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End of Ch. 23 - Beginning of Ch. 26

by: Sarah Sierra

End of Ch. 23 - Beginning of Ch. 26 BLAW 3311 - 001

Sarah Sierra

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Hello, I hope these notes will be useful to you....I also have voice recordings for EVERY class lecture. If you're interested in those as well please contact me by my email and we can make a deal :...
John V Dowdy
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This 8 page Class Notes was uploaded by Sarah Sierra on Friday April 15, 2016. The Class Notes belongs to BLAW 3311 - 001 at University of Texas at Arlington taught by John V Dowdy in Spring 2016. Since its upload, it has received 12 views. For similar materials see LAW II in Business Law at University of Texas at Arlington.


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Date Created: 04/15/16
1. Tort theories (breach of warranties) a. Negligence – plaintiff has a burden i. There’s not a warranty cause of action, there’s just a blanket disclaimer. So the plaintiff’s attorney sues for negligence. Is the disclaimer of warranty going to be a good defense in tort cause of action? No, because disclaimers is a contract defense in a contract cause of action. Breach of warranty is a contract cause of action and this is a tort defense. ii. Negligence – defective product case. 1. Early on, the courts had a requirement of what’s called privity case. A lot times in a defective product case, you have three defective parties, the manufacturer (defendant), the dealer (defendant), and the costumer (plaintiff). The plaintiff in a defective product case can make out a cause of action against the defendant. That the plaintiff has to be in privity with that defendant, now privity is a contact concept, meaning direct contractual relationship. In this case, the plaintiff’s privity would be the dealer. The privity is not required if the plaintiff can meet the tracing burden, the plaintiff does not see negligence in the dealer but see it in the manufacturer. The plaintiff has to prove that the product left the manufacturing in the same conditions in which it was expected to and ultimately did reach the consumer without intervening change in the condition in which it was sold. b. Elements to the Res Ipsa Loquitar – the thing speaks for itself. It’s way for the plaintiff’s attorney to make out a case, even though the plaintiff cannot prove a specific act of negligence. i. Injuring causing of instrumentality ii. Under the exclusive control of the defendant iii. The injury can only be explained by negligence iv. Case: coca cola vs. S cola, S cola bought a coca cola and before opening the bottled, the bottle exploded in his hand causing him severe personal injuries. S cola attorney filed suit against the bottling company with whom S cola was not in privity. Plaintiff’s attorney raised the theory of ‘res ipsa loquitar.” The question was why did the bottle explode? They didn’t know, for some reason the pressure inside the bottle was greater than the outside. Secondly, exclusive control of the defendant. If the plaintiff can prove that the product left the manufacturer in the same condition, the plaintiff met the tracing burden. Thirdly, what happened would not have happened after the pursuit of negligence. And so, the negligence started at the bottling company. c. Strict liability – liability in regardless of fault, it a non-fault theory. i. Another tort theory, its distinguishable from negligence because negligence is a fault paradigm. There are two types of paradigm: fault paradigm and reciprocal risk paradigm. ii. Restatement 1. Primary authority – a statute passed by the legislator, which is actable, case law and statutory law. 2. Legal commentary (secondary authority)- law book publishers a. Attorney will go into court and call out secondary authority, but its best if you can try primary authority. For example, what you use the restatement for? To read the commentary and find in that commentary primary authority, because that’s what I want to sight in court. Every once in awhile an attorney will sight secondary authority after sighting primary authority and saying for example, Texas jury prudence sums up these cases thusly. 3. Pg. 143 – 145 breakdown of sec 402A of strict liability a. Elements of strict liability – this liability applies even thought the seller (merchant) has exercise all possible care in the preparation of the sale of product. i. The product should be in a defect or strict condition when the defendant sells it, when the product left the defendant possession. ii. The defendant is a merchant dealing in goods with that kind iii. The product must be unreasonably dangerous to the user or consumer because of its defective condition iv. The plaintiff must incur physical harm to self or property by user or by product. v. The defective conditions must be proximate cost of the injury or the damages vi. The goods must not have been substantially changed from the time the product was sold to the time the injury was sustained. 4. Strict liability comes to play when the product was defective, not because the consumer used it wrong. IV. Negotiable Instruments Law (uniform commercial code) a. Assignments (review) 1) Law of assignments is important for contract law and also important because if you don’t understand the law of assignment, you will not understand the law of negotiable instruments. 2) A>K<b (b performs services for a and a give B money) B has a contract right to C to collect the money making B the assignor and C the assignee. C has the right to the collect the money from A; A has a defense against B either failure of consideration or some form of duress or misrepresentation (innocent or fraud of the inducement), undue influence, mistake. Anything to make the contract voidable. i. Article 3 of UCC: four kinds of instruments: 1. Drafts (orders to pay) – three party instruments, where you have a drawer, drawee, payee. The drawer is ordering the drawee to pay money to a payee. 