Case study business law

22.1 Note Sandra McGuire and her husband entered into a contract to purchase the inventory, equipment, accounts receivable, and name of “Becca’s Boutique” from Pascal and Rebecca Tursi. Becca’s Boutique was a clothing store that was owned as a sole proprietorship by the Tursis. The McGuires agreed to purchase the store for $75,000, with a down payment of $10,000 and the balance to be paid at a specified date in the future. The promissory note signed by the McGuires read: “For value received, Thomas J. McGuire and Sandra A. McGuire, husband and wife, do promise to pay to the order of Pascal and Rebecca Tursi the sum of $65,000.” Is the note an order to pay or a promise to pay? P. P. Inc. v. McGuire, 509 F.Supp. 1079, Web 1981 U.S. Dist. Lexis 17984 (United States District Court for the District of New Jersey)

22.2 Negotiable Instrument William H. Bailey, M.D., executed a note payable to California Dreamstreet, a joint venture that solicited investments for a cattle breeding operation. Bailey’s promissory note read: “Dr. William H. Bailey hereby promises to pay to the order of California Dreamstreet the sum of $329,800.” Four years later, Dreamstreet negotiated the note to Cooperative Centrale Raiffeisen-Boerenleenbank B.A. (Cooperatieve), a foreign bank. A default occurred, and Cooperatieve filed suit against Bailey to recover on the note. Is the note executed by Bailey a negotiable instrument? Coop-eratieve Centrale Raiffeisen-Boerenleenbank B.A. v. Bailey, 710 F.Supp. 737, Web 1989 U.S. Dist. Lexis 4488 (United States District Court for the Central District of California)

22.5 Order to Pay Sana Travel Services, Ltd. (Sana), was a travel agency located in New York. Sana was negotiating with Al-Bank Turismo, a Brazilian company, to secure additional business in that country. To expedite negotiations, one of Sana’s directors, Attaullah Paracha, made out a check for $33,000, payable to the order of “Jamil Ahmed Kahn, Al-Bank Turismo.” On the check Paracha wrote “Just to hold for the security of future business.” Paracha then sent the check to Kahn in Brazil. Kahn, Al-Bank’s owner, indorsed the check and sold it to Jurandi Carador, a Brazilian citizen. Carador then arranged for the check to be presented to the National Bank of Pakistan, Sana’s New York bank. When the bank received the check, it telephoned Sana, which directed the bank to dishonor the check. Sana claims that the notation on the check “Just to hold” rendered the instrument conditional and made it a nonnegotiable instrument. Is the check a negotiable instrument? Carador v. Sana Travel Services, Ltd., 876 F.2d 890, Web 1989 U.S. App. Lexis 10488 (United States Court of Appeals for the Second Circuit)

25.1 Cashier’s Check Dr. Graham Wood purchased a cashier’s check in the amount of $6,000 from Central Bank of the South (Bank). The check was made payable to Ken Walker and was delivered to him. Eleven months later, Bank’s branch manager informed Wood that the cashier’s check was still outstanding. Wood subsequently signed a form, requesting that payment be stopped and a replacement check issued. He also agreed to indemnify Bank for any damages resulting from the issuance of the replacement check. Bank issued a replacement check to Wood. Seven months later, Walker deposited the original cashier’s check in his bank, which was paid by Bank. Bank requested that Woods repay the bank $6,000. When he refused, Bank sued Woods to recover this amount. Who wins? Wood v. Central Bank of the South, 435 So.2d 1287, Web 1982 Ala. Civ. App. Lexis 1362 (Court of Civil Appeals of Alabama)

25.2 Overdraft Louise Kalbe maintained a checking account at the Pulaski State Bank (Bank) in Wisconsin. Kalbe made out a check for $7,260, payable in cash. Thereafter, she misplaced it but did not report the missing check to the bank or stop payment on it. One month later, some unknown person presented the check to a Florida bank for payment. The Florida bank paid the check and sent it to Bank for collection. Bank paid the check even though it created a $6,542.12 overdraft in Kalbe’s account. Bank requested Kalbe pay this amount. When she refused, Bank sued Kalbe to collect the overdraft. Who wins? Pulaski State Bank v. Kalbe, 122 Wis.2d 663, 364 N.W.2d 162, Web 1985 Wisc.App. Lexis 3034 (Court of Appeals of Wisconsin)

25.5 Postdated Check David Siegel maintained a checking account with the New England Merchants National Bank (Bank). On September 14, Siegel drew and delivered a $20,000 check payable to Peter Peters. The check was dated November 14. Peters immediately deposited the check in his own bank, which forwarded it for collection. On September 17, Bank paid the check and charged it against Siegel’s account. Siegel discovered that the check had been paid when another of his checks was returned for insufficient funds. Siegel informed Bank that the check to Peters was postdated November 14 and requested that the bank return the $20,000 to his account. When Bank refused, Siegel sued for wrongful debit of his account. Must Bank recredit Siegel’s account? Siegel v. New England Merchants National Bank, 386 Mass. 672, 437 N.E.2d 218, Web 1982 Mass. Lexis 1559 (Supreme Judicial Court of Massachusetts


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