Suppose that the name Red Rhino Market Group, LLC, had not been included on the note. Would Evans have been personally liable for its payment? Discuss.

Nancy Mahar was the office manager at Golden Years Nursing Home, Inc. She was given a signature stamp to issue checks to the nursing home's employees for up to $\$ 500$ as advances on their pay. The checks were drawn on Golden Years' account at First National Bank. Over a seven-year period, Mahar wrote a number of checks to employees exclusively for the purpose of embezzling funds for herself. She forged the employees' indorsements on the checks, signed her name as a second indorser, and deposited the checks in her personal account at Star Bank. The employees whose names were on the checks never actually requested them. When the scheme was uncovered, Golden Years filed a suit against Mahar, Star Bank, and others to recover the funds. Using the information presented in the chapter, answer the following questions.

What is the rule set forth by that provision?

On Evans's motion for summary judgment, what evidence did the opposing parties emphasize? Based on this evidence, what did the court conclude?

Nancy Mahar was the office manager at Golden Years Nursing Home, Inc. She was given a signature stamp to issue checks to the nursing home's employees for up to $\$ 500$ as advances on their pay. The checks were drawn on Golden Years' account at First National Bank. Over a seven-year period, Mahar wrote a number of checks to employees exclusively for the purpose of embezzling funds for herself. She forged the employees' indorsements on the checks, signed her name as a second indorser, and deposited the checks in her personal account at Star Bank. The employees whose names were on the checks never actually requested them. When the scheme was uncovered, Golden Years filed a suit against Mahar, Star Bank, and others to recover the funds. Using the information presented in the chapter, answer the following questions.

With regard to signature liability, which provision of the Uniform Commercial Code (UCC) discussed in this chapter applies to this scenario?

Material Alteration. Williams purchased a used car from Stein for $\$ 1,000$. Williams paid for the car with a check (written in pencil) payable to Stein for $\$ 1,000$. Stein, through careful erasures and alterations, changed the amount on the check to read $\$ 10,000$ and negotiated the check to Boz. Boz took the check for value, in good faith, and without notice of the alteration. He thus met the Uniform Commercial Code's requirements for the status of a holder in due course. Can Williams successfully raise the universal (real) defense of material alteration to avoid payment on the check? Explain. (See Defenses and Limitations.)

Negotiation. Bertram writes a check for $\$ 200$ payable to "cash." He puts the check in his pocket and drives to the bank to cash the check. As he gets out of his car in the bank's parking lot, the check slips out of his pocket and falls to the pavement. Jerrod walks by moments later, picks up the check, and later that day delivers it to Amber, to whom he owes $\$ 200$. Amber indorses the check "For deposit only, [signed] Amber Dowel" and deposits it into her checking account. In light of these circumstances, answer the following questions:

(a) Is the check a bearer instrument or an order instrument?

(b) Did Jerrod's delivery of the check to Amber constitute a valid negotiation? Why or why not?

(c) What type of indorsement did Amber make?

(d) Does Bertram have a right to recover the $\$ 200$ from Amber? Explain. (See Negotiation.)

Warranties. Milan purchased saffron extract, marketed as "America's Hottest New Way to a Flat Belly," online from Dr. Chen. The website stated that recently published studies showed a significant weight loss (more than $25$ percent) for people who used pure saffron extract as a supplement without diet or exercise. Dr. Chen said that the saffron suppresses appetite by increasing levels of serotonin, which reduces emotional eating. Milan took the extract as directed without any resulting weight loss.

(a) The first group will determine whether Dr. Chen's website made any express warranty on the saffron extract or its effectiveness in causing weight loss.

(b) The second group will discuss whether the implied warranty of merchantability applies to the purchase of weightloss supplements.

(c) The third group will decide if Dr. Chen's sale of saffron extract breached the implied warranty of fitness for a particular purpose.

(d) The fourth group will evaluate the possible success of a suit against a company that offers weight-loss products requiring no diet or exercise given that, according to current common knowledge, people must burn more calories than they consume to lose weight.

A Question of Ethics-The IDDR Approach and Priorities. Roger Rand loaned funds to Frank Welte to buy farm equipment. Security agreements were executed for the loans, and under these agreements, Welte could not transfer the equipment without Rand's consent. Rand perfected his security interest in the collateral by filing a financing statement with the office of the Iowa secretary of state. Welte later sold two tractors bought with the funds to his son Matthew for about $20$ percent of the tractors' market value. Rand died several years later. On behalf of his estate, the Security National Bank of Sioux City, Iowa, filed a petition in an Iowa state court to obtain possession of the equipment that secured the loan to Welte. Regarding the tractors in Matthew's possession, Welte argued that his son had acquired them free of Rand's interest under an implied course of dealing with the lender that allowed Welte to sell equipment in which Rand had a security interest without Rand's permission.

(a) Use the IDDR approach to evaluate the ethics behind Welte's argument that his "course of dealing" with Rand allowed him to sell collateral for much less than its market value.

