The chairs would not normally be expected to be received in a damaged state, so the argument could be made that these chairs were not received in the condition that one would expect from chairs that cost $1,000 each.
Security Interest
On the financial end of this transaction, the bank that lent the funds to Megalo for the purchase of the chairs did not perfect security interest in the chairs from the standpoint of Article 9 of the UCC. In the most strict interpretation of the perfecting security interest, the bank should have taken possession of the chairs once the loan went delinquent. Of course, this as well is subject to certain restrictions and details, and Burnham did not tender the goods in accordance with the requirements of the UCC.
Blank Endorsement
Also in regard to finances, the legal effect of the blank endorsement of the bank check presented for the purchase...
Under the Code, the use of the blank endorsement made it possible for anyone who possessed the check eligible to cash the check without question; therefore, the endorsement itself made it possible for the employee to allegedly steal the check and disappear.
Creditor Rights
All of this leads to the respective rights of the creditors in this situation. For Burnham, the right to collect payment for the undamaged portion of the chair shipment from Megalo exists because the delivery was made in good faith, and again, provided that consideration is made for the damaged goods. For the bank that lent the funds to Megalo to make the purchase, under the UCC, the right exists to pursue legitimate avenues of collection for the debt, up to and including repossession of the goods that served as collateral for the loan.
Business
