Welcome to the Week 4 podcast for the course Advanced Business Law. This week’s
topic is “Debtor/Creditor Relationships.”
In the melodramas of the 1800s, one familiar character was the evil landlord that
entered the stage to the boos and hisses of the audience, where he inevitably showed
no mercy towards the lovely heroine and her family. The debtor-creditor relationship has
advanced significantly since those days. Contracts and collateral, as well as a wide area
of negotiable instruments, provide both options and protection to the parties in a
transaction.
What is the difference between an unsecured loan and a secured loan? What is a bill of
lading and why is it needed? This week you will be introduced to these different types of
agreements that may be formulated between a creditor and a debtor, as well as the
various tools or negotiable instruments that may be used in the transactions.
By the end of this week you will be able to:
•
Identify the different types of negotiable instruments, their purposes, and the
parties to each type
•
Differentiate between the parties and terminology in connection with both
unsecured and secured credit transactions
•
Demonstrate the requirements for creating a valid security interest by
attachment
•
Evaluate the methods that can be used to establish the priority of a security
interest through perfection
•
Explain the general and special priority rules for security interests and the
rights of creditors upon a debtor’s default
Let’s look at an overview of the resources that you’ll be using this week. This week’s
topic is “Debtor/Creditor Relationships.”
Read Chapter 14, titled “Negotiable Instruments,” and Chapter 16, titled “Creditors’
Rights and Bankruptcy,” from the course text Business Law Today: The Essentials.
Chapter 14 details the concept of negotiable instruments, including the different types of
negotiable instruments, how they may be transferred, and the different types of liability
that can be associated with these instruments. The first section of Chapter 16 focuses
on the topic of creditors’ rights. You will be introduced to the concept of security and
explore laws protecting both creditors and debtors.
This week, you will participate in one Discussion. Here is the prompt for the topic,
“Strategic Default”:
Due to fluctuations in the housing market, some investors may discover that they have
purchased property at the most inopportune time. With market values falling, individuals
may find themselves in the inauspicious position of owing much more than the property
is currently valued at—they are “underwater” on their mortgage.
Conduct online research regarding the concept of a strategic default, then respond to
the following questions:
•
Should the collateral be the only exposed asset if there is a secured transaction?
Should the creditor be able to go after the debtor beyond the collateral?
•
Should it be different if the default is on a home mortgage versus a car loan?
•
As a business consultant, one of your clients is considering a strategic default on
her home mortgage. What advice would you give her?
With these thoughts in mind:
Post an initial statement by Day 3 that expresses your thoughts on strategic default.
The length of your response should be a minimum of 150 words.
Read a selection of your colleagues’ postings.
Respond by Day 5 to two or more of your colleagues’ postings in one or more of the
following ways:
•
Ask a probing question.
•
Share an insight from having read your colleague’s posting.
•
Offer and support an opinion.
•
Make a suggestion.
•
Expand on your colleague’s posting.
Return to this Discussion in a few days to read the responses to your initial posting.
Note what you learned and the insights you gained as a result of the comments your
colleagues made.
Be sure to support your work with specific citations from the Learning Resources and
any additional sources.
This week, you will complete two Application Assignments. The topic of the first
assignment is “Security Interests.”
In extending high-risk credit to individuals or businesses, it is often necessary for the
lenders to have some means of protecting themselves from default or bankruptcy on the
part of the debtor. One of the mechanisms that can help protect creditors from the
effects of bankruptcy or default is the establishment of a security interest.
In a 2- to 3-paragraph paper, respond to the following:
•
How do you go about creating a security interest?
•
Why would you even want to create a security interest?
•
How do security interests facilitate businesses being able to borrow money?
•
Lastly, why is perfection so important in connection with security interests?
Your written assignments must follow APA guidelines. Be sure to support your work with
specific citations from this week’s Learning Resources and additional scholarly sources
as appropriate.
Save your Application as a “.doc” or “.rtf” file with the filename “APP4A+last name+your
first initial”. For example, Sally Ride’s assignment filename would be “APP4ARideS”.
Use the Submit an Assignment link, choose the Week 4: Application 1 Dropbox, and
then add your Application as an attachment.
Submit your Application Assignment to the Dropbox by Day 7.
The topic of the second Application Assignment is “Negotiable Instruments.”
Negotiable instruments are among the most common tools for financial transactions.
Whether a check, a draft, a promissory note or a certificate of deposit, negotiable
instruments allow for business transactions to occur more smoothly, while legally
protecting the parties involved.
Using the information presented in the scenario below respond to the following in a 1- to
2-page paper:
Mary has started a company that will provide computer hardware and software for
processing orders for companies who sell moderately high volumes of merchandise
over the Internet. For a typical customer, Mary will sell a hardware and software
package to the customer along with a multiyear maintenance contract, typically 2, 3, or
4 years. The customer will incur a significant up-front charge for the equipment, followed
by monthly charges for the maintenance plan. Mary plans to allow her customers to pay
for the equipment itself over the time of the maintenance plan. Thus, if the customer
gets a 3-year maintenance plan, the customer will have up to 3 years to pay for the
equipment. In order to acquire its facilities and equipment, Mary’s company will need to
borrow money. Discuss the common situations where Mary’s company is likely to make
use of negotiable instruments, and in particular, the risks associated with the use of
negotiable instruments.
Your written assignments must follow APA guidelines. Be sure to support your work with
specific citations from this week’s Learning Resources and additional scholarly sources
as appropriate.
Save your Application as a “.doc” or “.rtf” file with the filename “APP4B+last name+your
first initial”. For example, Sally Ride’s assignment filename would be “APP4BRideS”.
Use the Submit an Assignment link, choose the Week 4: Application 2 Dropbox, and
then add your Application as an attachment.
Submit your Application Assignment to the Dropbox by Day 7.
This week, you will complete a Tutorial Quiz. It is recommended that you complete the
Tutorial Quiz by Day 7 of the week.
This week, you have a Forward Thinking note to keep in mind after you complete this
week’s assignments.
Next week, you will participate in a group simulation of a bankruptcy negotiation. You
may want to look ahead and read through the parameters of the Application
Assignment, so that when you receive your role assignment, you will be ready to move
forward.

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