Disposition of Collateral. Dustin Mosely financed the purchase of two cars with a loan from Show-Me Credit Union (SMCU). When Mosely stopped making payments on the loan, SMCU notified him that it intended to repossess the cars and dispose of them at a "private or public" sale. After the sale, the creditor filed a suit in a Missouri state court to recover the difference between the sale price and the outstanding debt. Mosely counterclaimed that SMCU had failed to give proper notice before repossessing the vehicles. Public and private sales of collateral are significantly different methods of disposition. Did SMCU's failure to specify the type of sale, either public or private, at which the creditor would dispose of the collateral violate the UCC's notice requirement? Explain

Woodridge USA Properties, L.P., bought eighty-seven commercial truck trailers from Southeast Trailer Mart, Inc. (STM). Gerald McCarty, an independent sales agent who arranged the deal, showed Woodridge the documents of title. They did not indicate that Woodridge was the buyer. Woodridge asked McCarty to sell the trailers, and within three months they were sold, but McCarty did not give the proceeds to Woodridge. Woodridge—without mentioning the title documents— asked STM to refund the contract price. STM refused. Does Woodridge have a right to recover damages from STM? Explain. [Woodridge USA Properties, L.P. v. Southeast Trailer Mart, Inc., 412 Fed.Appx. 218 (11th Cir. 2011)] (See Remedies of the Buyer or Lessee.)

Business Case Problem with Sample AnswerPerfection of a Security Interest. G&K Farms, a North Dakota partnership, operated a farm in Texas. G&K was insured under the Supplemental Revenue Assistance Payments Program (SURE), through which the federal government provides financial assistance for crop losses caused by natural disasters. PHI Financial Services, Inc., loaned G&K $\$ 6.6$ million. PHI filed a financing statement that described the collateral as the debtor's interest in "Government Payments." The document did not refer to the farm's crops. G&K defaulted on the loan. Later, G&K received a SURE payment for crop losses and transferred some of the funds to its law firm, Johnston Law Office, P.C., in payment for services. PHI brought an action against Johnston to recover those funds as partial payment on its loan to G& K. Johnston argued that PHI did not have a perfected security interest in the SURE payment because the financing statement did not identify the crops. Was the description of the collateral in the financing statement sufficient? Why or why not?

Disposition of Collateral. With a loan of $1.4$ million euros from Barclays Bank, PLC, Thomas Poynter bought a yacht. The loan agreement gave Barclays multiple stand-alone options on default. One option required the lender to give ten days' advance notice of a sale. A different option permitted the lender to avoid this requirement. When Poynter did not repay the loan, Barclays repossessed the yacht and notified Poynter that it would be sold-but did not specify a date, time, or place. Two months later, the yacht was sold. The sale price was less than Poynter owed, and Barclays filed a suit in a federal district court for the deficiency. Is Barclays entitled to collect even though it did not give Poynter ten days' advance notice of the sale? Explain.

Requirements Contracts. Medalist Golf, Inc., a high-end golf course builder, was working on a new golf course project in Missouri. Chris Williams, doing business as Cane Creek Sod, submitted a bid with Medalist to provide Meyer Zoysia grass sod for the project. Williams and Medalist executed a "grass supplier agreement" that specified the type and quality of grass to be used, as well as the price, and gave Medalist a right to inspect and reject the sod. The parties estimated the quantity of sod needed for the project to be twenty-one acres. Williams had approximately sixtyfive acres of Meyer Zoysia grass sod growing at the time. The agreement did not specify the amount of sod that Medalist would purchase from Williams, nor did it say that Medalist would buy Williams's sod exclusively. Later, when Medalist had an expert inspect William's sod (before it was harvested), the expert concluded that it did not meet the quality standards required for the project. Medalist therefore rejected the sod. Williams sued for breach of contract. Was the "grass supplier agreement" enforceable as a requirements contract? Why or why not?

B.S. International, Ltd. (BSI), makes costume jewelry. JMAM, LLC, is a wholesaler of costume jewelry. JMAM sent BSI a letter with the terms for orders, including the necessary procedure for obtaining credit for items that customers rejected. e letter stated, “By signing below, you agree to the terms.” Steven Baracsi, BSI’s owner, signed the letter and returned it. For six years, BSI made jewelry for JMAM, which resold it. Items rejected by customers were sent back to JMAM, but were never returned to BSI. BSI led a suit against JMAM, claiming $41,294.21 for the unreturned items. BSI showed the court a copy of JMAM’s terms. Across the bottom had been typed a “PS” requiring the return of rejected merchandise. Was this “PS” part of the contract? Discuss. [B.S. International, Ltd. v. JMAM, LLC, 13 A.3d 1057 (R.I. 2011)]

