hapter 20


3. The right of rejection. Erb Poultry, Inc., is a distributor of fresh poultry products in Lima, Ohio. CEME, LLC, does business as Bank Shots, a restaurant, in Trotwood, Ohio. CEME order chicken wings and “dippers” from Erb, which were delivered and for which CEME issued a check in payment. A few days later, CEME stopped payment on the check. When contacted by Erb, CEME alleged that the products were beyond their freshness date, mangled, spoiled and the wrong size. CEME did not provide any evidence to support the claim or arrange to return the products. Is CEME entitled to a full refund of the amount paid for the chicken? Explain. (See remedies of the buyer or lessee).


5. Breach and Damages. Utility Systems of America, Inc., was doing roadwork when Chad DeRosier, a nearby landowner, ask the Utility to dump 1,500 cubic yards to field onto his property. Utility agree but exceeded DeRosier’s request by dumping 6,500 cubic yards. Utility offered to remove the extra filling for $9,500. DeRosier paid a different contractor $46,629 t remove the fill and do certain other work, and filed a suit against Utility. Because Utility charged nothing for the filling, was there a breach of contract? If so, would the damages be grater than $9500? Could consequential damage be justified? Discuss. (See remedies of the buyer or lessee).



Chapter 21


3.  Implied Warranties. Bariven, A.A., agree to buy 26,000 metric tons of powered milk for 123.5 million from Absolute Trading Corp. The milk was to be delivered in shipments from China to Venezuela. After the first three shipments, China halted dairy exports due to the presence of melamine (a harmful chemical) in some products.

Absolute assuered Bariven that its milk was safe, and when China resumed its dairy exports, Absoluted delivered sixteen more shipments. Sample testing of the milk revealed that it contained dangerous levels of melamine. Did Absolute breach any implied warranties? Discuss. (see warranties).


5. Product liability. David Dobrovolny bought a new Ford F-350 pickup truck. A year later, the truck spontaneously caught on fire in Dobrovolny’s driveway. The truck was destroyed, but no other property was damage, and no one was injured. Dobrovonly field a suit in a Nebraska state court against Ford Motor Co, on a theory of strict product liability to recover the cost of the truck. Nebraska limits the application of strict product liability to situations involving personal injuries. Is Doborvonly’s claim likely to succeed? Why or why not? Is there another basis for liability on which he might recover? (see product liability)


Chapter 22


3. Deceptive Advertising. Innovative Marketing, Inc. (IMI), sold “scareware) computer software. IMI’s ads advised consumers that a scan of their computers had detected dangerous files viruses, spyware, and “illegal” pornography. In fact, no scans were conducted. Kristy Ross, an IMI co-founder and vice president, reviewed and edited the ads, and was aware of many complaints about them. An individual can be held responsibility liable under the Federal Trade Commission Act  for deceptive acts or practice if the person (1)  participated directly in the practices or had the authority to  control them, and (2) had or should have had knowledge of them. Is Ross liable under this standard? Explain. (deceptive advertising).


5. Deceptive Advertising. Brian Cleary field a suit against cigarette maker Philip Morris USA Inc., Claiming deceptive advertising. Cleary asserted that “light” cigarettes, such as Marlboro Lights, were adavertised as being safer than regular cigarettes even though the health effects were the same. Philip Morris responded that the claim should be dismissed because the government authorized Philip Morris to advertise cigarettes. Should the court allow Cleary’s claim? Why or why not? (deceptive advertising).



Chapter 23


3. Bearer instruments. Eligio Gaitan borrowed the funds to buy real property at 4520 w. Washington St. in Downers Grove, Illinois, and signed a note payable to Encore Credit Corp. encore indorsed the note in blank. When Gaitan defaulted on the payments, an action to foreclose on the property was filed in an Illinois state court by U.S Bank, N.A. The note was in the possession of the bank, but there was no evidence that the note had been transferred or negotiated to the bank. Can U.S. Bank enforce payment of the note? Why or why not? (see transfer of instruments).


5. Negotiability. Michael Scotto borrowed $2,970 from Cindy Vinueza. Both of their signature appeared at the bottom of a note that stated, “I Michael Scotto, owe Cindy Vinuezaa $2,970 (two thousand and nine-hundred-and-seventy dollars) and agree to pay her back in full. Signed on this 26th day of September 2009.” More than a year later, Vinueza field a suit against Scotto to recover on the money, but he contended without proof that he had paid Vinueza in full. Is this note negotiable? Which party is likely to prevail? Why? (see what is a negotiable instrument?)


Chapter 24


3. Holder In Due Course. New Houston Gold Exchange, Inc. (HGE) issued a $3,500 check to Shelly Mckee to buy a purportedly genuine Rolex watch. The check was postdated that is, assigned a date later that the actual one. Mckee indorsed the check and presented it to RR Maloan Investments, Inc., a check-cashing service. Without verifying that the check was valid, PR Maloan cashed it. Meanwhile, HE issued a stop-payment order on the check based on the information that the watch was counterfeit. When RR Maloan presented the check to HGE’s bank for paynment, the bank refuses to honor (cash) it. Is RR Maloan entitled to payment as a holder in due course? Why or why not? ( see requirements for HDC status).


5. Defenses. Damion and Kiya Carmichael took out a loan from Ameriquest Mortgage Co. to refinance their mortgage and signed a note to make monthly payments on the loan. Later, Deutsche bank National Trust Co. acquired the note. The Carmichaels stopped making payments and field for bankruptcy. Deutsche asked the court to foreclose on the mortgage. The Carmichaels asserted that they had been fraudulently induced to make the loan and sign the note. Was the bank free of this defense? Explain. (see defense).



Chapter 25


3. Consumer fund transfers.  Stephen Patterson held an account with Suntrust Bank in Alcoa, Tennrsse. Juanita Wehrman with whom Patterson was briefly involved in a romantic relationship stole his debit card and used it for sixteen months (well beyond the length of their relationship) to make unauthorized purchases in excess of $30,000. When Patterson learned what was happening, he closed his account. The bank refused to reimburse him more than $677.46 the amount of unauthorized transactions that occurred within sixty days of the transmittal of the bank statement that revealed the first unauthorized transaction. Is the bank’s refusal justifiable? Explain. ( see Electronic fund transfers.)


5. Forged Drawers’ Signatures. Debbie brooks and Martha Tingstrom lived together. Tingstrom handled their finances. For five years, brooks did not look at any statements concerning her accounts. When she finally reviewed the statements, she discovered that Tingstrom had taken $85,500 through Brooks’s checking account with Transamerica Financial Advisors. Tingstrong had forged Brooks’s name on six checks paid between one and two years earlier. Another year passed before Brooks filed a suit against Transamerica. Who is most likely to suffer the loss for the checks paid with Brooks’s forge signature? Why? (see honoring checks)


Grading Criteria / Rubric

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