BUSINESS LAW TAKE-HOME PORTION EXAM 3

rbBUSINESS LAW

TAKE-HOME PORTION EXAM 3

CHAPTERS 10, 12-14

PLEASE TAKE THIS PORTION OF YOUR EXAM HOME, COMPLETE IT, AND HAND AT THE BEGINNING OF CLASS

SHORT ANSWER: ANSWER 3 OF THE FOLLOWING. (5 POINTS EACH) ANSWER MORE FOR EXTRA CREDIT.

1. Chelsea answers a classified advertisement for the sale of a Ford Escape. Chelsea has been shopping for two months for a used Accord, and answers this ad because the asking price is $9,500 for a car that has a retail book value of $13,000. The seller, Thomas, says the price is low because he is moving out of the country in three days to start a new job and must have the cash from the car before he leaves. Chelsea buys the car and pays the full price, only to learn that Thomas had just purchased the car from another individual, named Terrance. The check that Thomas used to purchase the car was written on an account that Thomas had closed several months earlier. Thomas has disappeared. Discuss who will get to keep the car and all factors below that the court will use in reaching its decision.

Who keeps the car: ____________________________

Why? ____________________________________________________________________

_________________________________________________________________________

_________________________________________________________________________

What type, if any, title did Thomas have when he sold the car to Chelsea? _________________

Why? __________________________________________________________________

Who can sue Thomas? ________________________________________________________

What warranties exist, if any, on the Escape sold to Chelsea from Thomas? ________________

____________________________________________________________________________

2. Marilyn went to the local discount store for her weekly shopping, picking up a number of items. Over the next few days, she had problems with several items. She had purchased a combination phone and answering machine, but when she opened the box, she noticed that the one inside was different than the one pictured on the package. The one inside was lacking several features of the one pictured on the box. When she opened her frozen dinner, it did not look nearly as appetizing as the ones pictured on the box. Also, she prepared some brownies from a mix, but her brownies looked nothing like the ones pictured on the box. Upon closer inspection, she noticed that on the bottom of the box for the phone in fine print1, it said, “The picture is for illustration purposes only. The picture might show features not included on this particular phone. Please refer to the features list on the side panel for the features on this model.”

Next, she went to an automobile dealership. While Marilyn was shopping there, the salesman showed her a car, which he said was a 2011 Chrysler. The salesman also said, “This is the best car in town,” and, “This car is worth at least $19,000. I had it appraised last week for $19,200. Any other appraiser would say it is worth $19,500, at least. The statement about the car being appraised is true. The salesman also stated, “The engine is in great shape, and it has just had a tune-up.” Marilyn paid $8,000 for the car. Shortly after purchasing the car, when receiving the paperwork, Marilyn learned that it was a 1997 Chrysler, that it was worth only $6,000, and that it was not the best car in town. Discuss whether any warranties were breached, as to the: (TELL ME WHY AND WHAT, IF ANY, WARRANTY WAS BREACHED)

Telephone:

Frozen dinner & Brownies:

Car: 2011 Chrysler –

“This is the best car in town,” -

“This car is worth at least $19,000. I had it appraised last week for $19,200. Any other appraiser would say it is worth $19,500, at least. –

The engine is in great shape, and it has just had a tune-up.

3. Determine whether the following instrument is a negotiable instrument, addressing ALLthe requirements of negotiability in your response.

“I, Kevin Washington, promise to pay $5,000 to Main Street Bike Barn in four equal installments of principal, beginning on January 1, 2014, and on the third day of each month for the next three years. Each payment will consist of $1,250 in principal, plus interest accrued since the date of this note, in the case of the first payment, or since the prior payment in the case of all other payments. Interest shall accrue at the rate of 8% per annum, or in the event of default, at the Scottimum rate allowed by law until the default is cured. This note is secured by collateral consisting of various experimental flying machines. This note may be paid in whole or in part prior to the due dates, and the interest accrued will be reduced accordingly. The due date for any payment under this note may be extended by mutual agreement of the parties up to six months from the due date as stated herein. The proceeds of this note will be used by Kevin Washington to further his aviation experiments, and in the event those experiments are unsuccessful, the payment obligation is canceled.

Signed, Kevin Washington 1/1/03

4. Joe Cool, a good old country boy who has moved to the big city, had never locked the doors at his house in the country. Now that he has moved to the big city, he still often forgets to lock his doors. On one of these days, someone came into his home and stole, among other items, his checkbook and debit card. Joe Cool only writes a few checks a month, so he did not know until 2 weeks later that the checkbook and debit card were missing. Joe Cool had partially filled out a check, which he had planned to use to make final payment to a carpenter who was to do some work the following week in Joe Cool’s condominium. Joe Cool had signed the check and filled in the carpenter’s name, but had not filled in the amount because he did not know the carpenter’s charges. It turns out that the thief was this carpenter who had noticed that Joe Cool did not keep his door locked when he went to Joe Cool’s to estimate the job. The thief filled out the amount on the signed check as $1,500. In addition to the incomplete check made to him, the thief forged three other checks and deposited them. Lastly, when Joe Cool and the carpenter agreed on the work, Joe Cool wrote a $200 check to the carpenter that had not been paid when Joe Cool discovered the thefts. Joe Cool placed a valid stop-payment order on the $200 with his bank, but the bank paid this check anyway 5 days later. All of the other checks were also paid by Joe Cool’s bank. In addition, the thief used the debit card in a $3,000 transaction. Discuss the liabilities of Joe Cool and the bank. Don’t worry about the carpenter’s liability – he’s ultimately liable for all of the checks.

	JOE COOL	BANK
$1500 check
$200 check
Forged checks
Debit Card

5. Scott took his family and a couple of friends out to one of the best restaurants in town to celebrate his recent promotion. Unfortunately, several of his family members suffered injuries from items in the food that night. First, Scott broke a tooth on an olive pit in one of the olives in his Greek salad. Scott’s wife shortly thereafter was injured by a piece of glass in her soup. Then one of Scott’s friends was hurt by some sharp bones in his salmon filet. Scott’s daughter was hurt by an olive pit that was in her mashed potatoes. His other daughter was hurt by a crusty chicken foot in her chicken salad sandwich. Wanting to salvage some aspect of the evening, Scott stopped at an ice cream shop on the way home. Upon biting into his ice cream, Scott broke another tooth on a piece of bone from a cow. The next evening, as Scott was straining his dinner before eating it, he wondered which problems from the prior night would support a breach of warranty claim

Under BOTH of the tests, put in either the word "Scott" or "Restaurant" for who would win their case.

	Consumer Expectation Test	| Foreign Substance Test
Olive Pit
Soup
Salmon
Mashed Potatoes
Chicken Salad
Ice Cream