Guillermo and Guadalupe Albarran and their sons, Ruben and Rolando, owned R. Cleaning Impact, Inc. (RCI). Neresh Kumar owned Amba II, Inc., a check-cashing business. The Albarrans cashed checks through Amba on a regular basis, often delivering a stack of employee paychecks to Amba for cashing. Later, the Albarrans’ bank refused payment on some of the checks. Kumar learned that some of these items were payable to fictitious payees with fictitious addresses. Others had been filled out for amounts greater than real employees’ pay. Meanwhile, RCI became insolvent and closed its account, and Guillermo and Guadalupe filed for bankruptcy. Amba was left with many unpaid checks. Among these parties, who can be held liable for the loss on the unpaid checks? Explain. [Albarran v. Amba II, Inc., 2016 WL 688924 (2016)]

Perfecting a Security Interest. Thomas Tille owned M.A.T.T. Equipment Co. To operate the business, Tille borrowed funds from Union Bank. For each loan, Union filed a financing statement that included Tille's signature and address, the bank's address, and a description of the collateral. The first loan covered all of Tille's equipment, including "any after-acquired property." The second loan covered a truck crane "whether owned now or acquired later." The third loan covered a "Bobcat mini-excavator." Did these financing statements perfect Union's security interests? Explain.

Defenses. Niles sold Kennedy a small motorboat for $\$ 1,500$, telling Kennedy that the boat was in excellent condition. Kennedy gave Niles a check for $\$ 1,500$, which Niles indorsed and gave to Frazier for value. When Kennedy took the boat for a trial run, she discovered that the boat leaked, needed to be painted, and required a new motor. Kennedy stopped payment on her check, which had not yet been cashed. Niles had disappeared. Can Frazier recover from Kennedy as a holder in due course? Discuss. (See Defenses and Limitations.)

Signature Liability. Waldo makes out a negotiable promissory note payable to the order of Grace. Grace indorses the note by writing on it "Without recourse, Grace" and transfers the note for value to Adam. Adam, in need of cash, negotiates the note to Keith by indorsing it with the words "Pay to Keith, Adam." On the due date, Keith presents the note to Waldo for payment, only to learn that Waldo has filed for bankruptcy and will have all debts (including the note) discharged. Discuss fully whether Keith can hold Waldo, Grace, or Adam liable on the note. (See Signature Liability.)

The Bank-Customer Relationship. Euro International Mortgage, Inc. (EIM), held two accounts-Account $9378$ and Account $3998$-at Bank of America. Ravi Kadiyala was an authorized signatory on Account 9378 but not on Account $3998$. Through EIM, Kadiyala obtained a username and password to gain access to Account $3998$, from which he transferred $\$ 200,000$ to Account $9378$ . He then instructed the bank to issue cashier's checks against the new balance in Account $9378$. Meanwhile, Mark Pupke, an authorized signatory on both accounts, learned what Kadiyala had done and told the bank to cancel the checks and reverse the transfer. Does the bank have a duty to honor either party's request? If so, whose? Why?

Disposition of Collateral. PRA Aviation, LLC, borrowed $\$ 3$ million from Center Capital Corp. to buy a Gates Learjet $55$B. Center perfected a security interest in the plane. Later, PRA defaulted on the loan, and Center obtained possession of the jet. The market, design, and mechanical condition of similar aircraft were reviewed to estimate the jet's value at $\$ 1.45$ million. The jet was marketed in trade publications, on the Internet, and by direct advertising to select customers for $\$ 1.595$ million. There were three offers. Center sold the jet to the highest bidder for $\$ 1.3$ million. Was the sale commercially reasonable? Explain.

Paul Barton owned a small property-management company, doing business as Brighton Homes. In October, Barton went on a spending spree. First, he bought a Bose surround-sound system for his home from KDM Electronics. The next day, he purchased a Wilderness Systems kayak and roof rack from Outdoor Outfitters, and the day after that he bought a new Toyota 4-Runner financed through Bridgeport Auto. Two weeks later, Barton purchased six new iMac computers for his office, also from KDM Electronics. Barton bought each of these items under an installment sales contract. Six months later, Barton's property-management business was failing. He could not make the payments due on any of these purchases and defaulted on the loans. Using the information presented in the chapter, answer the following questions.

Suppose that after KDM Electronics repossesses the surround-sound system, it decides to keep the system rather than sell it. Can KDM do this under Article $9$? Why or why not?

Paul Barton owned a small property-management company, doing business as Brighton Homes. In October, Barton went on a spending spree. First, he bought a Bose surround-sound system for his home from KDM Electronics. The next day, he purchased a Wilderness Systems kayak and roof rack from Outdoor Outfitters, and the day after that he bought a new Toyota 4-Runner financed through Bridgeport Auto. Two weeks later, Barton purchased six new iMac computers for his office, also from KDM Electronics. Barton bought each of these items under an installment sales contract. Six months later, Barton's property-management business was failing. He could not make the payments due on any of these purchases and defaulted on the loans. Using the information presented in the chapter, answer the following questions.

Which of these purchases would qualify as a PMSI in consumer goods?