EXAMINATION

INTRODUCTION TO

COMMERCIAL LAW

FALL 2011

This is the examination for the Fall 2011 course Introduction to Commercial Law/UCC. Question one and two of this examination consists of problem statements followed by a question requiring the examinee’s written response. Question three is a direct question also requiring the examinee’s written response.

These are the rules:

1)You are to record your written responses to each question propounded in ink on the right hand page of the examination booklets provided or via EBB as you chose. Be sure to designate each response by the statement and question number to which you are responding and assure that your examination number identifies your submission.

2)You may have three hours in which to consider, organize and record your responses to the three questions propounded in the examination. Be sure to address the question asked rather than the question you believe should have been asked. Take the time to consider your response deliberately.

3) You may have with you during the examination: writing materials, the scratch paper provided, a copy of the Uniform Commercial Code published by West as “Selected Commercial Statutes.” This code may be annotated in your handwriting as you wish. You are to have no other materials with you during the examination.

Start of Examination

Question 1:

Dan purchased a used car from Charles Car Dealer by borrowing the money for the purchase from Charles. In exchange for the car certified “OK used” by Charles, Dan physically gave Charles a promissory note drawn promising to pay Charles the amount for the car purchase signed by Dan as Maker and then endorsed by Dan. Dan also signed a document that states the he was the debtor, Chas was the creditor and that the debtor granted a security interest in the car, identified as “collateral,” to the creditor to secure payment of the note, and further that the debtor would assure that the collateral was insured against loss. Because Bank financed Charles’ inventory, Charles assigned the Dan note and security agreement to Bank the day following the completion of the transaction with Dan by endorsing the note.

The week following the Dan –Charles-Bank transactions, the annual United Fund campaign began and Bank was asked to make the lead donation, as Bank’s president was the campaign chairman. Short on cash, Bank Pres. selected a number of promissory notes made by debtors with whom the bank did not have relationships otherwise and transferred them to the campaign by endorsement as the bank’s donation to the campaign.

Bank president also undertook to assist the campaign in assuring collection of the money represented by the notes. Well into the year following the transfer of the notes to the campaign the process established by bank president reached the Dan-Charles-Bank note and demanded for the campaign that Dan pay the note made by him. Dan’s response was explosive. Dan stated that he would never pay the note because the car sold to him by Charles had worked only one time in the preceding year. That one time was the day Dan drove it off Charles’ lot.

  1. Please advise Bank president as to whether or not Dan’s defense to the campaign’s collection action on Dan’s note will or will not defeat the campaign’s claim. Be sure to articulate the reasons supporting your opinion. (See: Text 687)

Question 2:

Assume that First Federal Bank takes a security interest in the inventory of a series of franchised hardware stores that pool their purchases to improve their negotiating position with suppliers. That inventory is composed of hand tools, lawn mowers, garden tractors and the like, all most all of which is intended by the stores for sale to consumers.

For some reason Bank failed to file a financing statement. On the hardware stores’ bankruptcy, bank claims that it is a perfected secured creditor, because it has a purchase money loan against consumer goods.

  1. Is the bank’s position on the above-described matter legally sound? If not, why not? If so, why? (See W&S 6th p. 1201.)

Question 3:

  1. Specify at least one security interest arising under Article 2 or 2A and give an opinion as to whether or not such an interest can attach before the debtor obtains possession of the goods that are subject to the security interest.

End of examination