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5 Cards in this Set

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Lease Disguised Security Interest?
(a) Parties will call it a lease, and refer to themselves as lessor/lessee. BUT if you see a lease and question asks what law governs, raise this issue b/n art 2A and Art 9.
(b) Key fact to look for – they’ll give you details from the lease, and will ask what law governs
(c) Is lessee building some equity or ownership interest? If so then disguised security interest.
(d) If lessee actually becomes owner of the goods, either as nominal buyout or otherwise, not truly a lease. Facts triggering – small buyout at the end where lessee must buy at the end, or if it’s worth nothing at the end.
Finance Lease
(a) 3 party transaction
(1) Lessor doesn’t manufacture sell select the goods, almost always bank, or financial institution as lessor.
(2) Lessor buys the goods for purpose of leasing it;
(3) Lessee is made aware fo the terms of K b/n lessor and seller/supplier.
(b) Ex. car lease
(1) Quintessential finance lease. Lessee selects the goods from manufacturer. Supplier sells it to financial institution who leases it to lessee
(c) Importance
(1) Warranties do not come from lessor. They come from supplier.
Disputes under 2A
(a) Lesse v. lessor
(1) Think art 2 – they closely parallel art 2 provisions, e.g., parol evidence, express warranties, implied warranties. No 2-207 here.
(2) Finance leases
(i) Claim against supplier not lessor
(b) Lessor (or Lessee) v. 3rd Person
(1) Similar to Art 9 (but no filing requirement or perfected for leases).
ART 3 – NEGOTIABLE INSTRUMENTS: Types of Instruments
(a) Promissory Notes (Most common along with checks)
(1) Two Party Instruments
(i) Obligor (Maker)
1. Person who makes payment
(ii) Obligee (Payee/Holder)
1. Person who receives payment
(2) A promise to pay money
(3) Includes negotiable certificate of Deposits issued by banks
(i) Most are non-negotiable and not w/in art 3.
(4) Jane Jones (Maker b/c it’s signed by her) promises to pay to the order of Joe Smith (If he issues the note he’s Payee and if he has possession also holder) 10k on 6/1/06. signed.
(b) Drafts (including Checks)
(1) 3 party instrument
(i) Obligor (Drawer not maker) person who signs it and is responsible for payment
(ii) Obligee (Payee/Holder)
(iii) Drawee (draft is an order by drawer to drawee to pay on behalf of drawer). When you sign a check you’re ordering your bank to pay on your behalf whoever you write check to.
(2) Checks
(i) Always negotiable
(ii) Art 3 and Art 4 governs
1. Art 3 governs
a. Responsibility of drawer or indorser to pay the check
b. Forgery of checks
c. Effect on obligations – most checks are based on some obligation – issuance of the check and the underlying debt
2. Art 4 governs
a. Banks obligation to process the check; and
b. Bank’s relationship w/ customer, i.e., time of payment
What makes check a draft?
1. The word “pay” alone makes it a draft. You can have drafts that are not checks, e.g., if issued form bank and payable on demand.
2. Jane Smith, b/c she signs it is obligor call “drawer” b/c she’s drawing on her account with the bank.
3. 1st bank of DE is drawee – person to whom order to pay is directed. Jane is ordering them to pay Joe 10k.
4. Joe Jones – payee –
5. Signatures of drawer on negotiable instruments