Sage Brushes is looking to buy materials for its brushes.

List and explain the eight principles of contract formation they will want to follow under UCC Article 2 (include (1) the three basic principles, (2) the three writing and enforceability requirements, and (3) what happens to added and different terms. Do not worry about the merchant exception here.

Question #2 (5 points):
Review the section on Negotiability in Ch. 15 (15-1c).

Leakproof Inc received a promissory note from Pilot Industries.

1. List (in bullet points) the six things Leakproof will look for to determine if the note is negotiable?
2. Explain why these requirements are necessary for a court to determine the intent of the parties. What is negotiability and how do these requirements enable negotiability?

Question #3 (5 points):
Review the sections on Attachment (section 16-2) and Perfection (section 16-3) in Ch. 16.

U.S. Bank has loaned $1,000,000 to ClearWater so it can purchase water purification equipment. As part of the loan agreement, a security agreement is signed in which ClearWater puts up as collateral the purification equipment that it will acquire with the loan. U.S. Bank makes the loan and ClearWater purchases the equipment.

1. What are the requirements for attachment and are they met here? How are they met? What means of attachment are not applicable in this case?
2. How would the loan officer for U.S. Bank perfect its interest as a creditor? Be specific as to what needs to be done by U.S. Bank. What are two other ways to perfect a security interest that are not applicable here?

Sample Solution