Exam 2 Review

Someone who signs the back of an instrument endorses it. If the instrument is payable to Bob, and Bob signed the back, it is now a bearer instrument not an order instrument.

These are allowed from the party who intends to pay so long as it is definite (not vague). However, if the holder of the instrument can extend the time of payment, the extended maturity date need not be specified.

Someone who paid value for an instrument and has no knowledge of a claim or defense on the instrument. They may make the party obligated to pay, pay. Value paid may not be a promise. One thing that would give notice that the instrument has a claim is if the instrument is refused by the party to pay in the past, it is defective and the holder knows that.

An order instrument must be payable to the order of someone, and must be signed and delivered. Whereas a bearer instrument is not payable to the order of a real person, and does not need to be signed but still must be delivered.

Qualified indorsement - Indorser includes words indicating that they are not guaranteeing or assuming liability for payment, such as "Pay to Jack without recourse, Sara". Relieves indorser of any liability for payment of the instrument; frequently used by agents or others acting on behalf of another.

Blank indorsement - Indorser does not identify the person to whom the instrument is payable. This indorsement can merely consist of a signature, such as "Mary". Creates a bearer instrument, which can be negotiated by delivery alone.

Restrictive endorsement - Indorser includes specific instructions regarding the funds involved or states a condition to the right of the indorsee to receive payment, such as "For deposit only". Only a bank can become a holder of instrument indorsed for deposit or collection (most common).

Conditional/trust endorsement - The agent has the rights of a holder but has a duty to use the funds consistent with the indorsement. "Pay to Jim to use the money for my child, Ann."

Questions relating to:
Remedies of a party if they win a lawsuit - garnishment of bank account, brokerage fund, salary.
Certain property exempt from creditors - a certain portion of homestead is excempt, household furniture, vehicle, clothing
Artisan's lean - when a worker improves your personal property, they only have a lean if they retain possession of the personal property
Mortgage - using real estate as security for the loan

When a third person promises to pay a debt owed by another in the event that the debtor, or principal, does not pay. It must be in writing unless its main purpose is to benefit the suretoruarantor.

Suretyship permits primary liability to the suretor. Guarantyship permits secondary liability to the guarantor.

Defenses unavailable for them include:
1. Incapacity and bankruptcy
2. Statute of limitations
3. Fraud

Rights available for them include:
1. Subrogation (any rights the creditor had against the debtor, the suretoruarantor now has)
2. Reimbursement
3. Contribution (when a co-suretoruarantor pays more than their proportionate share, they are entitled to recover from the other co-suretoruarantor the amounts paid in excess)

Releases for suretorsuarantors:
1. Material modification (modifying the terms of the original contract materially releases the suretoruarantor)
2. Surrender of property (if the creditor surrenders collateral to the debtor or impairs the collateral without the suretyuaranty's consent, the suretoruarantor is released)
3. Payment or tender of payment (any payment of the principal obligation by the debtor or by another person on the debtor's behalf discharges the suretoruarantor)

When a worker on real estate incurrs and obligation, and the party who owns the real estate must pay or else the mechanic who did the work can put a lean against the property. The real estate could then be sold, if necessary, to settle their debts.

Floating lean - floats over the original inventory or machine, and money from selling that inventory or machine, and inventory or machine that is acquired
Attachment - the creation of the security interest. Requires a security agreement signed by the debtor. If the collateral is in the possession of the creditor, no written agreement is necessary all that is needed is the loan from the debtor, rights and collateral owned by the debtor.
Financing statement - typically used in business. what it needs to have is the debtor's name, the creditor's name, and the description of the collateral. but the purpose for the transaction is not necessary.
Priorities in regards to secured transactions - first to file or perfect wins. However, a buyer in the ordinary course of business may win...if a buyer buys inventory from a car dealer, and its represented in a financing statement, the buyer in the ordinary course of business takes it free of the lean. You can perfect by taking possession. Or if you're the owner of a store that sells goods, youre automatically perfected when a consumer takes possession of the goods.

Questions relating:
Chapter 11 - goal is to rehabilitate a corporation, NOT liquidate it. some assets may be sold off, some debts relieved, but the corp should be back in the marketplace and better able to function.
Automatic stay - this happens as soon as you file for bankruptcy. there are some exceptions which punish the filer for bad behavior.
What makes up the bankruptcy estate? - some things, if you acquire after you file, will still be part of the bankruptcy estate.
Trustee's powers - the trustee can recover preferences, and fraudulent transfers. He can bring back transfers that were made before bankruptcy up to 2 years before the bankruptcy was filed (usually the filer trying to hide assets...the trustee can bring those back into the estate).
The goal of the debtor is to get a discharge, but there can be cases where a party doesn't get a discharge. Or the court could revoke the discharge of debts, typically for bad behavior and deceipt.
Exceptions to discharge - obligations that society values, such as alimony payments or support payments for minor children.
Chapter 13 - for the benefit of the debtor, voluntarily filed only. gets them a payment plan to pay off their debts when they dont qualify for chapter 7 liquidation of debts.
Chapter 12 - same as 13 but for farmers and fishermen
Chapter 7 -
Know which parties get paid first in a bankruptcy liquidation - the first priority is secured creditors. next is unsecured creditors, then domestic support obligations, then administrative expenses, ordinary business expenses, ordinary salaries
What does the debtor have to have with their application for bankruptcy? - chapter 7 schedules include ...

