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I. Course Summary and Class Structure
This course will generally introduce you to the mechanisms by which actors in commercial transactions (business deals) make payments (e.g., by cash, check, credit/debit card, wire transfer, etc.). In this course, we will learn how these payment transactions occur (i.e., what pieces of “commercial paper” are traded among the parties and how) and how state and federal law governs the rights and obligations of the parties to a payment transaction. We will spend a good deal of time on the checking system, including the rules governing how banks processes checks, but we will also discuss other important systems, such as credit and debit cards, electronic payments and wire transfers, letters of credit, and even investment securities holdings (don't worry--you'll know what all of this is by the end of the course!).
In making our way through the coursebook, we will spend most of our time working through problems to see how these rules apply to fact scenarios that you might encounter in practice or in your private life. The cases in the book are for illustration only--I will generally NOT discuss them or ask you to discuss them in class. To maximize the potential for productive classroom discussion, I will try to limit the length of assignments, and you should be thoroughly prepared to work the problems. I suggest that, the first time the coursebook calls for reference to a section of the UCC or other law, you read the section carefully and at least skim the official comments in the UCC. These comments, while not “law” per se, are often helpful to an understanding of the provision of law, and courts often rely on them in interpreting difficult or ambiguous sections of the UCC. If, for whatever reason, you feel as though you are not able to participate effectively in class discussion, please let me know (with a note or quick comment) before class. You may excuse yourself from class discussion as often as necessary, but keep in mind 1) I will focus on those who have opted out of the previous class discussion in the next class meeting, and 2) your grade for this class may be affected by your performance in class discussion (see below in “Evaluation”).
II. Course Goals
The primary goal of this course is to develop in each of you a facility to work with the UCC and other state and federal statutes and regulations in analyzing and solving problems relating to mechanisms for making payments--and toHAVE FUN doing it! By the end of this course, you should be able to do the following:
appreciate and explain to a consumer or business client the advantages and disadvantages of making a payment using, e.g., a check, credit or debit card, wire transfer or other form of electronic payment, or letter of credit;
classify the various types of payment devices and the state and federal rule(s) governing such devices (e.g., Articles 3, 4, 4A, and 5 of the Uniform Commercial Code, Truth in Lending Act, Electronic Fund Transfers Act, etc.);
evaluate and assess compliance with legal requirements for the creation, use, and collection of checks and promissory notes, including the rules applicable to fraudulent misuse of these devices and others, such as credit and debit cards;
interpret any given provision of the Uniform Commercial Code, both in isolation and in the broader context of the UCC as a whole and the system of making and processing payments in the United States;
and ultimately, synthesize the applicable rules to analyze and evaluate fact hypotheticals to determine any given payor-, payee-, or bank-client's legal position with respect to any given payment device.
III. Required Materials
Ronald Mann, Payment Systems and Other Financial Transactions(4th ed. 2008), Aspen, ISBN 978-0-7355-7647-6.
A recent version of the Uniform Commercial Code and related commercial laws and regulations. I have ordered one very good statutory supplement for the bookstore, Comprehensive Commercial Law Statutory Supplement (Ronald J. Mann, Elizabeth Warren, Jay Lawrence Westbrook eds., Aspen Law & Business), but any similar recent supplement will do.
You will be evaluated primarily based on your performance on one final examination consisting of multiple-choice (and perhaps short answer) problems of the type we have worked in class. You may bring with you and refer to during the exam anything that is neither alive nor disturbing to other students. Class participation is especially important to me, however, so I reserve the right to adjust your final grade up or down by as much as a full letter grade, though most likely no more than a + or - based on the quality (not necessarily quantity) of your contribution. You do not necessarily have to announce the "correct answer" immediately to receive an upward adjustment--concerted and reasoned efforts to grasp the materials, and especially voluntary and well-reasoned responses to questions posed in class, may lead to an upward adjustment. Extreme absenteeism, frequent requests to be excused from class discussion, and failure to be prepared for the next class after being excused from class discussion, will provide the basis for a downward adjustment.
One assignment per class meeting, 26 assignments over 13 weeks:
1. Properly Payable Checks Read Intro to Part One and Assignment 1, work Problem Set 1 (skip 1.6)
2. Funds Availability Read Assignment 2 and work Problem Set 2 (skip 2.2(c) and (d), 2.5, and 2.6)
3. Collection and Payment Read Assignment 3 and work Problem Set 3 (skip 3.6-3.8)
4. Collection cont'd Complete Problem Set 3 and read Assignment 22 part A only.
5. Negotiability Read Assignment 22 and work Problem Set 22
6. Negotiation and Liability Read Assignment 23 and work Problem Set 23
7. Holders in Due Course Read Assignment 24 and work Problems 24.1, 24.2, and 24.5
8. Check Problems: General Rules Read Assignment 4 and work Problem Set 4 (skip 4.5, 4.7, and 4.8)
9. Check Fraud: Special Rules Read Assignment 5 and work Problem Set 5 (skip 5.2(c), (d), (e) and (f))
11. Check Truncation Finish Negotiable Instruments Review Problems; read Assignment 6 and work Problem 6.5
12. Credit Cards: System Read Assignment 7 and work Problem Set 7 (skip 7.6)
13. Credit Cards: Error & Fraud Read Assignment 8 and work Problem Set 8
14. Debit Cards Read Assignment 9 and EFTA §§ 908 and 909 and work Problem Set 9 (skip 9.3 and 9.7)
15. E-Checks and ACH Payments Read Assignment 10 and work Problems 10.3 - 10.5 and 10.6(a) and (d)
16. Internet Payments (including PayPal) Read Assignments 14 and 15, and work Problems 14.1, 14.2, 14.3, 15.1, and 15.3
17. Stored Value Cards Work Problems 15.5 and 15.6, read pp. 327-32, and work Problems 16.1, 16.2, and 16.4
18. Wire Transfers Read Assignment 11, along with pp. 249-56 (part A.1.), 258-59, 263-65 (part B.), and 268-71 (part A.), and work Problems 11.1, 11.3 (pp. 245-46), 12.1, 12.4 (pp. 265-66) and 13.3 (p. 286).
19. Interest Rates, Late & Prepayment Review carefully the promissory note at pp.353-57 and be prepared to discuss.
20. Guarantees (Suretyship) Read Assignment 17 and use the Guaranty on pp. 357-61 to work Problem Set 17
21. Protections for Guarantors (Suretyship Defenses) Read Assignment 18 (skip “C,” pp. 374-76), compare UCC § 3-605 (2002 revised version) with 810 ILCS 5/3-605, read 740 ILCS 155/0.01, and work Problem Set 18 (skip 18.2 and 18.3(a)).
22. Letters of Credit: System Read Assignment 19 and work Problem Set 19
23. Letters of Credit: Error, Fraud, Etc. Read Assignment 20 and work Problem Set 20
24. Standby Letters of Credit Read Assignment 21 (skip “B.1.” pp. 419-22) and work Problems 21.1, 21.2, and 21.5
25. Investment Securities Read Assignment 26 and work Problems 26.1, 26.3, and 26.4
26. Flex day for missed classes, makeup, or Q&A session for exam review discussion.