Chapter 12: 2. Define lease contracts governed by Article 2A of the UCC.
UCC Sales and Lease 3. Describe the formation, performance, and remedies for breach of sales
Contracts and Warranties and lease contracts.
4. Identify and describe express and implied warranties.
Chapter 13: 5. Distinguish between unsecured and secured credit.
Credit, Secured 6. Explain security interests in real property and the foreclosure of
Transactions, and mortgages.
Bankruptcy 7. Describe the different forms of personal and business bankruptcy.
Key Terms Unit Lesson
1. Article 2 (Sales) This unit examines the Uniform Commercial Code (UCC) and Bankruptcy. What
2. Article 2A (Leases) is important to understand about the UCC and Bankruptcy is: 1) what they are;
3. Attachment 2) when they are triggered; and 3) how they are used.
4. Buyer in the ordinary
course of business The main thing to understand about the UCC is that it deals with the sale of
5. Caveat emptor goods, and at least one of the parties to the sale must be a merchant
6. Counteroffer (Cheeseman, 2013).
7. Express warranty
8. Good faith purchaser The UCC follows basic contract principles, and while the result may seem harsh,
for value if looked at closely, the roots of contract law are there. The theory behind the
9. Guarantor remedies and rules in the UCC is that the merchant is held to a higher standard
10. Implied warranty of and “should know better” (Cheeseman, 2013).
merchantability
11. Mechanic’s lien The other player that can pop up in the UCC is the reasonable person, but in the
12. Mirror image rule UCC, they are referred to as good faith purchasers for value (Cheeseman,
13. Recording statute 2013). A good faith purchaser for value is the person who comes in and buys a
14. Release of lien good and gives money for it (Cheeseman, 2013). Each element of this title is
15. Risk of Loss essential. Remember, all of these words have a purpose. Basically what this
16. Secured transaction means is that the purchaser comes in and buys a good, for value, i.e., they give
17. Security agreement money for it, and they have no knowledge that the good may not be within the
18. Undue hardship right of the merchant to sell (Cheeseman, 2013). Consider this scenario: Bob
19. Uniform Commercial walks in to the jewelry store with his grandmother’s engagement ring to have it
Code (UCC) sized to give to his fiancé. Tom, who works in the store, accidentally sold the ring
20. Unsecured creditor to Jerry. Conventional wisdom dictates that Tom has to get the ring back from
21. Warranty Jerry, but no. As a good faith purchaser for value, Jerry is protected. Tom is
probably fired, and Bob sues a jewelry store. Yes, ideally Jerry would
understand and sell it back, but this very painful scenario shows just how
unforgiving the UCC can be.
UCC Sales and Lease 3. Describe the formation, performance, and remedies for breach of sales
Contracts and Warranties and lease contracts.
4. Identify and describe express and implied warranties.
Chapter 13: 5. Distinguish between unsecured and secured credit.
Credit, Secured 6. Explain security interests in real property and the foreclosure of
Transactions, and mortgages.
Bankruptcy 7. Describe the different forms of personal and business bankruptcy.
Key Terms Unit Lesson
1. Article 2 (Sales) This unit examines the Uniform Commercial Code (UCC) and Bankruptcy. What
2. Article 2A (Leases) is important to understand about the UCC and Bankruptcy is: 1) what they are;
3. Attachment 2) when they are triggered; and 3) how they are used.
4. Buyer in the ordinary
course of business The main thing to understand about the UCC is that it deals with the sale of
5. Caveat emptor goods, and at least one of the parties to the sale must be a merchant
6. Counteroffer (Cheeseman, 2013).
7. Express warranty
8. Good faith purchaser The UCC follows basic contract principles, and while the result may seem harsh,
for value if looked at closely, the roots of contract law are there. The theory behind the