(b) Suppose that First State Bank had loaned Matthew the funds to buy the tractors in exchange for a purchasemoney security interest. Could Welte successfully assert that this interest was superior to any interest Rand might have in the tractors? Explain.

How did the rules of contract construction apply in this case?

A Question of Ethics-The Doctrine of Precedent. Sandra White operated a travel agency. To obtain lower airline fares for her nonmilitary clients, she booked military-rate travel by forwarding fake military identification cards to the airlines. The government charged White with identity theft, which requires the "use" of another's identification. The trial court had two cases that represented precedents.

In the first case, David Miller obtained a loan to buy land by representing that certain investors had approved the Loan when, in fact, they had not. Miller's conviction for identity theft was overturned because he had merely said that the investors had done something when they had not. According to the court, this was not the "use" of another's identification.

In the second case, Kathy Medlock, an ambulance service operator, had transported patients when there was no medical necessity to do so. To obtain payment, Medlock had forged a physician's signature. The court concluded that this was "use" of another person's identity. [United States v. White, $846$ F.$3$d $170$ ($6$th Cir. $2017$)] (See Sources of American Law.)

• Which precedent-the Miller case or the Medlock caseis similar to White's situation, and why?

• In the two cases cited by the court, were there any ethical differences in the actions of the parties? Explain your answer.

Business Case Problem with Sample AnswerDefenses. Thomas Klutz obtained a franchise from Kahala Franchise Corporation to operate a Samurai Sam's restaurant. Under their agreement, Klutz could transfer the franchise only if he obtained Kahala's approval and paid a transfer fee. Without telling Kahala, Klutz sold the restaurant to William Thorbecke. Thorbecke signed a note for the price. When Kahala learned of the deal, the franchisor told Thorbecke to stop using the Samurai Sam's name. Thorbecke stopped paying on the note, and Klutz filed a claim for the unpaid amount. In defense, Thorbecke asserted breach of contract and fraud. Are these defenses effective against Klutz? Explain.

The Brown family owns several companies, including the J. H. Stevedoring Company and Penn Warehousing and Distribution, Inc. Many aspects of the companies' operations and management are intertwined. Dennis Bishop worked for J. H. and Penn for more than ten years before he became the financial controller at J. H. His responsibilities included approving invoices for payment and reconciling the corporate checkbook. In December of the following year, Bishop began stealing from Penn and J. H. by writing checks on the corporate accounts and using the funds for his own benefit (committing the crime of embezzlement). Several members of the Brown family signed the checks for Bishop without hesitation because he was a longtime, trusted employee. Over the next two years, Bishop embezzled more than $\$ 1.2$ million. He used $\$700,000$ to buy horses from the Fasig-Tipton Company and Fasig-Tipton Midlantic, Inc., with Penn and J. H. checks made payable to those firms. When Bishop's fraud was revealed, J. H. and Penn filed a suit in a federal district court against the Fasig-Tipton firms (the defendants) to recover the amounts of the checks made payable to them. Using the information presented in the chapter, answer the following questions.

Do the defendants in this situation (the two Fasig-Tipton firms) meet the requirements to be HDCs? Why or why not?

Insurance Coverage. PAJ, Inc., a jewelry company, had a commercial general liability (CGL) policy from Hanover Insurance Company. The policy required PAJ to notify Hanover of any claim or suit against PAJ "as soon as practicable." Yurman Designs sued PAJ for copyright infringement because of the design of a particular jewelry line. Because PAJ did not realize that the CGL policy had a clause that covered infringement claims, it did not notify Hanover of the suit until four to six months after litigation began. Hanover contended that the policy did not apply to this incident because the late notification had violated its terms. PAJ sued Hanover, seeking a declaration that it was obligated to defend and indemnify (reimburse) PAJ for any loss resulting from the infringement claim. (See The Insurance Contract.)

(a) The first group will decide whether Hanover had an obligation to provide PAJ with legal assistance.

(b) The second group will determine the effect that PAJ's late notice to the insurance company had on its ability to provide assistance and mount a defense. Should the court require the insurance company to indemnify PAJ in this situation? Why or why not?

Holder in Due Course. Robert Triffin purchased a dishonored payroll check from Fair Law Financial Services (doing business as United Check Cashing) and filed a complaint against the maker seeking to collect on the check. The check was issued by Extensis Group, LLC, to Maria Pagan in the amount of $\$ 610$. The face of the check clearly stated "THE FACE OF THIS DOCUMENT HAS A COLORED BACKGROUND NOT A WHITE BACKGROUND." But the check that Triffin introduced into evidence had a white background. The check also stated, "THE BACK OF THIS DOCUMENT CONTAINS A UNIQUE IDENTITY BARCODE AND AN ARTIFICIAL WATERMARK-HOLD AT AN ANGLE TO VIEW," but Triffin's check did not have this barcode or watermark. Was Triffin an HDC? Why or why not?