Denny has had a life-long dream of selling, restoring, and
repairing motorcycles. On January 1, Denny went to BigBank
and obtained a $100,000 line of credit to start his business.
Denny properly signed a Security Agreement giving BigBank
collateral in all “after acquired property.” On January 2,
BigBank filed a properly prepared Financing Statement with the
Washington Department of Licensing. With the line of credit
from BigBank Denny purchased equipment such as tools, and
other goods to outfit his store/ garage (which he already owns
free and clear of any mortgage).
On January 3, Denny called Manny – a builder of
motorcycles – to see if he (Denny) could order two motorcycles
the first of every month for the next six (6) months; beginning in
February (Each motorcycle is worth $10,000 wholesale). On
January 4, Manny faxed Denny, on Manny’s business letterhead,
indicating that Manny would first be able to send Denny
motorcycles on March 1, FOB: Fast Delivery Service (FDS).
Denny noticed the different beginning date and the method of
delivery, but did not contact Manny about the discrepancies. In
the same fax, Manny also inquired as to how Denny Wished to
pay for the motorcycles. On January 5, Denny signed properly
filled out Security Agreement – specifically for the motorcycles
as inventory – giving “the motorcycles and all prior and after
acquired property” as collateral. That same day, Manny also
filed a properly completed Finance Statement with Washington
State Department of Licensing. Manny notified BigBank in
writing of his secured interest in the motorcycles.
On January 10, Denny purchased a big screen television for
his shop/ garage from Terry’s Television. Denny signed a
properly filled out Security Agreement giving Terry as collateral
“the television and all prior and after acquired property.” Terry
filed a Financing Statement with King County Department of
Licensing; Terry did not notify BigBank or Manny about the
loan to Denny.
On March 1, the first two motorcycles arrived without
problems. On March 15, Manny sent an email to Denny stating
that he could only deliver one (1) motorcycle in April; however,
he would send three motorcycles on May 1. On April 1, only
On March 1, the first two motorcycles arrived without
problems. On March 15, Manny sent an email to Denny stating
that he could only deliver one (1) motorcycle in April; however,
he would send three motorcycles on May 1. On April 1, only
one motorcycle arrived. On May 1, FDS picked up the three
motorcycles to deliver them to Denny. Manny notified Denny
that FBS has the three motorcycles. On the way, one of the
motorcycles fell off the delivery truck and was destroyed. Denny
wrote to Manny telling Manny that he (Denny) would not pay
for the destroyed motorcycle. On June 1, Denny received two
motorcycles, selling one the same day. On June 2, the customer
who purchased the motorcycle on June lSt returned the
motorcycle stating that the transmission was broken
(manufacturing defect) when the customer first tried to ride the
motorcycle. Denny called Manny in regard to the inoperable
motorcycle; Denny told Manny that Manny had breached their
agreement and that Denny was not going to perform his
remaining obligations under the agreement.
On July 1, Denny went out of business. At the time Denny
owed BigBank $90,000; he owed Manny $80,000 (including the
destroyed motorcycle); and Terry $5000 for the television.
BigBank foreclosed on Denny. BigBank properly contacted the
King County Sheriff’s Department, which in turn repossessed all
the property in Denny’s shop/ garage. BigBank gave Manny and
Terry lS-days’ notice of its intent to sell Denny’s property at a
Sheriff’s Auction.
Denny has brought a breach of contract claim against
Manny, averring that Manny has breached their agreement
because of one of the motorcycles had a broken transmission.
Manny has filed a counter claim asserting that Manny may not
repudiate the contract and must continue to perform for the
duration of the agreement.
Denny is not incorporated and would be personally liable for
any debts or liabilities.
Part # 1: Agreement 45 Points
Using IRAC answer the following questions:
1. Determine the type of agreement between Denny and
Manny. 5 Points
Part # 1: Agreement 45 Points
Using IRAC answer the following questions:
1. Determine the type of agreement between Denny and
Manny. 5 Points
2. Was there a properly formed agreement between Denny
and Manny? (You must analyze all elements of formation).
10 Points
3. Does the fact that Manny’s response differs from Denny’s
initial inquiry void the agreement? 5 Points
4. Does the agreement comply with the Statute of Frauds? 5
Points
5. Was there a modification of the agreement; and if so was it
valid? 5 Points
6. Who was at risk for the motorcycle which was destroyed
while being shipped? 5 Points
7. Are there any warranties involved in regards to the
motorcycle with the broken transmission? 5 Points
8. May Denny discontinue performance, because of the
broken transmission? 5 Points
Part # 2: Credit 30 Points
Using IRAC answer the following questions:
1. Is BigBank’s secured interest a loan or a PMSI (If PMSI,
what type)? Has it attached and has it been perfected? 5
Points
2. Is Manny’s secured interest a loan or a PMSI (If PMSI,
what type)? Has it attached and has it been perfected? 5
Points
3. Has Terry’s secured interest a loan or a PMSI (If PMSI,
what type)? Has it attached and has it been perfected? 5
Points
4. Who (BigBank, Manny, or Terry) has priority for any funds
derived from the sale of motorcycles at the Auction? 5
Points
5. Who (BigBank, Manny, or Terry) has priority for any funds
derived from the sale of the television at the Auction? 5
Points
6. May BigBank, Manny, or Terry attempt to repossess any of
the motorcycles purchases by Denny’s customers? 5 Points