1. This is a limited open book examination. During the examination you may consult the
Keating casebook on sales, the Neustadter materials on Article 9 (both electronic and hard
copy), Selected Commercial Statutes (or other copy of the Uniform Commercial Code), class
handouts, and any notes, outlines, charts, or other form of written work product that you
have prepared yourself or in cooperation with another student or students enrolled in the
class. You may not consult any other sources.
2. Apply Revised Article 9 of the Uniform Commercial Code (not existing Article 9)
where applicable. If required to apply the Commercial Code provisions of a specific state,
assume that such provisions are identical to the provisions of the Uniform version.
3. Support your answers with explanation and analysis. Reference to specific Uniform
Commercial Code section numbers is not necessary to receive full credit.
4. I look for ability to identify issues, demonstrated understanding of legal
principles and relationships, skill in using the statutory law we have studied, accuracy,
clarity and creativity of analysis, and organization and conciseness of response.
5. Time estimates stated for each question reflect the approximate weight given to each
question. The estimates also reflect my best guess as to the relative length or difficulty
of a question for most students. The time estimates are:
Question 1: 75 minutes
Question 2: 30 minutes
Question 3: 45 minutes
Question 4: 60 minutes
Question 1 (75 minutes)
The University of Maine ("University") annually honors those members of its
faculty who have served the University for twenty-five years by presenting each of them
with an engraved plaque at a faculty appreciation dinner. At the faculty appreciation
dinner of Friday, April 7, 2000, the University presented plaques to two members of the
faculty. A third plaque was presented to the brother of a faculty member who had died
shortly before the dinner. The University Provost held two additional plaques intended for
two faculty members who were on leave and therefore did not attend the dinner.
Each plaque was engraved with the name and seal of the University, the name of the
faculty member, and the following words:
In appreciation for your 25 years of dedicated
service to the University, students, and stuff.
April 8, 2000
The date was wrong by one day (the University's written order had provided the words
for the engraving, including the date April 7, 2000) and a typographical error had
resulted in the word "stuff" instead of "staff."
Maine Trophy delivered the plaques to the University in March, 2000, two weeks before
delivery was due. Nonetheless, no employee of the University had noticed the errors prior
to the faculty appreciation dinner, because Maine Trophy had packaged each plaque in a
custom box wrapped with gift paper and a silver bow, as had been its practice for the many
years in which it had provided plaques to the University.
The two faculty members who received a plaque opened their boxes the next week, placed
the plaques on their desks, but did not notice the errors. The Provost did not notice the
errors because he did not open the boxes containing the plaques for the two faculty
members on leave. The brother of the deceased faculty member immediately noticed one of
the errors ("stuff" instead of "staff") but never mentioned it to the
University because he thought the error was humorous and fit the eccentric personality of
his deceased brother.
A few days after the dinner, Professor Oldstadter, who had also served 25 years but had
not received a plaque or been recognized at the dinner, informed the Provost of the
oversight. After profusely apologizing, the Provost immediately ordered another plaque
from Maine Trophy. Maine Trophy's engraver, using the same template that she had used in
engraving the other plaques, noticed and corrected one of the errors ("stuff"
instead of "staff") before engraving the additional plaque, but she forgot to
mention the correction of the error or the fact of the earlier error to her boss. Maine
Trophy promptly delivered the new plaque to the Provost, but in its haste forgot to wrap
the plaque in accordance with its prior practice. When the Provost received and looked at
the plaque, he noticed the error in the date and opened the other two packages that he was
holding to see if they had the same error. He noticed the same error in the date and also
noticed the other error ("stuff" instead of "staff").
Because the plaques were quite expensive and because the Provost was annoyed by rude
treatment by an employee of Maine Trophy, the Provost instructed the University
Controller's Office to withhold payment for any of the six plaques pending a determination
of the University's rights against and obligations to Maine Trophy.
What are the rights of the University against and the obligations of the University to
Maine Trophy? Assume that U.C.C. Article 2 applies to the transaction. Do not discuss any
formation issues. If appropriate, include a discussion of remedies under Part 7 of U.C.C.
Article 2.
