Subject: Legal Environment Of Business – Recommended textbook for the subject: Cheeseman, H. R. Legal Environment of Business: Online Commerce, Ethics, and Global Issues. (CHAPTERS 12 & 13) – Answ 3

Subject: Legal Environment Of Business

– Recommended textbook for the subject: Cheeseman, H. R. Legal Environment of Business: Online Commerce, Ethics, and Global Issues. (CHAPTERS 12 & 13)

– Answer the following essay questions:

1. Brenda Brandt was admitted to Sarah Bush Lincoln Health Center (Health Center) to receive treatment for urinary incontinence.  During the course of an operation, the doctor surgically implanted a ProteGen Sling (sling) in Brandt. Subsequently, the manufacturer of the sling, Boston Scientific Corporation, issued a recall of the sling because it was causing medical complications in some patients. Brandt suffered serious complications and had the sling surgically removed. Brandt sued Boston Scientific Corporation and Health Center for breach of the implied warranty of merchantability included in Article 2 (Sales) of the Uniform Commercial Code (UCC). Health Center filed a motion with the court to have the case against it dismissed. Health Center argued that it was a provider of services and not a merchant that sold goods, and because the UCC (Sales) applies to the sale of goods, Health Center was not subject to the UCC. Health Center proved that Brandt’s bill was $11,174.50 total charge for her surgery, with a charge of $1,659.50, or 14.9%, for the sling and its surgical kit. 

Is the transaction between Brandt and Health Center predominantly the provision of services or the sale of goods? Explain your answer.

2. Executive Financial Services, Inc. (EFS), purchased three tractors from Tri-County Farm Company (Tri-County), a John Deere dealership owned by Gene Mohr and James Loyd. The tractors cost $48,000, $19,000, and $38,000. EFS did not take possession of the tractors but instead left the tractors on Tri-County’s lot. EFS leased the tractors to Mohr-Loyd Leasing (Mohr-Loyd), a partnership between Mohr and Loyd, with the understanding and representation by Mohr-Loyd that the tractors would be leased out to farmers. Instead of leasing the tractors, Tri-County sold them to three different farmers. EFS sued and obtained judgment against Tri-County, Mohr-Loyd, and Mohr and Loyd personally for breach of contract. Because that judgment remained unsatisfied, EFS sued the three farmers who bought the tractors to recover the tractors from them.

• What does the entrustment rule provide? Explain.
• Did Mohr and Loyd act ethically in this case?
• Who owns the tractors, EFS or the farmers?

3. Donald Wayne Doyle (Debtor) obtained a guaranteed student loan to enroll in a school for training truck drivers. Due to his impending divorce, Debtor never attended the program. The first monthly installment of approximately $50 to pay the student loan became due. Two weeks later, Debtor filed a voluntary petition for Chapter 7 bankruptcy. Debtor was a 29-year-old man who earned approximately $1,000 per month at an hourly wage of $7.70 as a truck driver, a job that he had held for 10 years. Debtor resided on a farm, where he performed work in lieu of paying rent for his quarters. Debtor was paying monthly payments of $89 on a bank loan for his former wife’s vehicle, $200 for his truck, $40 for health insurance, $28 for car insurance, $120 for gasoline and  vehicular maintenance, $400 for groceries and meals, and $25 for telephone charges. In addition, a state court had ordered Debtor to pay $300 per month to support his children, ages 4 and 5. Debtor’s parents were assisting him by buying him $130 of groceries per month.

• What legal standard must be met to have a student loan discharged in bankruptcy?
• Did Doyle act unethically in trying to have his student loan discharged in bankruptcy?
• Should Doyle’s student loan be discharged in bankruptcy?

4. PSC Metals, Inc. (PSC), entered into an agreement whereby it extended credit to Keystone Consolidated Industries, Inc., and took back a security interest in personal property owned by Keystone. PSC filed a financing statement with the state, listing the debtor’s trade name, “Keystone Steel & Wire Co.,” rather than its corporate name, “Keystone Consolidated Industries, Inc.” When Keystone went into bankruptcy, PSC filed a motion with the bankruptcy court to obtain the personal property securing its loan. Keystone’s other creditors and the bankruptcy trustee objected, arguing that because PSC’s financing statement was defectively filed, PSC did not have a perfected security interest in the personal property. If this were true, then PSC would become an unsecured creditor in Keystone’s bankruptcy proceeding. 

Is the financing statement filed in the debtor’s trade name, rather than in its corporate name, effective? Explain your answer.

5. Discuss the formation, performance, and remedies for breach of sales and lease contracts.