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Business Law: Terry and Valerie (cat-sitting) & Betty's new car

1) Terry has a business in which he visits with client's pet cats in the client's home while the client is out of town. The primary purpose is to prevent the cats from becoming psychotic due to the owner's absence. Terry contracted to visit Valerie's cat daily for a two-week period when Valerie was on vacation. Because Terry charged by the hour, Valerie gave Terry a signed check with the amount blank for Terry to fill in based on $10 per hour. While visiting with Valerie's cat, Terry noticed a check on Valerie's desk that had the amount of $100 filled in, but no payee and no signature. Terry took the check, converted the $100 to $1,000 and signed Valerie's name. Terry then filled out the check that Valerie had given him in the amount of $10,000, rather than the $200 he had earned at $10 per hour. Terry transferred both checks to a holder in due course, who later seeks payment from Valerie. How much must Valerie pay to a holder in due course of these checks?

2) Betty purchases a car, signing the following note in payment.

"I, Betty, hereby promise to pay to commercial Auto, Inc., the sum of $1,200, on or before March 1, 2002, as payment in full for my car.

(Signed) Betty."

Betty received her car, used it for several weeks until it stopped working. Commercial Auto had guaranteed the car for one year, but they refused to fix it. Meanwhile, Commercial had sold the note to Third Bank, for $1,000. This represented the fair market value of the note as discounted. Third Bank had purchased this note in the normal course of business, in good faith, and had no knowledge that Betty's car was faulty. On March 1, 2002, Third Bank demanded payment from Betty, who refused. Bank sued. Discuss the probable outcome of this suit, assuming that this is not a consumer credit transaction.

Solution Preview

1. Terry has a business in which he visits with client's pet cats in the client's home while the client is out of town. The primary purpose is to prevent the cats from becoming psychotic due to the owner's absence. Terry contracted to visit Valerie's cat daily for a two-week period when Valerie was on vacation. Because Terry charged by the hour, Valerie gave Terry a signed check with the amount blank for Terry to fill in based on $10 per hour. While visiting with Valerie's cat, Terry noticed a check on Valerie's desk that had the amount of $100 filled in, but no payee and no signature. Terry took the check, converted the $100 to $1,000 and signed Valerie's name. Terry then filled out the check that Valerie had given him in the amount of $10,000, rather than the $200 he had earned at $10 per hour. Terry transferred both checks to a holder in due course, who later seeks payment from Valerie. How much ...

Solution Summary

The solution examines the law under cat sitting. How much the owner must pay to a holder in due course of the checks are analyzed. A situation of Betty purchasing a new car is analyzed. The solution examines a new car which stops working with a year warranty. The laws the surround this situation are analyzed.

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