Basic Facts for Questions 2 - 4
Carlos Morales, resident of South Lake Tahoe, California, owned a valuable collection
of rare books. The books were on indefinite loan to and in the possession of the Rose
Garden Public Library ("Library"), located in North Lake Tahoe, Nevada. The
Library permits patrons to read the rare book collection on the premises but does not
permit patrons to borrow them.
Carlos approached ABC Finance ("Finance") for a $40,000 loan, to be used in
part to help finance his sister's education and in part to retain a lawyer as counsel to a
non-profit association Carlos wanted to form to help preserve Lake Tahoe from the adverse
consequences of development. Carlos offered the books as collateral. Finance was willing
to make the loan, secured by the books (which would remain on loan to the Library).
Question 2 (30 minutes)
a. Is it lawful for Finance to take a security interest in the rare books?
b. Would the case for the lawfulness of the security interest be aided if Carlos sent
the Library an e-mail message informing it that the Library should hold the books as
collateral for a loan from Finance and if the Library forwarded Carlos' e-mail message to
Finance as an attachment to its own e-mail message to Finance that read in full as
follows: "We received the attached from Carlos Morales."
Question 3 (45 minutes)
Assume that a security interest in favor of Finance in the rare books is permissible.
Finance advanced Carlos the funds and Carlos signed a note and security agreement in favor
of Finance. The security agreement described the collateral as "goods" and did
not otherwise describe the collateral. The Library did not send Finance the e-mail message
referred to in Question 2 nor did it otherwise acknowledge that it was holding the books
for the benefit of Finance. Finance did not file a financing statement.
Carlos defaulted in payments on the note three months after receiving the loan.
Following the default, Finance obtained possession of the books from the Library
(without breaching the peace) and sent Carlos a proposal to accept the books in
satisfaction of $25,000 of the $40,000 debt. (Even though Carlos had made three payments,
interest accumulations after default had brought the amount owing back up to $40,000.)
Carlos did not respond to the proposal. Six months after sending the proposal, Finance
sued Carlos for $15,000, plus accumulated interest.
a. What is your advice to Carlos about the prospects for a successful claim against
Finance for conversion?
b. Assuming an unsuccessful claim for conversion, what is your advice to Carlos about
the prospects for defending against the claim for $15,000 plus interest?
Question 4 (60 minutes)
All dates specified below are in the same year.
Assume that a security interest in favor of Finance in the rare books is permissible.
On February 15, the following events occurred: Finance advanced Carlos the funds and
Carlos signed a note and security agreement in favor of Finance. The security agreement
described the collateral as "the following rare books: [stating the title and author
of each book]." The Library did not send to Finance the e-mail message referred to in
Question 2 but did write down for itself and kept in the appropriate file a note that it
was holding the rare books on behalf Finance. Finance did not file a financing statement.
On September 15, the Library temporarily returned the books to Carlos because of
remodeling of the Library. On the same day, the Library notified Finance that it had
returned the books to Carlos. On September 20, Finance filed a financing statement,
containing the information required by U.C.C. 9-502(a), with the office named in Nevada
Commercial Code 9-501(a)(2).
On September 25, Carlos sold 1/2 of the rare books to a bookstore for $5,000. The
bookstore is located in California. The bookstore did not know about the security interest
when it took delivery of the books.
On September 30, Finance filed a financing statement, containing the information
required by U.C.C. 9-502(a), with the California Secretary of State. The filing office
accepted the financing statement for filing even though it failed to contain the debtor's
mailing address.
On November 5, Carlos delivered the remaining rare books to his next door neighbor in
settlement of the neighbor's claim that a leak from a broken water line on Carlos'
property had damaged the neighbor's property. The neighbor resides in California. The
neighbor did not know about the security interest when he took delivery of the books.
Carlos defaulted on payments to Finance and Finance learned about the delivery of the
books to the bookstore and to the neighbor. Finance has written to the bookstore and the
neighbor demanding that they surrender the books to Finance. You represent both the
bookstore and the neighbor. What will you advise each about the merits of the demand by
Finance. In addition to whatever other sections you may deem appropriate, consult U.C.C.
9-520, 9-201(a), 9-315, 9-317, and 9-320. We have not previously discussed three of these
sections and the purpose is to test your skill in reading and applying statutory language.