Fiduciary duties are the largest part of agency principal relationships. The agent owes fiduciary responsibilities to the principal.
The agent is held to a standard of care of performance by the principal and the agency.
Difference between an independent contractor and an employee - independent contract would be somebody who essentially has their own profession, their own business their own employees. an independent contractor is typically not an agent. they have their own tools, are typically paid in a lump sum, and are not controlled by the employer. the opposite of all of this is an employee.
Indemnification of a principal due to agent misconduct - if an agent damages a principal by doing something that the principal told the agent not to do, then the principal could sue the agent.
anything an agent finds out while performing duties for the principal, the principal now knows whether he is told or not.
how can agencies be created - by the parties, or after the fact when an agent does something he wasnt told to do but the principal likes it and thus ratifies it to an agency contract.

The principal is always liable for the agency unless the principal is undisclosed. In this case, the agent is liable.
If it is a partially disclosed principal, the third party doesnt know who the principal is but knows there is one, the agent is liable.
If it is a fully disclosed principal, where the third party doesnt even know hes dealing with an agent then the agent is liable too.
Termination of agencies - these occur if either party dies or becomes incompetent. the agreement might expire. the purpose of the agency is no longer relevant. if the transaction becomes illegal. this is true in all cases even if one party is not aware. it is terminated upon the event.
Authority - an agent has no authority unless given expressly, with words, or implied, where things arent named but the agent assumes them. apparent authority is when a third party believes an agent to have authority. a principal could give a third party reason to believe the agent has authority, if the agent continues to do actions and the principal doesnt object.
Respondeat superior - if the agent damages property or persons while on business for the principal, the principal is liable. this does not apply to independent contractors, however, which the principal never has control over. the independent contractor would be liable except for instances where the principal has an independent contractor do something inherently dangerous (like demolition), the principal (party who hired them) can be liable for damages or negligence.

Employment at will - the employer doesnt have to hire in the first place and can fire you at will. There are exceptions to aid public policy in which employers cannot fire you.
Labor lawnions - proper things that are to be considered, typically, by the employer in collective bargaining. good faith vs bad faith bargaining. worker's safety, wages, pensions, layoffs, employment benefits.
Strike - when a strike is over, does the employer have to take the striking workers back? NO if its an economic strike, they've hired replacement workers and don't have to take the strikers back. But they do have to take back strikers who were striking over conditions such as workplace safety, or if the workers were claiming that the employer had engaged in unfair labor practices.
National Labor Relations Act - required that employers and employees to be fair with each other.
Family and Medical Leave -
Immigration Law - requiring employers to ensure employees are legally allowed to work
Employee Privacy Protection - The employee has privacy unless the employer gives them a phone to use or a computer, in which case those devices may be monitored.
What is it and what is the purpose of Workman's Compensation -
When are you entitled to overtime? - when you work more than 40 hours in a work week. doesnt apply to the top 10% of earners in a company. or those working on commission.
Employers are prohibited from -
Other types of employer monitoring - lie detector tests, drug tests

Age Discrimination in Employment Act - discrimination based on age applies to those over 39 years old.
Title VII - prohibits discrimination based on race, color, national origin, sex, and religion. you can have direct discrimination because someone is in a protceted class which is disparate treatment. or you can have discrimination that is unintended, such as a test to employees, which is called disparate impact
Sexual harassment - sex was for a long time meant to only apply to differences between men and women. however, supreme court rules lgbtq fall under that spectrum as well.
Two kinds of sexual harassment - quid pro quo (this for that) which is sex in exchange for jobs or promotions. the other is hostile work environment which is when harassment is allowed by employees, supervisors, and customers to persist despite complaints.
Americans with Disabilities Act - 1990 covers a great part of activities in this country in employment and education. employers are required to make a reasonable accommodation (if they can) for a person with a disability. they dont have to if it causes undue hardship on the business.
in order to sue for discrimination - you have to be in a protected class. you suffered an adverse job consequence. you're qualified to do the job. once you establish these 3 things, then the ball is in the employer's court to defend themselves. however, it cannot be a pretext (not the real reason). then the employee has to show it is a pretext.
If you claim you're discriminated against, and the employer takes action against you for complaining, you have a separate claim under retaliation now.
Pick which activity would be the most likely to be a violation of title VII.

A signed writing that contains an unconditional promise or order to pay an exact amount, either on demand or at a specific future time.

There can be no conditions to payment, nor reference to a document that discusses terms of payment. It is okay to refer to the transaction itself on the negotiable instrument. It is okay to stipulate payment from a particular fund (such as payment will come from next year's crop's proceeds).

The instrument must be signed, but it can be signed however the parties wish to do so (a smiley face).

The drawer is the party who signed the draft. The payee is the one receiving payment. The drawee is the party told to pay (such as a bank).

Must be payable in money, the official currency of a recognized government. The instrument itself must be in writing on something moveable and permanent.

A time instrument is overdue the day after its due date.

If an instrument states that it is "payable in 30 days", counting begins the day after the instrument is dated.

If the payment date falls on a Sunday or holiday, the instrument is payable on the next business day.

A series of notes issued at the same time with successive maturity dates is overdue when any note in the series is overdue.

If the principal is to be paid in installments, the default or nonpayment of any one installment will make the instrument overdue and provide notice to prospective purchasers of the default. It will remain overdue until the default is cured.

An instrument does not become overdue if there is a default on a payment of interest only.

A time instrument also becomes overdue the day after an accelerated due date, unless the purchaser has no reason to know that the due date has been accelterated.