Business law 2 mod 2 WA (002)

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Feb 20, 2024

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Business Law 2 Module 2 Written Assignment 1/22/2024-2/4/2024 Spring 2024 Ch. 27: 3, 11, 15 (pg. 521-523) 3) The UCC defines a Negotiable Instrument as a signed document that promises a payment from one person to a specific person or signee. Negotiable Instruments can be transferable which allows the recipient to take funds as cash. Examples are Money orders, Checks and Promissory notes. Negotiable Instruments shouldn’t have any conditions associated with it. While Charter bank is in possession of the note that has several provisions on the interest rate of the mortgage, it is not considered a Negotiable Instrument. This is because it does not contain an unconditional promise for one party to pay another but only has the conditions on the terms of the mortgage. This decision would be covered under 3-104 (1) (b) of the UCC: Negotiable Instruments 11) While Richard Bell does have a written promise to pay Lorry Motors $10,000 for the purchase of a vehicle with in three weeks, there is a contingency of Richard having to receive the final distribution of funds from the estate of his deceased aunt.( this would be considered an additional action beyond that) This contingency of Richard getting the funds in a timely manner or at all, instead of already having them could void this promissory note to be considered Negotiable Instrument. Also, because there was no immediate cash, check or money order exchanged a note of intent can’t be used as a down payment. This decision would be covered under 3-104 (3) (d) of the UCC: Negotiable Instruments 15) Under UCC, there is a difference between a promissory note( which is a note that includes a promise to pay on demand or at a specified future date, and steps for repayment) versus and IOU( a document containing the information that a specific person is in acknowledgement of owing another person a specific amount of money , but does not have a date of when letter was written and/or an effect of date on demand is in place. While an IOU is a

legal document that can be introduced in a court of law- though whether it is binding or not is open to dispute. (Kenton, 2021) References. Kenton, W. (n.d.). IOU: What it is, how it works, and examples . Investopedia. https://www.investopedia.com/terms/i/iou.asp#:~:text=An%20IOU%20is%20a %20legal,acknowledgement%20that%20a%20debt%20exists. Mortgages and the UCC . Baker Donelson. (n.d.). https://www.bakerdonelson.com/Mortgages- and-the-UCC-02-14-2012 Legal Information Institute. (n.d.). § 3-104. negotiable instrument. Legal Information Institute. https://www.law.cornell.edu/ucc/3/3-104 Ch. 28: 2, 5, 7 Question 2) The negotiation process of this settlement check written out to multiple parties should be done in the following steps (1) The check should be indorsed and signed in the following order: client (Joseph Klimas), then by his Attorney (Fritzshall & Gleason) then Blue Cross Blue shield and Carpenters welfare Fund deposited into a bank account. (2) Once that is done before any money can be disbursed there should be a settlement statement drawn up. Settlement statement will usually have the following: amount of settlement, the amount payable to firm for fees earned per settlement agreement, as well as if applicable any expenses cover by the firm during settlement process; any amounts payable to a third party (Blue Cross Blue Shield Company and Carpenters Welfare Fund) then amount due to client and signed by lawyer and client. (3) once funds are available write checks and receive portion of the settlement. (4) Prepare a final documentation and paperwork.

References Gruenke, P. (2023, June 20). Handling settlement funds: A best-practices checklist . Attorney at Work. https://www.attorneyatwork.com/handling-settlement-funds/#h-2-prepare-a- settlement-statement 5) Yes, the Peavy’s have a claim, the bank should not have accepted and deposited the check without the required endorsement from Trust Company Bank. The reversal of this transaction and debiting the Peavy’s account, the bank essentially took the funds away from the Peavy family. Threatening to send the family to jail if they didn’t return the funds was in appropriate and could be considered coercion. The bank’s failure to obtain the proper endorsement may considered a violation of Article 3 of UCC for negotiable instruments and the requirements for validity and negotiation. 7) The courts determined as a matter of law that UCC section 3-405(1)(c) did not apply because the payees were bona fide creditors. Yes, the bank would be successful in defending the Imposter rule. This provides the bank with a legal protection from any form of liability when someone forges a signature on a check. The bank will be successful because it acted on good with and followed the instructions given by SNUG Harbor’s authorized representative Magee and had no knowledge that signatures were fraudulent. The imposter rule places the responsibility on the drawer of the check (Snug Harbor) to prevent such fraud by ensuring the integrity of its employees and internal control procedures. Reference Legal Information Institute. (n.d.-b). § 3-405. employer’s responsibility for fraudulent indorsement by employee. Legal Information Institute. https://www.law.cornell.edu/ucc/3/3-405

