. Abandons “Mirror Image Rule”
2. Only Quantity required
3. Modification require only consent
4. Merchant Firm Offer Rule
5. Less than or equal to $500 SOF applies

Abandons “Mirror Image Rule” meaning?

The immaterial terms stick in the contract while material terms drop off. Counter offers can only be made if specifically stated by party. (The Offer + Acceptance do not have to match)

Only Quantity requires meaning?

Only thing required in UCC-2 to make a contract is the quantity term which can be outputs or requirements like “your whole stock of oranges” (code will fill in the rest of thed etails like the price and standard)

Modifications require only consent meaning?

Modifications to something in a contract require only a consent from the seller and it will become binding even without extra money

Merchant Firm Offer meaning?

If a merchant states they will sell something to someone and will give them a certain amount of days to think of the offer, then they must give that buyer that amount of time to think about the deal. Also in that time they cannot sell to another company. This must be a merchant and not same random guy (Must be written and signed)

Less than or equal $500 SOF

Goods priced at $500 or more must be in writing to be enforceable. Writing include both emails or electronic record. (Will hold if after verbal agreement one merchant send to another merchant a signed memorandum containing all details within a reasonable time and there are no objections. Verbal contracts for specifically manufactured goods will be enforced.)

If a contract involves labor is it UCC-2?

* If the job is majority labor, it will be traditional law
* If it is the majority product, it will be all UCC-2
* (meaning if a case is 70% food and 30% labor, then it will follow UCC-2 because it is majority food, IT WILL ALWAYS BE UCC-2 IF IT MAJORITY TANIGBLE)

Two defaults in UCC-2?

1. Reasonable Price
2. FOB Shipping Point

Parole Evidence Rule

Judge will always default to using writing if its in the contract

Order of Interpretation of Ambiguous Terms (UCC)

Express Written, Express Verbal, Course of Performance, Course of Dealing (past dealing), and Custom/Industry

Are crops and timber UCC-2?

Yes

Are Minerals, Gas, or Oil UCC-2?

* If seller extracts the material then it is UCC-2
* If the buyer has to extract the material then it is traditional law

What is insurable insurance?

Can be used by both the seller and the buy on product that insured it in case of damages to product

FOB Destination vs. FOB shipping point

* FOB destination means seller has title and risk of loss until product is delivers to the buyer
* FOB shipping point means that buyer has risk of loss and title as soon as product is being shipped and there after

Who has ownership during transit if product is defective?

Title switches back to the seller during the transit. Buyer must follow seller’s reasonable instructions

Sale of Return?

Buyer has title of product that they are purchasing, but buyer has options to return for their money back. (Buyer should insure product)

Sale of Approval

Seller retained title and all risk on product while buyer may have trial period in which they have to approve the product within a time frame before having to pay for it.

Who can insure product when its in Work in Progress

Only the seller

Identification

takes place when specific good are separated out for the buyer. Fungible goods that are alike by physical nature, by agreement, or by trade usage (grains or wheat) can pass title to buyer without separating the goods

Can title ever pass to a stolen good?

NO

Can title pass in an entrustment and what is it?

* Yes, it can pass in entrustment
* Entrustment is when someone entrust an item to a merchant and the merchant sells this item to a good faith buyer to trans title. This good faith buy must also give value (pay for it)

What are the warranties under UCC-2?

1. Express Warranties (may be written or verbal)
2. Implied Warranties (Merchantable and Fit for particular purpose)
3. Good Title
4. No encumbrance
5. No Infringement

Express Warranties meaning

sellers verbal or written promise, relating to an underlying sales agreement, regarding the quality, description, or performance of goods

Merchantable Warranty (Implied Warranty)

Good is “reasonably fit” for the ordinary purposes for which such goods are used (average, fair, medium grade, adequately packaged and labeled, and conforms to promises on label. Like buying helmet expecting it to protect your head if you fall off the bike.)

Fit for Particular Purpose Warranty (Implied Warranty)

Sale of goods when a seller knowns the following:


1. particular purpose for which a buy will use the goods
2. Buyer relied on merchant skill to buy the good

Good Title

Product is legally owned by seller

No Infringement

No patents, copyrights, etx on the product that cause issues

No encumbrance

No liens or security issues with product that could cause issues

UCC-2 Perfect Tender Rule

You must deliver exactly what the buyer purchased

If seller does not follow perfect tender rule what can seller do?

1. Keep it all anyways
2. Return all of it
3. Keep some and return some

Duties of the seller

1. Deliver “Perfect Tender”
2. Arrange for shipping (if shipped)
3. Give Notice
4. Deliver Key Documents (Receipts, Registration Papers)

Duties of Buyer

1. Take Delivery
2. Make Payment (reasonable method and upon delivery of goods)
3. Inspect Goods
4. Accept Goods

What is curing a contract?