2. Checks (orders to pay) - is a specialized form of draft. What separate a check from a generic draft? Well, in a check, the drawee is the bank. 3. Certificate of deposit (promises to pay) 4. Promissory notes (promises to pay) a. A has a promissory note payable to B. B winds up transfer negotiation to C. C is now the holder. Why did A sign the note payable to B? Because there’s an underlining contract. i. First element: its negotiable inform ii. Second element: The holder of the instrument is called the holder in due course. 1. Rights consists of personal defenses: a. Failure to consents b. Misrepresentation c. Fraud in the inducement i. Lets say, A was belly aching, he was defrauded. C has presented the note to A for payment, and A wants to assert one or more of these defenses. So, C attorney bring a lawsuit against A. The evidence that A and his attorney wants to introduce on any of these defense is inadmissible. The defenses do not apply. Why? Because C’s lawsuit is on the note. And those defenses all apply to the underlying contract. A could have asserted those defenses against B; because B was an underlying contract but was not an underlying to that contract. C lawsuit is based on the note, and not the underlying contract. However, if C was the assignee of an assignment contract then these defenses do apply. d. Undue influence e. Most duress f. Mistake b. If C says to pay the note but A says he didn’t sign that note then there’s a real defense (if these two elements are present, the instrument is negotiable and the instrument is in the hands of the holder in due courses, will then the law of negotiable instruments applies.) i. Real defenses: 1. Forgery a. A says he never signed a note and never seen the note in his life, however, it does has his signature on it. That is forgery. 2. Material alteration a. Lets say A did sign the note, and when the time comes to pay it. A notice the decimal was moved over and A then points out that’s not what he signed for. 3) What if one of these elements is not present? Either the instrument is not negotiable or C is not a holder in due course, or maybe both are missing. Does that mean the instrument is no good? No, it just means that if one of these elements is missing we don’t apply the law of negotiable instruments; we default to the law of assignments. Meaning exposure to all the defenses. Chapter 25 – The function and creation of negotiable instruments b. Introduction to negotiable instruments – drafts, checks, certificates of deposit and promissory notes and their functions 1) Why do these instruments have these special treatments? Lets take an example, a check. To pay a bill, the check goes through a payee and once its received to the drawee (bank); the check might go through several hands. Same thing with promissory notes. These instruments are substitutes for cash. c. Requirements for negotiability (sec. 3-104) 1) In writing and signed i. No such thing as an oral instrument. 2) Unconditional promise or order to pay i. If it is a CD or promissory note, that is a promise to pay. Checks and drafts are order to pay. Unconditional means that it is absolutely payable. The note should not say, pay to Billy Bubba Hawkins IF …. 3) Sum certain in money and no other requirement for discharge i. Has to be payable in money, if a note say I promise to pay Billy bubba $5000 or it equivalent in peace court. That would be no negotiable because the maker in the note would have the options of discharging the note in some other way than the payment of the money. Well the maker of the note or if the drawee with the check or draft has the option of doing that then the instrument is not negotiable. Now it goes without saying that the holder of the instrument always has the option of accepting something. Sum certain in money, meaning let’s say Billy bubba promise to pay a reasonable amount of money. What’s the reasonable amount? Well, that would be non negotiable. To have a sum certain, what that means is that you would have to be able to look at the face of the instrument and determine what amount is required to discharge at any given time. For example, lets say it’s a promissory note; maybe the maker of the note signed the note last year. Now, we are several months in the terms of the note. Can you look at the face of the note, presupposing that it is current, and be able to tell is when is the day to discharge it. 4) Payable on demand or at a definite time i. What’s a demand instrument? An instrument is one that is payable anytime the holder demands payment. Like a check is a demand instrument. Payable at a definite time, what if the instrument does not state a time? Well by default, its going to be payable when on demand. What if its not a demand instrument, then that means it has to be payable at a definite time. So, if the note recites that the maker of the note will pay Billy Bubba when the maker of the note gets the money. That is not payable at a definite time. Payable at a definite time means its payable on a specific date or before a date. 1. Acceleration clause- giving the holder the right to call the note. If the note was due on April 14, 2016 but the maker of the note was over due by two weeks then the holder has the right to accelerate it. The most prevalent was missing the pay statement. 5) Payable to order to bearer i. That means that there’s a name payee. What if there’s not a name payee, then it will have to payable to bearer (whoever has the note). Chapter 26 – transferability and holder in due course d. Holder 1) Holder in due course rule. Section 3-302 (a) of UCC. i. What it takes for a transferee to be a holder in due course: A>instrument<B>>C (C is the holder in due course) 1. Pay in full value a. Has to give B something. 2. C has to take the instruments in good faith a. There are no red flags in which surrounds that instruments. 3. C has to take the instruments without notice that is it over due or dishonored or any defenses of the instrument. 2) Shelter provision. Section 3-203 (b) of UCC. i. The transfer of an instrument invests in the transferee whatever rights the transferor has in that instrument. And these can include in holder in due course. D can be a holder in due course id C has those rights. e. Negotiation and endorsement 1) Bearer paper 2) Order paper 3) Types of endorsement i. Blank ii. Special iii. Restrictive iv. Unqualified v. Qualified


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