Fall 16 BUS-201 Final Exam Essays

Instructions

For the purposes of this Exam, assume the scenario occurred in Washington State.
• Title your document: example “John Doe – Final”
• Provide your answers on a separate document, from the Scenario and Questions.
• Times New Roman 12-point font; 1” X 1” borders; single-spaced
• Provide an answer for every question. Clearly mark each Question and Answer.
• Use IRAC to answer all the questions.
• Proof Read – more than once
• Spelling & Grammar Check
• All information needed to complete this Exam can be found in the Lecture Powerpoints and Textbook. Use of any other sources will result in a ZERO for this portion of the final exam.
• Each time you use a Rule you MUST provide a citation to where you found the rule; Example: (Contracts, slide 15). Failure to do so will result in a deduction of 1 point for each missed citation.
•
• SCENARIO

Denny has had a life-long dream of selling, restoring, and repairing motorcycles. On January 1, Denny went to BigBank and obtained a $100,000 line of credit to start his business. Denny properly signed a Security Agreement giving BigBank collateral in all “after acquired property.” On January 2, BigBank filed a properly prepared Financing Statement with the Washington Department of Licensing. With the line of credit from BigBank Denny purchased equipment such as tools, and other goods to outfit his store/garage (which he already owns free and clear of any mortgage).

On January 3, Denny called Manny – a builder of motorcycles – to see if he (Denny) could order two motorcycles the first of every month for the next six (6) months; beginning in February (Each motorcycle is worth $10,000 wholesale). On January 4, Manny faxed Denny, on Manny’s business letterhead, indicating that Manny would first be able to send Denny motorcycles on March 1, FOB: Fast Delivery Service (FDS). Denny noticed the different beginning date and the method of delivery, but did not contact Manny about the discrepancies. In the same fax, Manny also inquired as to how Denny wished to pay for the motorcycles. On January 5, Denny signed properly filled out Security Agreement – specifically for the motorcycles as inventory – giving “the motorcycles and all prior and after acquired property” as collateral. That same day, Manny also filed a properly completed Finance Statement with Washington State Department of Licensing. Manny notified BigBank in writing of his secured interest in the motorcycles.

On January 10, Denny purchased a big screen television for his shop/garage from Terry’s Television. Denny signed a properly filled out Security Agreement giving Terry as collateral “the television and all prior and after acquired property.” Terry filed a Financing Statement with King County Department of Licensing; Terry did not notify BigBank or Manny about the loan to Denny.

On March 1, the first two motorcycles arrived without problems. On March 15, Manny sent an email to Denny stating that he could only deliver one (1) motorcycle in April; however, he would send three motorcycles on May 1. On April 1, only one motorcycle arrived. On May 1, FDS picked up the three motorcycles to deliver them to Denny. Manny notified Denny that FBS has the three motorcycles. On the way, one of the motorcycles fell off the delivery truck and was destroyed. Denny wrote to Manny telling Manny that he (Denny) would not pay for the destroyed motorcycle. On June 1, Denny received two motorcycles, selling one the same day. On June 2, the customer who purchased the motorcycle on June 1st returned the motorcycle stating that the transmission was broken (manufacturing defect) when the customer first tried to ride the motorcycle. Denny called Manny in regard to the inoperable motorcycle; Denny told Manny that Manny had breached their agreement and that Denny was not going to perform his remaining obligations under the agreement.

On July 1, Denny went out of business. At the time Denny owed BigBank $90,000; he owed Manny $80,000 (including the destroyed motorcycle); and Terry $5000 for the television. BigBank foreclosed on Denny. BigBank properly contacted the King County Sheriff’s Department, which in turn repossessed all the property in Denny’s shop/garage. BigBank gave Manny and Terry 15-days’ notice of its intent to sell Denny’s property at a Sheriff’s Auction.

Denny has brought a breach of contract claim against Manny, averring that Manny has breached their agreement because of one of the motorcycles had a broken transmission. Manny has filed a counter claim asserting that Manny may not repudiate the contract and must continue to perform for the duration of the agreement.

Denny is not incorporated and would be personally liable for any debts or liabilities.

Part # 1: Agreement 45 Points

Using IRAC answer the following questions:
1. Determine the type of agreement between Denny and Manny. 5 Points
2. Was there a properly formed agreement between Denny and Manny? (You must analyze all elements of formation). 10 Points
3. Does the fact that Manny’s response differs from Denny’s initial inquiry void the agreement? 5 Points
4. Does the agreement comply with the Statute of Frauds? 5 Points
5. Was there a modification of the agreement; and if so was it valid? 5 Points
6. Who was at risk for the motorcycle which was destroyed while being shipped? 5 Points
7. Are there any warranties involved in regards to the motorcycle with the broken transmission? 5 Points
8. May Denny discontinue performance, because of the broken transmission? 5 Points

Part # 2: Credit 30 Points

Using IRAC answer the following questions:
1. Is BigBank’s secured interest a loan or a PMSI (If PMSI, what type)? Has it attached and has it been perfected? 5 Points
2. Is Manny’s secured interest a loan or a PMSI (If PMSI, what type)? Has it attached and has it been perfected? 5 Points
3. Has Terry’s secured interest a loan or a PMSI (If PMSI, what type)? Has it attached and has it been perfected? 5 Points
4. Who (BigBank, Manny, or Terry) has priority for any funds derived from the sale of motorcycles at the Auction? 5 Points
5. Who (BigBank, Manny, or Terry) has priority for any funds derived from the sale of the television at the Auction? 5 Points
6. May BigBank, Manny, or Terry attempt to repossess any of the motorcycles purchases by Denny’s customers? 5 Points