Business Law CH11

With respect to parol evidence and the UCC:

oral evidence may be used to explain trade dealings

A(n) is when a buyer agrees to take all of the output of a certain seller.

output contract

Under the common law, contract modifications must be supported by new consideration to be binding on the parties. Under UCC Article 2:

parties need not provide new consideration to modify an existing sales contract

The UCC's remedies for breaches of contract for the sale of goods are intended to

place the nonbreaching party in the same position as if the contract had been performed according to its terms

A(n) is one in which a seller agrees to provide all of a certain good that a buyer needs

requirements contract

According the UCC's statute of frauds all:

sales of goods worth more than $500 must be in writing

To satisfy the Statute of Frauds under UCC Article 2 there must be:

some basis for believing that the parties made a contract of the sale of goods

Under the UCC, merchantable means that goods must be of a quality comparable to:

that generally acceptable in that line or trade

If the buyer relies on the seller's skill or judgment to select the goods for that purpose, an implied warranty is created.

that the goods are suited for that purpose

When terms in contracts conflict, it is called:

the "battle of the forms

Warranty of title includes the warrant that

the goods being sold are free of any claim of infringement

If the buyer is willing to accept nonconforming goods:

the goods must be paid for

If goods do not conform to the standards created by the warranty

the seller can be held liable for damages for breach of warranty

Buyer is obligated to pay damages under Article 2 for a breach of contract if:

the seller delivered conforming goods to the buyer or delivered goods to an independent carrier that delivered to the buyer

. If the parties to a sale under the UCC do not specify when the title to the goods passes, then, assuming the goods did not have to be moved, title passes to the buyer when:

the seller delivers the title documents

If a buyer rejects a shipment of goods as not conforming, the seller has the right to cure the defect, except for which of the following:

the seller is due a "reasonable time" for repair or performance past the original due date

A buyer and a seller would like to enter into a contract for the sale of goods. In his offer the buyer does not specify a price. The seller agrees with the arrangement.

there is a contract under Article 2 because it allows the parties to enter into a contract even though the price is to be determined later

By definition, a sale under Article 2 of the UCC requires that:

title to the goods pass from the seller to the buyer and that a price be paid for the good

The proper tender of goods to, and their acceptance by, the buyer entitles the seller

to be paid according to the contract

When a seller fails to deliver goods, either by being too late to be useful or because the goods are nonconforming, the buyer is entitled:

to buy substitute goods and recover the price difference

The UCC's purpose is:

to simplify, clarify and modernize the law governing commercial transactions

The seller's basic obligation under the UCC is to:

transfer and deliver goods that conform to the contract to the buyer

A buyer and seller have been doing business for months without a formal contract. Every Monday, the seller delivers supplies to the buyer's business. Every Thursday, the buyer pays the invoice by mail. Is there a contract between the parties?

under the UCC, a contract has been formed by the conduct of the parties

Balls, Inc. sells all baseballs needed by Major League Baseball (MLB). MLB agrees that prices and quantities will be determined at the beginning of each year. After 4 years, MLB decides its needs fewer balls and demands it be allowed to buy less. Balls demands MLB buy as much as in years before. If MLB sues under the UCC it will likely:

win if the contract modification is sought in good faith

Because the UCC's warranty requirements create a tough standard, sellers may wish to reduce their liability by issuing:

. disclaimers

Which of the following is a contract most likely to fall under UCC Article 2:

GM buys seat belts from Ace to install in new Cadillacs

Every state except has adopted UCC Article 2

Louisiana

Most states have recently adopted to cover certain leases of personal property.

UCC Article 2A

Contracts under Article 2 of the UCC could include:

a load of wheat

A warranty of title means:

a seller is the rightful owner of the goods being sold

Incidental damages awarded to a seller after a buyer's breach of contract can include compensation for which of the following:

a. stopping delivery b. transporting and taking care of the goods after the breach c. returning or reselling the goods

A person may hold legal title to a good if:

a. the good exists b. the good has been identified to the contract

. A seller can breach a sales contract in which of the following ways:

a. the seller repudiates the contract before tendering the goods b. the seller fails to make a scheduled delivery on time c. the seller delivers nonconforming goods

With respect to the buyer's basic obligations under Article 2, the most critical element is:

accept conforming goods and pay for them according to the contract

The UCC modifies the common law perfect tender rule by:

allowing the buyer to accept less than the entire shipment

Lisa mailed an offer to sell cotton to Jeff who sent an acceptance. However, Jeff made changes in the time and place of delivery. Under the UCC's Article 2:

an acceptance is valid if the parties intend to form a contract⎯even though the acceptance contains some different terms from those in the offer

Under the common law, an acceptance cannot deviate from the terms of the offer without being considered either a rejection or a counteroffer. Under UCC Article 2:

an acceptance is valid when the parties intend to form a contract⎯even though the offeree's acceptance contains different terms from those in the offer

Unlike express warranties, implied warranties

are automatically imposed on sellers unless they specifically disclaim them

A seller's right to cure an improper tender of goods protects sellers from

buyers rejecting shipments based on minor problems when the price of the good is falling

A warranty may be generally defined as a statement:

by the seller that its goods conform to certain quality, safety, performance or title standards

The (higher) price paid by a buyer for substitute goods in the event of a breach by a seller is called: a. consequential damages

cover

. The is what is paid for the substitute goods when a seller fails to deliver goods as specified by a contract. a. extra price b. market price c. compensatory price d. cover price e. total price

cover price

Commercial codes

date back thousands of years

. If a contract for the sale of goods does not specify where goods are to be delivered, the UCC presumes that in most cases:

delivery is at the seller's place of business

If a price is unclear when a contract is found to exist, the UCC directs the courts to:

determine "a reasonable price"

