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Your clients, Fred Frugal and Barney Bizarre, have been operating their business for the past five (5) years

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Your clients, Fred Frugal and Barney Bizarre, have been operating their business for the past five (5) years. The first year Fred and Barney were busy getting established and acquiring customers. Years two through five, however, proved very successful for Fred and Barney as they were able to expand their customer base, their revenue base, their employees, and their business assets. Unfortunately, a sudden, unanticipated downturn in the economy in this, their sixth year of operation, has caused Fred and Barney to lose a large portion of their customer base. They have spent money advertising with various media in an attempt to gain new customers, but their income from sales and services remains flat and declining. Likewise, their stockpile of financial resources is being rapidly depleted forcing them to contemplate downsizing and layoffs as the bills mount faster than they can pay them off

Law of Commercial Transactions (Project 2) Student’s Name:Yuqi Chang Institutional Affiliation Course Name: Law of Commercial Transactions Instructor’s Name: Lois Beier Date: 3/10/2021 2 Law of Commercial Transactions (Project 2) 1. The negotiable instruments Negotiable instruments are contracts that are presented in written form with benefits that can be passed on from an initial holder to another holder. Negotiable instruments are credentials that promise disbursement to the person it is dispensed to or a definite person. The negotiable instruments are transferable papers that promise to reimburse the holder a given amount of money as agreed or at the moment in the future. Negotiable instruments can be in the form of a promissory note which is an unconditional promise that is in the written form indicating to repay a loan or any given debt at a future date that is fixed or determinable. However, a promissory note is as formal as a loan agreement, even though it is legally enforceable. Promissory notes are also used in facilitating business-to-business lending between private entities. The lenders shall require Fred and Barney to sign the promissory note to avoid any misunderstandings or any possible legal problems (Chapleau, 1929) A promissory note has several terms that Fred and Barney should carefully consider because they define the contract conditions. Such terms consist of the loan amount, and this shall be what the two investors will have to pay back. The two should be sure of this amount to ensure it's something they shall manage to pay back without difficulties. Another important term is the date by which the loan borrowed shall be paid back. Fred and Barney have to understand this because if they fail to meet the repayment deadlines, they shall have breached the contract. Additionally, Fred and Barney should be familiar with the lender's interest rate, and they should avoid borrowing from lenders who charge very high interest. The last term is a record of the collateral they offer in securing the loan, and they should not use personal property as collateral since this is a partnership form of business. 3 2. The Surety or guarantor When a lender requires a surety or guarantor, it merely means that they need a person to promise that they would pay or perform an obligation owed by the principal debtor. A guarantor is principally accountable for the debt, and the lender can demand the guarantor to pay the debt whenever it is due. In most cases, when a person is borrowing, they are first supposed to attach collateral to secure the borrowed revenue. The lender engages a guarantor to be firmly assured that he shall be paid or performance made. Fred and Barney may be required to get the signatories of a given number of guarantors depending on the loan amount to qualify for a loan (Arnold, 1928). 3. Mortgages and security interests Mortgage and security interest are more of the same things because they both refer to collateral formed to secure a borrower's debt to the lender. The two operate in the same way, and they usually give preferential rights to the secured party. The two differ to the point that a mortgage is a traditional safeguarding debt under common law. Simultaneously, the security interest is a statutory formation classically within a commercial transaction provided by the uniform commercial code. A mortgage is mainly used to create security interest intangible assets held by the lender as collateral for the debt. The primary role of both mortgage and security interest is similar; the person holding one of these instruments is allowed to sell the property agreed upon while contacting to clear the debt if it is overdue. 