Please enable JavaScript.
Coggle requires JavaScript to display documents.
contracts / debtor and creditor relationships (chapter 20 (suretyship…
contracts / debtor and creditor relationships
chapter 16
firm offer
arises when a merchant-offeror gives assurance in a signed writing that the offer will remain open
to qualify: written and signed by the offeror
mirror image rule
requires that the terms of the acceptance exactly match those of the offer
formation of sales and lease contracts
offer: met by an unqualified acceptance, binding contract is formed
acceptance: prompt promise to ship or by the prompt or current shipment of conforming or nonconforming goods
consideration: only required under common law not UCC; to modify without consideration must be writing
statute of frauds: must be in writing
parol evidence: evidence outside the contract- parties' prior negotiations, prior agreements, or contemporaneous oral agreements
unconscionable contract: one that is so unfair and one sided that it would be unreasonable to enforce
chapter 17
risk of goods will pass to buyer when
shipment contract: when goods are deliver to the carrier
destination contract: when goods are tendered to the buyer at the specified destination
shipment contracts
seller is required to authorized to ship goods by carrier
titles passes to buyer at the time and place of shipment
destination contracts
seller required to deliver goods to a particular destination
title passes to buyer when the goods are tendered at the destination
seller breaches: risk of loss does not pass to the buyer until defects are cured or buyer accepts the goods as is
if defect is found later acceptance can be revoked and risk of loss back the the seller
when buyer breaches
risk of loss immediately shifts to the buyer
chapter 18
perfect tender rule
common law rule under which a seller was required to deliver to the buyer goods that conformed perfectly to the requirements stipulated in the sales contract
buyer breaches
before delivery the seller can cancel, resell, and sue to recover damages
sue to recover purchase price or lease payments due
sue to recover damages for the buyer's nonacceptance of goods
seller can stop delivery in transit if the seller learns the buyer is insolvent
up until the goods are delivered to the buyer
if buyer is insolvent the seller can demand the return of goods within 10 days
seller breaches
refuses to deliver buyer can
cancel
obtain goods that have been paid for is seller is insolvent
sue to obtain specific performance if goods are unique or dames are inadequate
buy other goods and recover damages from the seller
sue to obtain identified goods held by a third party
sue to obtain damages
seller deliver nonconforming goods buyer can
reject the goods: timeliness and reason for rejection are required
buyers when goods are rejected have the right to recover damages for accepted goods
chapter 19
title warranties arise in sale transactions
good title, no liens, no infringements
express warranties
making representation covering the quality, condition, description, or performance potential of the goods
arise when seller indicates
goods conform to any affirmation of fact or promise that the seller makes to the buyer about the goods
goods conform to any description of them
goods conform to any simply or model of the goods shown to the buyer
seller is an expert and giver opinion as an expert
statements of fact
disclaimers
seller can disclaim oral by including the contract a written disclaimer
disclaimer must be in clean and conspicuous language
seller must notify and get buyers content before modifying
implied warranties
law derives by implication or inference from the nature of the transaction or the relative situation or circumstance of the parties
warranty of fitness
arises in the sale or lease of goods when a seller knows both the following: particular purpose for which a buyer will use the goods and that the buyer or lessee is relying on the skill and judgment of the seller to select suitable goods
must be in writing to disclaim and conspicuous and doesn't have to mention the word fitness
merchantability
goods being sold or leased are reasonably fit for the ordinary purpose for which they are sold or leased, are properly package and labeled, and are of fair quality
seller must mention the word merchantability in disclaimer and doesn't have to be written
statute of limitations for breach of warranty
action accrues when seller tenders delivery, even if buyer is unaware
non-breaching party must be notify in reasonable time
prior dealings or trade custom
without evidence to the contrary, when both parties to a sale or lease contract have knowledge of a well-recognized trade custom, the courts will infer that both parties intended for that custom to apply to their contract
lemon law
customer who buy automobiles that repeatedly fail to meed standards of quality and performance because they are lemons
do not cover used-cars or leased cars
if seller fails to cure the problem the customer is entitled to a new car, replacement of defective parts, or return of all consideration paid
sales and leases