If the contract is breached there is some time after for the breaching party to cure the contract and deliver on it

Anticipatory Repudiation

An assertion or action by a party indicating that he or she will not perform an obligation that he or she is contractually obligated to perform at a future time. Buyer saying that they wont deliver or seller saying that they wont pay for it (telegraphing breach). Party being effected has the right to immediately move on.

Monetary/Damage Remedies

1. Compensatory
2. Consequential
3. Liquidated
4. Punitive
5. Nominal

Compensatory Remedy meaning

Money awarded to compensate party effected by covering the money lost from having to get a new contract compared to old contract. If new contract ends up being chapter than this, it will be null and void. (If old cost is $600, new cost is $1000, so they must give up $400 dollar to cover)

Consequential Remedy meaning

Giving damages for lost profit and cost, very high threshold. Contract has to originally state the ramification. Lost time is easier to get.

Liquidated Remedy?

States in contract exactly what and how much will be given in the case of a breached contract

Punitive Remedy meaning

to punish and make an example but very hard to get

Nominal Remedy meaning

Dumb for filing a frivolous lawsuit as breach benefited you. $1 dollar award.

Equity Remedies

6. Injunction
7. Specific Performance
8. Rescind/Void
9. Reformation
10. Combo

Injunction Remedy meaning

stop, cease, and desist from any info or material in the contract

Specific Performance Remedy meaning

unique items that cant be found in the everyday world that you want

Rescind.Void Remedy meaning

court can either rescind the entire contract, or can strike out specific items in the contract.

Reformation Remedy meaning

Reform the contract or to remake it.

Combo Remedy?

Combination of equity and monetary remedies

Exceptions to UCC-2

1. Custom made goods


1. don’t have to have good in writing even if it over the $5,000 statute of fraud limit, it does not apply (verbal or written)
2. damages are full price
2. Merchant= a written confirmation of a verbal contract is sufficient, to equal SOF

UCC-3 Negotiable Instruments

Designed to evidence a form of payment to whoever is holding that instrument

5 attributes negotiable instruments must have?

1. Unconditional Promise to Pay to “order” or “bearer”
2. on demand or specific time
3. sum certain (interest rate, attorney fees, penalties are all okay)
4. writing
5. singed

Best ways to be paid in negotiable instruments

* Cash
* Negotiable Instrument + Holder in due course
* Negotiable Instrument - Holder in due course
* Written
* Verbal

Two forms of negotiable instruments?

1. Drafts


1. draw is the person signing the check and their money will be paid to the payee who is receiving the money from the Drawee who is usually the bank of the check that will draw the money out of the Drawers account and give it to the Payee (3 party instrument)
2. Notes


1. Markers are 100% liable for the debt and can be more than one party; owe money to the payee who is the person receiving money from the markers. Common notes are house notes, student loans, and car notes

What makes someone an Holder in due course

3rd party that has bought negotiable instrument that the buyer has paid to a company, 3rd party must be in good faith, paid for the NI, and had no knowledge of damage. HIDC are exempt from having to pay for personal defenses

What are real defenses

ones that will never go away and are effective against all holders of Negotiable Instruments (except Cash)

What are 5 real Defenses

1. Bankruptcy
2. Forgery
3. Judicially Insane
4. Material Alterations
5. Fraud in Execution

What are personal defenses

only work for negotiable instruments that are written, verbal, and NI without HIDC

What are the five personal defenses

1. Break of Contract
2. Failed Consideration
3. Wrongful Completion
4. Duplicate Payment
5. Fraud in the Inducement

What happens if Negotiable Instrument is short term?

It will elevate to a cash equivalent status

What are the 5 endorsements?

1. Blank (just signing a check)
2. Restrictive (putting for deposit only and signing it)
3. Special (putting pay to which makes a check on the back of a check)
4. Qualified (“without recourse” “no warranties” cheapens paper saying not sure if its collectable)
5. Combo

Transfer Warranties

when someone endorses instrument they are making these transfer warranties. Endorser is saying that the NI are selling does not have any real or personal defenses on it, and if it does the endorser will be liable

5 transfer warranties

1. No forgeries
2. No Material Alterations
3. No insolvency (at this time)
4. No claims or defenses
5. Party is entitled to get paid

30 Day Rule meaning

You have 30 days to tell your bank that theirs is a forgery in your account until you have assume responsibility for those forgeries

Cashiers check vs. Money Order

A cashier’s check is when the bank draws on itself and you cannot stop payment on cashiers check. A money order is a non bank drawing on itself

Certify Check?

Bank that certifies the check is the only one liable

Stale Check

Old documents pasgt due over 6 months stays negotiable, banks option to cash it, or not, and it destroys HIDC status

Who is liable for the forgery on the front bs forgery on the back?

If the forgery occurs on the front it should be the Drawee bank that catches the forgery (drawers bank), if the forgery is on the back of the depository bank is liable for catching the forgery.