4. Terms and clauses in real estate contracts A real estate sales contract establishes the lawful rights and obligations which are generally negotiated between the buyer and the seller. A real estate agreement typically has some required paperwork to validate the purchase or sale contract. The terms include the price, which has to be negotiated between the two parties to reach an agreed value. The other 4 term is the closing date, as it serves as the period when the property shall be transferred. Financing is the other term as it a requirement for the purchaser of the loan to provide their information. 5. The title and deed of the property The property bought shall be held under the name of their names since their partnership cannot enjoy the same benefits as a company that has a separate legal entity to allow them to have the capacity to contract. The general warranty deed is the best type of deed that can be used in this case as it provides a lot of protection to the buyer due to its warranties borne by the grantor (Asabere et al., 1996) 6. Consequences of defaulting the loans Defaulting a business loan can have several consequences to Fred, Barney, and their business. The assets of the business can be frozen only a few days of default to pay the loan. Similarly, if the two default to pay the loan, they shall have problems getting approvals for future debt financing. There shall be an increase in charges since the defaulted may increase the interest rates in the loan. 7. Choosing between purchasing or leasing Fred and Barney have to estimate the cost of purchasing computer servers to leasing space on computer servers owned by other companies. A lease agreement should have a nondelivery of possession where the owner of the space on computer servers has to give Fred and Barney possession of the property once the term of the contract commences. Similarly, Barney should have the right to entry and the right to withhold rent (Gatimu, 2014). 8. The insurance concerns 5 The property leased has to be insured to make it safer for Fred, Barney, and their business at large. The property has to be insured against fire to ensure that their business gets compensated in case of damages by fire; the owner of the property always provides such insurance. Fred and Barney need to have errors and omission insurance to protect their business against claims of incomplete work or alienated actions. 9. Additional legal and business management for success Fred and Barney need to practice excellent marketing and customer care services, maintain good leadership, enhance problem-solving while offering services and improve on networking to ensure that their business succeeds in its operations. 6 References Arnold, E. C. (1928). Availability of Duress and Fraud upon the Principal as Defenses to the Surety and Guarantor. University of Pennsylvania Law Review and American Law Register, 77(1), 23-51. Asabere, P. K., Huffman, F. E., & Johnson, R. L. (1996). Contract expiration and sales price. The Journal of Real Estate Finance and Economics, 13(3), 255-262. Chapleau, L. C. (1929). Negotiable Instruments Pledged As Collateral Security for Loans. Notre Dame Law., 5, 318. Gatimu, E. M. (2014). Assessing institutional factors contributing to loan defaulting in Kenya's microfinance institutions (Doctoral dissertation, Egerton University). LAW OF COMMERCIAL TRANSACTIONS Bankruptcy Law Project Your clients, Fred Frugal and Barney Bizarre, have been operating their business for the past five (5) years. The first year Fred and Barney were busy getting established and acquiring customers. Years two through five, however, proved very successful for Fred and Barney as they were able to expand their customer base, their revenue base, their employees, and their business assets. Unfortunately, a sudden, unanticipated downturn in the economy in this, their sixth year of operation, has caused Fred and Barney to lose a large portion of their customer base. They have spent money advertising with various media in an attempt to gain new customers, but their income from sales and services remains flat and declining. Likewise, their stockpile of financial resources is being rapidly depleted forcing them to contemplate downsizing and layoffs as the bills mount faster than they can pay them off. As their business lawyer, Frugal Fred and Barney Bizarre once again seek your advice regarding their options for continuing to operate their business. Specifically, they seeks advice on the following: 1. Bankruptcy—What is it? What are the types of bankruptcy proceedings? How does each type work? What would be the effects of bankruptcy on their business and on Fred and Barney personally? 2. Sales Opportunity-- George Jetson, a venture capitalist, has indicated an interest in acquiring their business to modernize it and to bring it into the future. In negotiating with George Jetson, what concerns should Fred and Barney be considering as to timing of the acquisition, legal provisions to include in an acquisition agreement, whether George will have to wait to acquire the business as part of the bankruptcy proceedings, tax consequences of the transaction, personal legal liability of Fred and Barney as a result of this acquisition, etc.? Please submit to Professor Beier by the due date, a final copy of your recommendation for your clients, Fred Frugal and Barney Bizarre. Be Complete!!!!