Section
Business Law
• Regal finance Company, Ltd. and Regal Finance Company II, Ltd., Petitioners, v. Tex Star Motors, Inc
In the case at bar, TexStar was a used car dealer. Every time it sold cars, it allowed buyers to pay in installments, thereby extending credit to them. In turn, it sold these notes with full recourse to Regal. Regal would pay the amount of the note, effectively the loan amount, less $750 which would be deposited in the reserve. Should the buyer default in its payment, TexStar would be obliged to repurchase the amount of the note less $2,000. Such amount would then be drawn by Regal from the reserve. To fund the purchase of notes, Regal had an agreement with Bank One, which required the former to maintain a 5% reserve requirement. Every time the reserve fell below the agreed level, TexStar would then deposit additional money. However, at a certain time, Bank One refused to renew the credit line and TexStar likewise declined to collect notes nor repossess vehicles in Regal’s behalf. Thus, Regal was compelled to sell the repossessed vehicles.
The court here determined that the contract should prevail. Since it agreed to the contract wherein Regal would hold all reserve amounts until all contracts or notes have been paid, TexStar is obliged to honor such. In this instance, a used car dealer when disposing of such collateral should comply with the provisions of the law requiring the party to proceed in a commercially reasonable manner. As a purchaser of chattel paper with full recourse, then what has been negotiated is a negotiable instrument. The holder itself is then immune from the defenses of the prior holding parties. In such case, Regal is not required to provide notice to TexStar, prior to selling or auctioning off the repossessed vehicles.
Briefing Paper 2: Law Case with Answers
• Read Mitsch v. Rockenbach Chevrolet - Cheeseman textbook page 260-261
Mitsch purchased a used SUV from Rockenbach Chevrolet. In his purchase, he signed an “as is” agreement wherein the buyer is responsible for any defects that are present or may have been present. In short, the buyer has no recourse over the seller in terms of the quality of the vehicle purchased.
It was alleged that the “as is’ disclaimer was not conspicuous and should be voided. I, as a consumer would agree with Mitsch, that such cannot have been assumed to be conspicuous, as such cannot be proven with certainty. The agreement was a contract of adhesion, and the law states that such contracts would bind the maker, since he was the one who drafted such condition. However, in this case, it cannot totally bind the buyer if he can prove that during the transaction, he was not given a choice to reject the agreement. In short, it has to be proven that he has been given an adequate and clear chance to read, understand and reject the contract should he decide to do so.
On another note, without such evidentiary proof, the contract of “as is” should be given due course, depending on the circumstances surrounding the case. In the purchase of second hand vehicles, it can be safely assumed that the buyer is well aware of the possible defects surrounding the product. In doing so, he is willing to shoulder the risk of such defects, in exchange for a cheaper price as compared with buying a brand new vehicle. However, to hold the “as is” contract, the seller must prove that the price paid has been reasonable and equitable enough, in that the buyer has availed of a discount, in exchanged for the risk attendant.
Briefing Paper 3: Critical Legal Thinking Cases
In fraudulent transfer, the respondent here transferred the property pending the loan obligation. Such has been clearly made to defeat the existing obligation .
Meanwhile, in the case pertaining to the buyer in the ordinary course of business, the purchaser who has made a payment in good faith was made liable for the seller’s short comings, where the vehicle was actually listed as a collateral for financing .
In battle of the forms Miller’s negatives were lost and were never used by Newsweek. The Delivery Memo as Miller contended were valid and enforceable contracts despite being a common practice in photojournalism .
These matters are commonplace in the American business environment. Usually, individuals who are unable to pay would consider fraudulently transferring the property as a means of holding on to it, making the foreclosure even more costly and prolonged for the counterparty.
Meanwhile, in terms of forms, a lot of contracts are considered contracts of adhesion and sometimes are not given the proper notice and acknowledgement it deserves. Due to its commonplace existence, like for instance in the insurance agreements, most parties fail to discuss it, except when in hindsight, that conflict has already taken place.
Lastly for buyers in the ordinary course of business, once it has been proven that such has been made in good faith, the buyer cannot be made liable for the transaction. However, he shall be required to return the product in exchange for damages or reimbursement.
Briefing Paper 4: Ethics Case
In the Ethics case, Abatti was the sole owner of A&M, who purchased machinery from FMC. It trned out however that the equipment was defective. Since the contract provided A&M with no recourse, Abatti was unable to return or get a replacement for the defective purchases. The question is thus, is the contract unenforceable for being unconscionable?
In this case, it was a contract of adhesion, which once again was made purely by the seller, without any input from the buyer. Contracts of adhesion have to be construed strictly against the maker, and must be liberally construed as to the buyer to give full force to the intent of the parties.
FMC has clearly protected itself from any liability as the terms of the contract would suggest. However, in doing so, it has impliedly allowed itself to commit fraud without recourse to the buyer. In that sense, the contract must not be interpreted so strictly to disadvantage the other party. Such contract does not provide the buyer any recourse, which is as any one would see is unconscionable. The law was made to be just and in doing so, it has to ensure that the rights and obligations of the parties are fairly imposed. Thus, that part of the contract must be void. However, a contract with voidable portions may still be upheld, in terms of the other conditions contained therein which may not prejudice any of the parties unfairly.
Works Cited
Daniel Miller, Plaintiff, v. Newsweek, Inc., 660 F. Supp. 852 (District Court of Delaware May 20, 1987).
In the Matter of Peter and Geraldine TABALA, Debtors., Bankr. S.D.N.Y. 1981 (New York Bankruptcy Court May 21, 1981).
Indianapolis Car Exchange v Alderson, 910 N.E.2d 802 (Indianapolis Appellate Court 2009).
