Formalities

←
← Gibson County Farm Bureau v. Greer
← Issue:
• Whether a financing statement may also also serve as a security
agreement under Article 9 of the UCC?
← Facts:
• Financing statement was 1) signed by Greer as debtor; 2) identied
Miles as a secured party; 3) identified the collateral as “all corn and
soybeans…”; and 4) identidied land on which the crops were to be
grown in an attached Exhibit A.
• Greer sold dome crop to Dustyidated and received a check, which
was jointly payable to the order of “Norman Greer”
o Greer took the check, endorsed it, and gave it to Miles.
o Miles contacted Princeton Farms Bureau about getting their
share of the endorsements.
o Farm Bureau disputes the priority of Miles’ right to the money
← Discussion:
• Wheter Miles had a security interest in the crops tht Greer sold to
Dusty?
o Depends on whether UCC-1 financing statement that Miles
properly filed also served effectively as a security agreement.
 In other words, can a financing statement serve as a
security agreement?
• Step One:
o Were the requirements for attachment under 9-203(a) met?
 Collateral in possession, or the debtor has a signed
security agreement,
 Which contains a description of the collateral, and
 Where is crop is involved, a description of the land
  ALSO…
 The value must be given, and
 The debtor must have rights in the collateral
• Step Two:
o Was the security interest perfected?
• Step Three:
o Is the financing statement sufficient under 9-310?
←
← In re LYNCH
← Issue:
• Does the bank’s financing statement fail for lack of sufficient
description?
← Discussion:
• A financing statement is sufficient if it puts third parties on notice.
• “A mere inaccuracy in the description of collateral…is not fatal if the
property is so described that it can be readily identified by the
exercise of ordinary care, and by the aid of extrinsic evidence, so
long as there is sufficient description to put third parties on inquiry
notice.
← Held:
• Description insufficient. Financing statement fails.
• “At best, the financing statement identifies that a general business
security agreement exists between the Debtor and the Bank, but
the Bank’s financin statement does not identify the collateral
covered by it.”
←
← Bazak v. Tarrant
← The court considers a motion for summary judgment
← Discussion:
 • Tarrant contends that the alleged K violates the SoF
o It does not violate the SoF
 Falls withint the merchant exception (2-201(2))
 Email was sufficient because…
• Tarrant maintains that the K in unenforceable because it lacks
essential prerequisites of a contract, such as possibility of
performance and mutal assent.
o Signed is meant to include “any authentication which
identifies the party to be charged”
o Receipt: A person “receives” notice when: a) it comes to his
attention; or (b) it is duly delivered at the place of business
through which the contract was made or at any other place
held out by him as the place for receipt of the
communications.
←
Document Transactions
← The Document Transaction
• Three Acts
←
← Bill of Lading –
•
← Draft –
• One of two types of negotiable instruments
o Checks
• Drawers, Payees, and Drawee
←
Negotiability 13/10/2010 15:19:00
← Two types of negotiable instruments: order or promise
←
← Requirements: The language “to bearer” or “to the order” count in
American law as the “words of negotiability”.
• Unless these words are present – and generally there are few
equivalents – the instrument or document in question is not
negotiable. UCC §7-104(1)(a).
←
← Negotiable Instrument: UCC 3-105
• http://www.law.cornell.edu/ucc/3/3-105.html
• 1st Question: Does it qualify as a negotiable instrument?
o Non-Issuance is a defense that the person who wrote it out
could assert to say you never issued it.
o Once parties sign, they are jointly and severally liable.
 http://www.law.cornell.edu/ucc/3/3-116.html
• Indorsement: Obligation of the Indorser
o 3-415(e) – indorser of a check is liable…
 http://www.law.cornell.edu/ucc/3/3-415.html
o 1-201(b)21(a)
←
← Negotiation:
Performance 13/10/2010 15:19:00
←
← First National Bank of Jefferson Parish v. Carmouche
• Action: issuing bank (FNB) seeks reimbursement from customer
(TC) for sums disbursed by the bank to the beneficiary (PAC)
• Issue: Whether the issuing bank was in “good faith” when it paid
the credit, even though the bank was informed by the customer and
the beneficiary that the customer might not owe the sums
stipulated in the demand due to some deficiency in the beneficiary’s
accounting to the customer.
• Procedural:
o Trial: no reimbursement for bank. Damages and fees to ∆.
o Appeals: no attorneys fees but…
 bank was in bad faith because it paid the LC after bring
notified by both the customer and the beneficiary of a
possible overstatement of TC’s indebtedness..
• Law:
o Issuing bank has independent obligation beyong contract of
customer and beneficiary
o Duty extends only to examination of documents, and it does
not act in bad faith where it pays on a demand after having
been informed of a dispute or possible fraud in the customer’s
underlying agreement to the benny.
• Held:
o Bank entitled to reimbursement from customer when it fulfills
obligation to pay out on any proper and timely demad
wherein the documents submitted conform with reqs of the
credit.
• Rationale:
o Independence principle (UCC 5-109(2)) –
 a bank’s respective Ks with the customer and the benny
will not be affected by the unenforceability of the
cusomter’s K with the benny, unless the terms of the
credit so provide.
  If they do provide, wouldn’t that take the bank’s
duty to inspect beyond the 4 corners of the
documents?