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Ch. 29: 7, 8 7. As the new owner of the business, Jackson Corp who purchased all the assets from Jones- this transferred all the assets of his business, including any promissory notes to the new owners. (Sale of assets) successor of liability-. So Holder through a holder in due course is why is giving the legal rights to collect on those notes that were transferred. Jackson Corp now assumes the liabilities and obligations of the business. So, if the maker of the old note refuses to pay due to failure of consideration, this can be grounds for the Jackson Corp to sue for payment. If the Jackson Corp, can provide evidence to refute the maker’s claim or prove there was indeed consideration they should have a strong chance of succeeding in the lawsuit. 8. In the case of Financial Associates v. Impact Marketing, Impact Marketing is the correct party. While Financial Associates can argue that they were holder in due course and had had rights to collect postdated checks issued by Impact Marketing. On the other hand, Impact marketing claimed that Financial Associates could not be a holder in due course because the checks were postdated and issued for an executory promise. This is where the concept of a holder in due course-. (A holder in due course is someone who acquires a negotiable instrument, such as a check, in good faith, without notice of any defects, and for value), comes into play. The holder in due course is then entitled to certain legal protections, including the ability to collect on the instrument. Even though, Financial Associates purchased the postdated checks from Bell, who was supposed to provide legal services to Impact Marketing in the future. However, payment was stopped on the last two checks when Bell's services were terminated. This means that the checks were issued for an executory promise- a promise to perform an act in the future. According to the

Uniform Commercial Code (UCC). A postdated check is not payable on demand and is not negotiable until the date specified on the check. Ch. 30: 5, 7 5) A payment on a forged signature of drawer. Forgery of the signature of the drawer occurred when the name of the drawer (Shipper) has been forged by another person (Shipper’s Acquaintance) without authorization to do so with the intent to defraud by making it appear that the drawer signed the check. The bank is liable to the drawer if they paid out the funds from the drawer’s account. The Check Truncation Act (CTA) part 21, banks have the right to substitute electronic images of checks for customer billing statements. Once received a customer has 40 calendar days from whichever of the following is later (1) monthly statement (2) that date on which substitute check was made for examination and/or review (Twomey et al., 2017) there is a rule in place that if the consumer has been traveling or ill there is an extension of the deadline to challenge a substitute check. Shipper’s wife could challenge it, but the bank does not have to enforce it without any written correspondence. Customers have the obligation to report unauthorized signatures to the bank within a year period. With Shipper’s wife has missed the deadline by 30 days (since her response was 13 months after the fact) Reference Twomey, D. P., Jennings, M., & Greene, S. M. (2017). Business law principles for today’s commercial environment . Cengage Learning. 7) The Check Truncation Act (CTA) part 21, banks have the right to substitute electronic images of checks for customer billing statements. Once received a customer has 40 calendar days from whichever of the following is later (1) monthly statement (2) that date on which substitute check was made for examination and/or review (Twomey et al., 2017) there is a rule in place that if the consumer has been traveling or ill there is an extension of the deadline to Customers have the obligation to report unauthorized signatures to the bank within a year period . The loss on the forged check from January would typically be borne by the First

bank. Once Gloria discovered the forged signature on her December check and immediately notified the bank on January 25 th about the fraudulent activity giving the bank amble notification before paying the January check on 21 st . when a bank receives notice of forgery and still pays a subsequent check with the same forged signature, the bank is typically held responsible for the loss, since it failed to exercise reasonable care in verifying the authenticity of the signature on the January check. Reference Twomey, D. P., Jennings, M., & Greene, S. M. (2017). Business law principles for today’s commercial environment . Cengage Learning.

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