9. Guarantor remedies and rules in the UCC is that the merchant is held to a higher standard
10. Implied warranty of and “should know better” (Cheeseman, 2013).
merchantability
11. Mechanic’s lien The other player that can pop up in the UCC is the reasonable person, but in the
12. Mirror image rule UCC, they are referred to as good faith purchasers for value (Cheeseman,
13. Recording statute 2013). A good faith purchaser for value is the person who comes in and buys a
14. Release of lien good and gives money for it (Cheeseman, 2013). Each element of this title is
15. Risk of Loss essential. Remember, all of these words have a purpose. Basically what this
16. Secured transaction means is that the purchaser comes in and buys a good, for value, i.e., they give
17. Security agreement money for it, and they have no knowledge that the good may not be within the
18. Undue hardship right of the merchant to sell (Cheeseman, 2013). Consider this scenario: Bob
19. Uniform Commercial walks in to the jewelry store with his grandmother’s engagement ring to have it
Code (UCC) sized to give to his fiancé. Tom, who works in the store, accidentally sold the ring
20. Unsecured creditor to Jerry. Conventional wisdom dictates that Tom has to get the ring back from
21. Warranty Jerry, but no. As a good faith purchaser for value, Jerry is protected. Tom is
probably fired, and Bob sues a jewelry store. Yes, ideally Jerry would
understand and sell it back, but this very painful scenario shows just how
unforgiving the UCC can be.
The UCC also protects merchants when the contract is not clear or not
complete, but at the same time, it also holds to the wayward merchant to a strict
standard (Cheeseman, 2013). Consider this scenario: Merchant A agrees to buy
complete, but at the same time, it also holds to the wayward merchant to a strict
standard (Cheeseman, 2013). Consider this scenario: Merchant A agrees to buy
BBA 3210, Business Law 1
1,000 bolts from Merchant B, and the bolts are to be delivered on a certain date.
However, the price is left out. B delivers the goods as promised with an invoice
for the fair market cost of the goods. Merchant A does not want to accept
delivery of the goods because he found them cheaper, and since no price was
mentioned, he thinks he is golden as a key element of the contract was missing.
So can Merchant A avoid his duties? Under the Gap-filling rules of the UCC, the
price, if left out, can be the fair market value of the goods (Cheeseman, 2013).
Is this fair? Yes and no to both parties, but one can see its equitable principles
and how the UCC works to keep commerce moving smoothly without wayward
merchants making nonsensical arguments.
price, if left out, can be the fair market value of the goods (Cheeseman, 2013).
Is this fair? Yes and no to both parties, but one can see its equitable principles
and how the UCC works to keep commerce moving smoothly without wayward
merchants making nonsensical arguments.
What about when Merchant A goes bankrupt as a result of his shifty ways? What
route does he take? There are different levels or “chapters” of bankruptcy people
and businesses can declare (Cheeseman, 2013). Merchant A can enter
bankruptcy voluntarily, or Merchant B, as a creditor, can force him into
bankruptcy.
route does he take? There are different levels or “chapters” of bankruptcy people
and businesses can declare (Cheeseman, 2013). Merchant A can enter
bankruptcy voluntarily, or Merchant B, as a creditor, can force him into
bankruptcy.
What if Merchant A also had to file personal bankruptcy, in addition to his
business bankruptcy? What chapter does that fall under? What if he cannot pay
back his debts? What if he can? Consider these questions as we move forward
into this unit, and discuss who files when, where, and why.
business bankruptcy? What chapter does that fall under? What if he cannot pay
back his debts? What if he can? Consider these questions as we move forward
into this unit, and discuss who files when, where, and why.
After Merchant A decides what to file, Merchant B will be automatically stayed
from attempting to collect his debt until the bankruptcy court either discharges
the debt or orders a repayment plan. Merchant B has a duty to accept or reject a
repayment plan.
from attempting to collect his debt until the bankruptcy court either discharges
the debt or orders a repayment plan. Merchant B has a duty to accept or reject a
repayment plan.
Merchant A knew he was going to file bankruptcy, so two months before he filed,
he transferred all of his valuable assets to his sister’s name, and he deposited
his money in an offshore bank. The merchant cannot hide, transfer or remove
assets within a certain period of time before or during a bankruptcy. If the
merchant does, then he will not be approved to proceed with the bankruptcy.
The merchant may also be faced with criminal penalties (Cheeseman, 2013).
Reference
he transferred all of his valuable assets to his sister’s name, and he deposited
his money in an offshore bank. The merchant cannot hide, transfer or remove
assets within a certain period of time before or during a bankruptcy. If the
merchant does, then he will not be approved to proceed with the bankruptcy.
The merchant may also be faced with criminal penalties (Cheeseman, 2013).
Reference
Cheeseman, H. R. (2013). The legal environment of business and online
commerce: Business ethics, e-commerce, regulatory, and international
issues (7th ed.). Upper Saddle River, NJ: Prentice Hall.
commerce: Business ethics, e-commerce, regulatory, and international
issues (7th ed.). Upper Saddle River, NJ: Prentice Hall.
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