Checks made out to “and” vrs. checks made out to “or”

* Checks made out to "and" need both signatures
* if its "or" you only need one signature.

Debtor/Creditor

laws regarding debtors and creditors

Sue

Go to Court against someone for not paying you

Sue

go to court against someone for not paying you

Writ of Attachment

You can attach any asset that the person who owes you money has. This is formalized by a writ of attachment on the asset.

Garnishment

A form of attachment that goes after wages and revenue of the person that owes you money. There will be limits on this as you cannot take all of their money at once and will instead of given out in percentages

Liens

Two primary liens are the labor liens and material lien. A lien has a super priority as they will rank higher in almost all circumstances. (Lien on test will be the highest rank)

Mortgage

Attaching a debt to real estate like a condo or a house. Mortgager is the person giving the right to a Mortgagee. Typically the Mortgager is the person using the real estate while the mortgagee is usually a bank.

How many Mortgages can you have?

Mortgager can take out multiple mortgages on their property. Whoever files the Mortgage first gets their full amount of the loan. Second, third, etx. gets the rest of it.

UCC-9 Security Agreement

Instead of real estate UCC-9 attaches with a moveable. MOVEABLE CAN BE TANGIBLE OR INTANGIBLE! Practically any asset outside of real estate can be used as UCC-9 (bank accounts, boats, clothing, trade marks). We will mainly focus on inventory and equipment. With UCC-9 you get a security agreement which is the attachment which is the attachment to whatever asset. To show you have filed you get a UCC-1 finance statement

Surety

Simply states that you will just pay something for someone. This surely can be verbal or written and makes you primarily liable.

Guarantor

A person who agrees to pay a debt if the primary debtor does not. This agreement must be in writing and they are secondarily liable

8 different methods of collection

1. Sue
2. Attachment
3. Garnishment
4. Liens (More reactionary in nature)
5. Mortgage
6. UCC-9
7. Surety
8. Guarantor (More of a safeguard and better except lien)

First to file rule

First party to file will move above other in the ranking

Exception to UCC-9 Written Rule

If the creditor will be taking physical possession known as a pledge or a pawn this is sufficient and there has to be no writing agreement. In every other case, UCC-9 agreements must be in writing to be valid.

4 ways to classify and rank UCC-9 creditors

1. Secured + Perfected
2. Secured +Unperfected
3. Unsecured + Unperfected
4. N/A = NO LOAN

Secured + Perfected

You have gotten your Security Agreement and Financing Statement meaning you have filed

Secured + Unperfected

You have gotten a security agreement but have failed to get you a Financing Statement from filing

Unsecured + Unperfected

You have either not gotten a Security Agreement and Financial Statement, or have gotten a Financing Statement but failed to get a Security Agreement. YOU CAN NOT BE PERFECTED WITHOUT BEING SECURED. Mortgages are unsecured and unperfected when talking about non real estate

N/A

No loan anymore

How long do UCC-9 files last?

5 years

How is money given out in UCC-9?

The first place ranking will be given the full money they are owed without sharing it. If there is a tie in secured + perfected look to who files first. If there is a tie in secured + unperfected look to who got security agreement first.

EXCEPTION TO NOTE SHARING MONEY

Share pro ratta in the 3rd strat. If owed equal get the same amount if different use percentages/

Is there ways to move up in UCC-9 Rank?

Yes you can move up in your rankings considering SA nad FS, but dates will always stay the same

Exception to UCC-9

1. Retail
2. Pawn
3. PMSI

Retail

Automatically perfected’ still must have a security agreement in writing and that is used as a date if needed to be ranked

Pawn

Physical possession of an item by the creditor means they are automatically secured + perfected. Still need the SA but do not have to file and it can be verbally stated above

PMSI

* Purchase Money Security

Incentive gives that creditor a super priority over other creditors even if they are after in filing. Just on a certain piece of equipment. You must also file within 20 days and must notify other creditors.

Bankruptcy

Will look at transactions up to two years in the past and all future assets you have and bring them all together with the assets you have right now in one big basket. Trustee will take all of these assets and divvy them out among the creditors

Ranking to get Bankrupt person assets

1. Lien
2. S + P
3. S + UP
4. US +UP (most people)

What happens if there is leftover assets in bankruptcy basket?

The debtor will get any leftover assets in the basket, but this is pretty rare as usually there will be no assets left

Rules for going back in time in bankruptcy

If there bankrupt person gave a gift or donation trustee can back 2 years to claim that for creditors. If this was a normal transaction trustee can go back 90 days to give to creditors

Bankruptcy Chapters

* Chapter 7- Liquidate
* Chapter 9- Governmental Entities
* Chapter 11- Reorganize
* Chapter 12- Farmers
* Chapter 13- Individuals

Exempt Property in Bankruptcy

Separated into two different exemptions partial and total

Partial Exemptions

* Homestead, Cars
* Tools of the Trade
* Jewelry
* Household Goods