Clark_11e-AM-Ch24.doc - 191 C HAPTER 24 T HE F UNCTION AND...

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Unformatted text preview: 191 C HAPTER 24 T HE F UNCTION AND C REATION OF N EGOTIABLE I NSTRUMENTS A NSWER TO C RITICAL A NALYSIS Q UESTION IN THE F EATURE I NSIGHT INTO THE G LOBAL E NVIRONMENT C RITICAL T HINKING I NSIGHT INTO THE S OCIAL E NVIRONMENT ? (P AGE 490) What are the disadvantages of not being able to endorse checks to other parties? An inability to endorse checks to other parties can hinder the transferability of a check, and transferability is one of the features that makes negotiable instruments acceptable and attractive to business and commercial entities. A NSWERS TO Q UESTIONS AT THE E NDS OF THE C ASES C ASE 24.1Q UESTIONS (P AGE 495) 1A. Did Gowins delivery of the note to Granite Depot meet his capital contribution requirement without further payment? Why or why not? The Virginia Supreme Court agreed with Gowin that his delivery of the note qualified him for membership in the LLC but rejected the proposition that the delivery eliminated his liability on the note. The court explained, A provision in an operating agreement allowing a member's promissory note to satisfy the capital contribution requirement is an accommodation that allows a person to become a member before paying the full amount of the required capital contribution to the company at the moment of membership. The failure to pay the promissory note in accord with its terms, however, would be a failure to meet the capital contribution requirements. Thus [t]he delivery of the Note did not relieve Gowin of his obligation to pay the capital contribution he was required to make. 2A. Why is a note with no stated time for payment considered a demand note rather than an unenforceable note? The chief reason for holding that a note with no stated time for payment is a demand note instead of an unenforceable note is that the parties to it regard it as a binding obligation, as occurred in this case. Under other circumstances, however, a court might rule that the note is incomplete and for that reason invalid. 192 UNIT FIVE: NEGOTIABLE INSTRUMENTS C ASE 24.2(P AGE 498) T HE E-C OMMERCE D IMENSION If Foundation had sent CTP an e-mail threatening to accelerate the note each time CTPs payment was late, would this have been sufficient to support the holders eventual demand for full payment? Why or why not Yes, this would have been enough to support Foundations later demand for full payment, in acceleration of the note, because the court could have cited the e-mail as proof that the holder had not waived its right to exercise the acceleration clause. No, this would not have been enough to support the attempted exercise of the notes acceleration clause, because accepting a series of ten consecutive late payments, out of a total of sixteen, establishes a course of dealing to overlook the stated due dates....
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This note was uploaded on 10/11/2010 for the course MGT 301 taught by Professor Pederson during the Fall '10 term at SUNY Stony Brook.

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Clark_11e-AM-Ch24.doc - 191 C HAPTER 24 T HE F UNCTION AND...

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