BUSINESS LAW

Sample Problems Consideration

1. Ray borrowed $25,000 from Lenny on January 1, and agreed to pay it back on June 1.

(a) On June 2, Ray telephoned Lenny and explained that he was having financial problems. In that conversation, Lenny promised Ray that if Ray paid him $20,000, he would take that amount in full satisfaction of Rays debt. The next day, Ray sent Lenny a check for $20,000 on which Ray had written in full satisfaction of my loan obligation. Lenny cashed the check and then sued Ray for $5,000. Judgment for whom? Explain.

(b) Instead of the facts in (a), assume that on June 2, Lenny called Ray and told him that if Ray, who worked for a concert promoter, would get him four front row tickets for a hot concert the next month (which were worth $1,000) , Lenny would take $20,000 in full satisfaction of Rays obligation. The next day, Ray gave Lenny $20,000 and the four concert tickets Lenny had asked for. Lenny cashed the check, went to the concert and two months later, sued Ray for $4,000. Judgment for whom? Explain.

2. Claire and Jack entered into a contract by which Claire was to repair and restore Jacks classic motorcycle for $10,000. After the services were performed, Claire and Jack got into a dispute about whether the services had been properly performed. Jack claimed that Claire had not performed all of the services called for and that he therefore only owed Claire $7,500. Claire agreed that she had not performed all of the services, but argued that the value of what she had done was $9,500.

(a) After arguing back and forth for several weeks, Jack sent Claire a check for $7,500, on which he had written in full payment of contract for repair and restoration of motorcycle. Claire cashed the check, without making any further notations on it, and then sued Jack for the remaining $2,000 she claims is due. What result? Explain.

(b) Assume that Claire received the check but, before cashing it, wrote under protest and then sued Jack for the $2,000 she claims is due. What result? Explain.

3. Abbott purchased several thousand DVDs from Costello at a price of $50,000. The DVDs were delivered on November 1 and payment was due on November 15. On November 10, Abbott and his staff inspected all the DVDs, discovered that a number of them were defective and notified Costello that he (Abbott) only owed $35,000 for those DVDs that were not defective. Costello, however, said that all of the DVDs were fine when Costello sent them. Costello argued that Abbott must have stored them improperly, causing the defects, and that Abbott owed the full $50,000.

After several days of arguing on the phone, Abbott sent Costello a check for $38,000, on which he had written, In full payment for DVDs purchased. Costello endorsed and deposited the check and then sued Abbott for $12,000.

Judgment for whom? Explain fully.

(b) Assume Costello deposited Abbotts check, but added the words under protest before he endorsed it. Judgment for whom? Explain.