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  1. What are the three kinds of checks?
    Personal check: draws on your account

    Cashiers check, drawn on bank by customer, certified funds avaliable

    Tellers check, one bank draws on another, or payable to bank.
  2. What are the requirements for negotiability?
    Writing, Signature, Unconditional promise or order, Fixed amount of money, Courier without luggage, payable on demand or at a definite time, payable to bearer or order.
  3. What are the three stages of transfer and negotiation?
    • Issuing stage: when it's first issued by the maker or drawer
    • Transfer stage: every legally signigicant movement between issuance and presentment.  (must make transferee a holder)
    • Presentment stage: instrument is presented for payment.
  4. How do you become a holder?
    • If order paper, must be endorsed by the person identified and instrument must be in possession of the individual named. 
    • If bearer paper, must simply be in possession.
  5. What are the two kinds of endorsements?
    Blank endorsements: just signs name, converts instrument to bearer paper

    Special endorsement: payee puts new pay to order of specifice new payee.  Preserves the order character of the paper.
  6. What is the rule for allonges in endorsements
    must be physically attached for valid endorsement to occur, normally stapled in modern times.
  7. What happens when the payee's name is forged?
    Proper negotiation hasn't taken place, therefore, nobody qualifies as a holder.  Only applies to order paper.
  8. How can you become a holder in due course?
    Must be in possession, named invidiual for order paper, must have given value for the instrument, must have taken in good faith without notice of any faults(no duty to investigate)
  9. What is the shelter rule in negotiable instruments?
    Transferee gets rights transferor had, including HIDC rights, unless transferee engaged in fraud or illegality.
  10. What are real defenses?  Personal defenses?
    Real defenses are infancy, duress, lack of legal capacity, illegality, fraoud in the fact, insolvency.  If merely voidable and not illegal, just a personal defense.  Only defenses that work against a HIDC.

    Personal defenses: all other contract defenses, do not work against HIDC, including failure of consideration, negligence, fraud in the inducement, etc.
  11. What is the rule for forgery and HIDCs?
    Since you need a valid signature to be a party to the negotiation, no one can qualify as a holder in due course to a forged instrument or signature.  Forgery of order paper is therefore a real defense.
  12. What is the underlying obligation rule?
    If a note or check is taken for an obligation, the obligation will be suspended until the note or check has been dishonored or paid. May not use on the underlying obligation until then.
  13. What sort of liablity to co-makers have of a note?
    Joint and several liablity with rights of contribution
  14. What is the drawer's liablity with a note or check?
    Obligated to pay the draft according to it's terms to a person entitled to enforce the check.  Only occurs after presentment, and only has secondary liability.
  15. What does it mean to dishonor a check?
    when drawee bank fails or refuses to pay for any reason.  Drawee bank has right to require reasonable identification.  Notice must be given to maker or drawer in timely manner.
  16. how can agents avoid liablity by signing on a check
    by indicating unambiguiously on the instrument that they are signing in a representative capacity.
  17. What is the endorser's obligation?
    anyone who signs the instrument incurs the obligations of an endorser.  Obligation to pay instrument according to it's terms if dishonored to person entitled to enforce it.  Can disclaim by writing "without recourse"
  18. What are the remedies a surety has when forced to pay?
    • Exonaration: compels principal to pay at maturity
    • Subrogation: once creditor is paid off, steps into shoes of creditor, takes on any leins or collateral, any rights. 
    • contirbution:  partial reimbursement from co-sureties. 
    • Right of reimbursement: obvious.
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    Love you dear
  20. What is Strictisimi juris?
    when a creditor releases a debtor from liabilty of gives principal extention, surety is discharged unless surety consents or creditor informes principal that preservation of surety rights occur.
  21. What is the properly payable rule?
    A bank may only tap a customers account when an item is property payable (been autorized in accord with an agreement between the customer and the bank)  Forgery will keep a check from beingn property payable, so will staleness.
  22. What is wrongful dishonor?
    When a bank makes an improper payment from a customer's account that causes other checks to be dishonored, customer may recover all actual and consequential damages from that incident.
  23. What are presentment warranties?
    A person who receives payment from a previous transfer warrants to drawee bank that they were entitled to enforce the draft, that the draft has not been altered, warrantor has no knowledge that signautre of drawer is unauthorized.
  24. What are transfer warranties?
    When a transfer is made, warrants 4 things, entitle to enforce check, signature are authentic, item has not been altered, notsubject to claim or defense in recoupment.
  25. What is the scope of article 2? what do you do in hybrid situations?
    • Scope of article 2 is all transactions dealing with goods, things movable at the time of identification to the contract, including unborn young and growing crops.  In hybrid situations, you can use two different tests.
    • Predominant purpose: look for what predominate in the transaction, the goods or the services
    • Gravamen:  What went wrong in the transaction, the good or the service?
  26. What is the scope of article 2a?
    Deals with transactions involving leases.  Must distinguish betewwn disgused sales and true leases.  (if contract contains walk away clause, if economic life left, true lease)
  27. Explain firm offer rule
    Offer by merchant to buy or sell goods in signed writing is not revocable for lack of consideration for the time stated, or a reasonable time (not exceeding 3 months) if none stated.
  28. What should an order to buy or sell goods be construed as?
    inviting acceptance by either a prompt promise to ship the goods or by prompt shipment of conforming or non-conforming goods.  However, a shipment of nonconforming goods does not constitue acceptance where seller seasonably notifies buyer that shipment is only being offered as an accomidation.
  29. What constitutes a material alteration?
    • Surprise (subjective and objective element)
    • undue Hardship (creates open ended or prolonged liablity)
    • Majority view is that arbitration clause is material alteration.
  30. Explain express warranties
    Express warrantis happen when the seller does something affirmative, such as making an affirmation statement, that creates a representation that goes to the basis of the bargain.  Does not require formal langauge, but mere puffery is not enough.
  31. What are the two implied warranties
    Merchantibilty:  all goods shall be merchantible (fit for ordinary prupose for which goods of that kind are used) if sold by a merchant of goods of that particular kind