negotiable instruments
chapter 13
order instrument negotiating
by delivery with any necessary indorsement
requires delivery and indorsement
fails to meet one or both it is treated as an assignment
bearer instruments negotiating
by delivery- transfer into another person's possession
greater risk of loss or theft
holder obtains only those rights that the transferor had in the instrument
holder in due course
takes an instrument free of most of the defenses and claims that could be asserted against the transferor
HDC must first be a hold of a negotiable instrument and must taken the instrument for value, in good faith, and without notice that it is defective
person who does not qualify as an HDC but who derives his or her title through an HDC can acquire the rights and privileges
shelter principle
chapter 12
orders to pay
drafts
checks
promises to pay
certificates of deposit
promissory notes
requirements for negotiability
written
signatures
unconditional promise or order to pay
fixed amount of money
payable on demand or at a definite time
payable to order or to bearer
don't affect negotiability
unless date is necessary to determine a definite time for payments, it is not needed
antedating or postdating
handwritten terms outweigh typewritten and printed terms and typewritten outweigh printed
words outweigh figures
instrument simply states with interest and doesn't specify a particular interest rate, the interest rate is judgment rate of interest
is negotiable even if there is a notation stating it is non-negotiable
chapter 14
warranty liability
arises when transferor does not indorse the instrument
transfer warranties
implied warranty, made by any person who transfers an instrument for consideration to subsequent transferees and holders who take the instrument in good faith
transferor is entitled to enforce the instrument
all signatures are authentic and authorized
the instrument has not been altered
instrument is no subject to a defense or claim of any party that can be asserted against the transferor
transferor has no knowledge of any bankruptcy proceedings against the maker, the acceptor, or the drawer of the instrument
transferee or holder who takes instrument in good faith can sue on the basis of breach of warranty as soon as he or she has reason to know of breach
can recover damages for the breach in an amount equal to the loss suffered
presentment warranties
person who presents an instrument for payment or acceptance that he or she is entitled to enforce the instrument or authorized on behalf of a person who is entitle, the instrument has not been altered, and he or she has no knowledge that the signature of the drawer is unauthorized
protect the person to whom the instrument is presented
defenses
universal / real all holders including holds in due course
fraud in the execution
material alteration
forgery
discharge in bankruptcy
minority, if the contract is voidable
illegality, mental incapacity, or duress, if the contract is void under state law
personal / limited ordinary holders but no against holder in due course
fraud in the inducement- ordinary
illegality, mental incapacity, or duress, if the contract is voidable
lack or failure of consideration
previous payment or cancellation of the instrument
breach of contract
unauthorized completion of an incomplete instrument and nondelivery of the instrument
chapter 15
bank's duty to honor checks
postdated checks
stale checks
overdrafts
stop-payment orders
incompetence or death of a customer
forged drawers' signatures
checks bearing forged indorsements
altered checks
EFT
types
point-of-sale systems
direct deposits and withdrawals
ATMs
internet payment systems
financial institutions to inform consumers of rights and responsibilities under the EFTA
bank must provide mostly statement for every month
if debt card is lost or stolen and used without her or his permission, customer shall be required to pay no more than $50
customer must discover any error on monthly statement within 60 days and notify the bank
bank must furnish receipts for transactions made through computer terminals
debtors and creditors
Chapter 21
secured transaction
transaction in which the payment of debt is guaranteed, or secured, by personal property owned by the debtor or in which the debtor has legal interest
rules of priority
perfected security interest versus unsecured creditor and unperfected security interest: two or more have claims on same collateral, perfected secured party's interest has priorty
conflicting perfected security interest: first to perfect has priority
conflicting unperfected security interest: first to attach has priority- "first-in-time" rule
termination statement
debtor fully paid the debt, if the secured party perfected the security interest by filing, the debtor is entitled to have a termination statement filed
demonstrates to the public that the filed perfected security interest has been terminated
security interest
interest in the collateral that secures payment or performance of an obligation
creditor to have enforceable security interest; security interest created