New Jersey Bank v. Bradford Securities Operations, Inc.

• Complete defense under UCC does not immunize ∆, nor does it
preempt the entire body of law.
• Though Artcile 8 claim is barred for lack of “genuineness”
(securities were fraudulent), plaintiff’s common law claims for
negligence should be allowed to proceed.
←
← Jason’s Foods v. Peter Eckrich & Sons
• 2-509 – where goods are held by a bailee to be delivered without
being moved, the risk of loss passes to the buyer…(b) on
acknowledgment by the bailee of the buyer’s right ot possession of
the goods
• Issue:
o Whether acknowledgment to the seller complies with the
statute?
•
Review 13/10/2010 15:19:00
← Formation 2-201;202;204;206
←
← K Terms 2-313;207;314;315;209;1-303
←
← Performance 2-301
←
← Breaches
• 601- remedies
• 602 – timely notice
• substantial performance, time notice
• rejection
• 606 – acceptance?
o Once acceptance the buyer can no longer reject the goods
 May revoke under certain circumstances (608)
 608(3)
• buy revokes has same rights and duties as
the buyer who has accepted
• 610 – anticipatory breach
o breach if you are almost certain that the other party is not
going to perform
 must be more than a rumor, rather unequivable
o must be very clear – whats unequivable is probably a fact
issue
o advice to represent: tell the client to send a letter demanding
adequate assurance.
  Policy: one party must make the other party insecure
about whether performance will occur
 Merchants: determined according to usage – no bright
line test – commercial standards
o 4 – im insecure, send demand, and no demand within 30
days, I can treat this as repudiation.
 Assurance must say going to perform, and show
something tangible to allay the fears of the other side
 Seller has a right to demand cash on delivery
 Buyer has a right for reduction in purchase price
• 609 – minuette between two parties
o if one party knows the other will not perform, the party who
is likely to breach may send out signals that are unequivable
in order to trick the other party to breach
←
← 2-615 – impossibility of performance (common law version)
• excuses a party from having to perform the contract
• UCC has come twist : delas with sellers obligations
o (a)
• comment 4: increased cost does not…neither rise or collapse in the
market… severe shortage in raw materials due to war or famine
may owe to impracticability.
• Commercial impracticability
• What if partial performance? (b)
o The seller must allocate supply pro rata, so that the buyer will
at least get some of the goods. (not in common law)
←
← 2-703: sellers remedies
• Where the buyer wrongfully rejects or revokes acceptance
of goods or fails to make a payment due on or before delivery or
repudiates (610) with respect to a part or the whole
• (f) cancel –
 • (d)
• (e)

706 – Cover
• if a buyer has wrongfuly revoked, cover losses by selling the
products to other products – revoking party will be responsible for
the difference
• resell obligations:
o how to resell:
 (2) private or public sale (auction)
 notificatin requirement
 canot scehdule the auction in a poor part of town;
or when inclimate weather is scheduled.
← 708 –
• seller is entitled to lost profit
←
← 709 – seller is entitled to the price of the contract of goods accepted or
of conforming goods lost or damaged…after risk of loss has passed.
←
← 710 – incidental damages;
• stopping delivery; labor; etc.
• (note: consequential damages are almost exclusively with the
buyer)

2-711 Buyer Remedies

2-716 – Replevin
←
← when time for revoking has passed, they have accepted the goods,
and the only ground for recourse is spelled out in 714
• HERE WE GET INTO WARRANTIES
o Breach of warranty claim is maintained
o 714(2) – difference at time of accept and the value they
would have been had they been warranted
 compensatory damages – loss of the bargain
o 714(3) – in proper case a buyer can get compensatory and
consequential damages
 foreseeability test – like in case with oxilbe
mix/minimart case
←
← 316 – exclusion or modification of warranties
• seller can eliminate damages almost all together
• deals with express warranties…
o problems arise with integration clauses
o where is a conflict between the warranty and disclaimer, the
disclaimer falls by the wayside and the buyer prevails
 especially when in the same document
a smart attorney will write a contract with the two that does
not crash
• 316(1)
o invoice with disclaimer, and an oral warranty that was given
that a product can do x, in warranty disclaimer says product
will not do x…
 what question has to be asked? Parol evience!!
 White and summers would say that something
that contradicts can never come in…
 • Feels that letting it in emasculates the rule
 Authors feel that disclaimers cannot contradict a
warranty
o Subject to the parol evidence rule
←
← 2-608: is the nonconformity substantially impairs the value of the
goods
• if so, buyer has the right to revoke acceptance
• objective evidence to show value impaired
• subjective evidence that the personal buyer was hurt
o will it pass the gut test of the jury?
 New car smell vs. lack of a spare tire…
•
 13/10/2010 15:19:00
←