    Fitness for particular purpose:  wehre the seller at the time of contract has reason to kow of any particular purpose for which the goods are required, and the buyeris relying on the seller's skill or expertise in selecting the goods, the goods must be fit for that purpose.
  32. What are the two warranty tests for food?
    natural substances test:  if it's a natural obje3ct, no liablity, foreign object, liablity

    Reasonable expectations: if there is a reasonable expectation it's removed, then liablity.
  33. How do you disclaim the implied warranties?
    Merchantabilty: must use the word merchantabiltiy in your disclaimer.  Does not have to be in writing , must be conspicious. 

    • Fitness for purpose:  Same as merchantibilty, except no merchantabitly requirement. 
    • All implied warranties excluded by "as is" or "with all faults"
  34. What's the warranty rule about goods with respect to inspection?
    when the seller has demanded the buyer inspect, and the buyer either has or has refused, then there's no warranty to anything that a reasonable examination would have shown.
  35. What limits can be placed on warranties?
    Under certain circumstances, can limit warranties to only repair or replacement, only return purchase price, etc. Must not fail essential purpose. Neither party may be deprived of adequate minimum remedy.  Cannot be unconcscionable.

    Can't limit physical injury consequential damages.
  36. What are the two major defenses in warranty actions?
    Notice:  Buyer must within a reasonalbe time after disvoering notify seller of the breach, need tell them that it's troublesome.

    Lack of privity:  focus only on horizontal privity for this class. 3 types.  A. warranty extends to self, natural presons in family or household of the buyer and buyers guests in home, who suffer personal injuries only when reasonalbe to expect person may use, consume or be effected by product.  B. no member of family/household/guest requirement, C.  no natural person requirement, no family/guest requirement, no personal injury requirement.
  37. What is teh warranty rule for finance leases?
    Generally, lessor makes no warranties to the lessee, must look to suplier for relief.  Lessor must not be in the business of selling those kinds of goods, Lesse must have knowledge of what the warranties are, Lessee must pay for goods regardless fo whether goods work (hell or high water)
  38. What is the perfect tender rule?
    Unless otherwise agreed, if goods fail to conform in every respect, buyer may accept the whole, reject the whole, or accept any commericla unit and reject the rest.  3 exceptions: parties agree goods need not be perfect, seller has aboluste right to cure if time for delivfery has not passed, if seller had reasoanble grounds for belieiving buyer would accept nonconfomring goods, thye get more time.
  39. Explain installment contracts and perfect tender connection
    In an isntallment contract, buyer can reject any particular shipment or installment, where the nonconformity substantially impairs teh value of the shipment or installment, and it either cannot be cured of the seller refuses to cure.  Buyer may terminate whole contract only where nonconformity substantially ijmpairs the whole value of the contract
  40. Explain shaken faith doctrine:
    where a reasonable person in teh buyers position would not accept sellers remedy to cure because buyers faith has been so shaken in teh product seller may be denied right ot cure.
  41. How do you reject goods?
    Can reject for any nonconfomrity, jmust occur within a reasonable time of receipt, must timely notify of objection, can't take action inconsistent with ownership of goods, must take reasonable care of goods while in his custody.  Always state objections in writing.
  42. When does acceptance occur?
    after a reasonable opportunity to inspect, teh buyer indicates to the seller the goods or conforming or fails to reject or takes action inconsistent with sellers ownership of goods
  43. When can a buyer revoke acceptance?
    when value to him is substnatial impaired, must show that acceptance was based on reasaonble assumption that defect would be cured or that there was difficuity in discovering the defect.  have to occur within a reasonable time after discovery or should have discovered,  cannot revoke of goods have materially deteriorated.  2 tests, subjective only, or two prong of subjective and objective.
  44. When can performance be excused as impossible?
    contingency has occured, performance is made impracticable, nonoccurrence of contneingey was basic assumption on which the contract is made.  Courts are reluctant to include rising prices as impossible.
  45. What are the sellers remedies?
    buyer has accepted goods? sue for contract price w/incidental damages (specific performance), appropraite under 3 circumstances (goods destroyed while risk of loss was on buyer, buyer refuses to accept and they are unreselable, buyer has made technical acceptance.)

    Buyer has not accepted goods?  Can resell goods, recover difference between contract pricne and resale price, must be sold in good faith, either private or public private requires notice to buyer, public has other requirements.  If no resale, can sue for difference between contract price and market price.  IF lost volume seller, can sue for lost profits.
  46. What happens with goods not yet identified at the time of breech?
    upon learning of breech, seller has option of identifying goods within his possession or control and using those as the contract goods. When unfinished, must exercise good commericla judgemnt in deiciding whehter to finish or scrap.
  47. What is the buyer's remedy?
    Accepted: damages, difference in value between what he was promised and what he received.  also incidental and consequential damages

    Not accepted:  specific performance where goods are unique, cover and get difference between cover price and contract price, or can sue for damages and get difference between market price and contract price.
  48. What is anticipatory repudiation?
    A positive expression by words or deeds of one parties intent to not perform when due.  Damages are difference between contract price at the end of reasonable time for cover.
  49. What is the staute of limitaiotns on breach of contract?
    ordinarily four years, may reduce to 1 year, cannot extend.  Accrues when the breach occurs, upon tender of delivery except where explicit extended to future performance. In that case, accrues when breach discovered or should have been.
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2013-04-20 10:10:06
Sales Taylor

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