creditor have possession of the collateral or have written or authenticated security agreement that clearly describes the collateral subject to the security interest and is signed or authenticated by the debtor
secured party must give the debtor something of value
debtor must have rights in the collateral
perfection
by filing a financing statement with the office of the appropriate government official
gives public notices to third parties the secured party's security interest
without filing; collateral is transferred into the passion of the secured party
without filing; security interest is one of a limited number under the UCC that can be perfected on attachment
these security intents are automatically perfected at the time of cf their creation
chapter 20
liens
encumbrance
claim against property to satisfy a debt or protect a claim for the payment of a debt
mechanic's
statutory lien on the real property of another, ensure payment for work performed and materials furnished in the repair or improvement of real property
artisan's
possessory lien given to a person who has made improvements and added value to another person's personal property as security for payment for services performed
judicial
when debt is past due, creditor can bring a legal action against the debtor to collect the debt
garnishment
permits a creditor to collect a debt by seizing property of the debtor that is being held by a third party
mortgages
fixed-rate
unchanging rate of interest
adjustable-rate
low fixed rate for a specified period, after a time the interest rate adjusts annually or by some other period
foreclosure avoidance
short sale: sale of property for less than the balance due on the mortgage loan
forbearance: postponement of part or all of the payments on a loan for limited time
workout agreement: contract that describes their respective rights and responsibilities as they try to resolve the default without proceeding to foreclosure
guaranty
guarantor (third person making the guaranty) is secondarily liable
satisfy the debt of another after the principal debtor defaults
guaranty contract terms determine the extent and time of the guarantor's liability and must be in writing
right of reimbursement
suretyship
express contract between the surety (third party) and the creditor
promise made by a third person to be responsible for the debtor's obligations
surety is primarily liable for the debt of the principal
release and defenses
material modification, surrender of property, payment or tender of payment
defenses: incapacity and bankruptcy, statute of limitations, and fraud
right of subrogation: person to stand in the place of another
right of contribution : co-surety who pays more than his or her proportionate share on a debtor's default to recover the excess paid from other co-sureties
right of reimbursement
property
real
homestead exemption: debtor to retain the family home, entirety or up to specified dollar amount; only if debtor has a family
personal
household furniture, clothing and certain personal possessions, vehicle, certain classified animals, equipment used for business or trade
bankruptcy
chapter 22
chapter 7 bankruptcy
provides for liquidation proceedings (the selling of all nonexempt assets and the distribution of the proceeds to the debtor's creditors
debtor in liquidation bankruptcy turns all assets over to a bankruptcy trustee
trustee sells the nonexempt assets and distributes the proceeds to the creditors
any person may be a debtor in liquidation proceedings
straight bankruptcy can be commenced by filing of either voluntary or involuntary petition in bankruptcy
voluntary: debtor files petition
involuntary: creditors file a petition to force the debtor into bankruptcy
reaffirmation agreement: between debtor and a creditor in which the debtor reaffirms, or promises to pay, a debt dischargeable in bankruptcy
chapter 11 bankruptcy
reorganization: creditors and the debtor formulate a plan under which the debtor pays a portion of the debts and is discharged of the remainder
debtor allowed to continue business as a debtor in possession (DIP)
court can appoint a trustee
generally corporate reorganization but any one under chapter 7 bankruptcy is eligible
reorganization plan must be fair and equitable and must do the following:
designate classes of claims and interest, specify the treatment to be afforded to the classes of creditor
provide an adequate means for the plan's execution, and provide for payment of tax claims over a five year period
chapter 13 bankruptcy
individuals with regular income who owe fixed unsecured debts of less than $383,175 or fixed secured debts of less than $1,149,525 may take advantage of bankruptcy repayment plans
eligible are salaried employees and sole proprietors
For individuals provide for the adjustment of debts by persons with regular incomes
chapter 12 bankruptcy
For family farmers and family fishermen provide for the adjustment of debts by persons with regular incomes
Farmer is one whose gross income is at least 50% farm dependent and whose debts are at least 50% farm related
Fisher 50% income dependent on commercial fishing operations and 80% debts related to commercial fishing