2.___of the Uniform Commercial Code governs the law of commercial sales.

e. none of the other choices are correct

. Suppose parties to a contract that is under the UCC fail to specify some term. The UCC:

has rules to fill the gap about a silent term

The UCC defines good-faith dealings as:

honest in fact in the conduct or transaction incurred

Under the UCC, parol evidence may not be used:

if the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement

. A disclaimer of an implied warranty is permitted if the disclaimer uses the word merchantability and the disclaimer: a. specifies the alternatives

is conspicuous

The UCC's definition of "conspicuous" for a disclaimer is that the disclaimer is:

is written so that a reasonable person would notice it

The subject matter of a sales contract is not considered a good under Article 2 unless:

it is movable and tangible

A computer store that one of HJ's friends owned went broke. HJ bought some disk drives from the friend. HJ sold the equipment. Some buyers are mad because the equipment has problems. HJ told them no refunds. If buyers sue him based on the UCC, they are likely to:

lose because HJ does not regularly deal in these goods

An express warranty may be created by:

. a seller's promise about goods being sold b. a seller's guarantee regarding the safety of a good c. the sample the buyer received from the seller

The UCC defines goods as:

. all things which are moveable at the time of identification to the contract for sale

Early sales law was governed by state law. This created a significant legal challenge for managers because:

. different rules developed across the states

. Which of the following is not true, under UCC Article 2, about a merchant's firm offer

. it must be open to all members of the public

In Paramount Contracting Co. v. DPS Industries, DPS claimed there was a contract to deliver hundreds of truckloads of dirt for Paramount, which claimed no contract had come into existence. The courts held that:

. the contract fell under Article 2 of the UCC as it was a contract for goods and Paramount breached the contract

. Under UCC Article 2, when there is a failure to respond to a writing signed by the other party:

. there may be a good contract

Which of the following is a contract most likely to fall under UCC Article 2:

Abbie purchases a suite of office furniture from Office Lots

In Griffith v. Clear Lakes Trout, Griffith grew trout for Clear Lakes; the parties got into a dispute over what were "market size" trout, as Clear Lakes wanted larger fish. The court held that:

Clear Lakes was incorrect about trade usage regarding "market size" so Griffith had no an obligation to grow larger fish to be in compliance with the contract

QD representatives met with EDS managers. They discussed plans for a conference room with Persian carpets, quality furniture, and nice art. The parties agreed that the job would be done for $100,000, the final bill to be subject to review. QD delivered a room with ordinary carpet and furniture and posters of dogs. They sent a bill for $85,000. EDS sues QD:

EDS should win based on the UCC's provisions providing express and implied warranties of quality and merchantability

In Lee v. R&K Marine, where a boat that Lee bought became unusable after only three years when it fell apart, and the seller had expressly disclaimed all warranties, the court held:

Lee was out of luck because the seller properly disclaimed warranties

means that the good "must be of a quality comparable to that generally acceptable in that line or trade."

Merchantable

In Crest Ridge Construction v. Newcourt, where an order for construction materials that Crest Ridge needed was rejected for failure to meet credit terms, and Crest Ridge had to find a higher-cost replacement and sued Newcourt for damages, the appeals court held that:

Newcourt was liable as its actions gave Crest Ridge reason to believe the sale had been approved

Northwest is a micro-brewery. It orders bottles from M that must have crests inscribed on the bottles. To be sure the bottles meet specifications, Northwest hires someone to check them as they were produced at M. With respect to the expenses of hiring the inspector:

Northwest pays the expenses but may recover them if the bottles do not conform

Ramirez contracted to buy a new truck. On the delivery date, the truck was not ready. After it was delivered, the truck had many problems that could not be fixed. Ramirez wanted to rescind the contract but the seller wanted more chances to repair. The court likely found:

Ramirez; the problems should have been fixed, so the seller's right to further efforts to cure defects was lost

. is a valid and sufficient offer of performance under a contract

Tender

When the seller has delivered conforming goods, the buyer has a duty to accept them. This is referred to as:

When the seller has delivered conforming goods, the buyer has a duty to accept them. This is referred to as:

Miller needs to paint his metal workshop. He tells the paint store what he needs and says he is concerned about peeling. The seller recommends Pitts, which the company advertises as good for such use. If Miller buys Pitts based on the recommendation, and it peels right away, with respect to fitness for a particular purpose, there is:

a breach of implied warranty; Miller relied on the maker's judgment and claims

Under the common law, a contract cannot be formed until an offer is clearly accepted. Under UCC Article 2:

a contract "may be made in any manner sufficient to show agreement" between the parties

. If the buyer breaches a UCC contract while the goods are still in the possession of the seller, the seller is authorized to:

a. cancel the contract b. salvage the goods c. stop delivery of the goods

Under Article 2 of the UCC a contract can exist even if which of the following terms is(are) omitted

a. payment terms b. delivery terms c. price

A seller or buyer is considered a merchant by the UCC when he:

a. regularly deals in goods of the kind involved in the transaction b. by occupation presents himself as having knowledge or skill specialized to the transaction c. employs an agent or broker who holds himself out as having requisite knowledge or skill

Under the common law, there is a doctrine called the "perfect tender rule". It means the seller's tender of delivery is required to conform in detail to the agreement between the parties. The UCC restates the perfect tender rule, holding that if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may:

a. reject the whole shipment b. accept the whole shipment c. accept any commercial unit or units and reject the rest

. Which of the following is a way in which the buyer may default on contractual obligations

a. rejecting a tender of goods that conform to the contract b. wrongfully revoking an acceptance c. repudiating the contract d. failing to make a payment

Under the UCC Article 2, a "reasonable time" for delivery of a good is determined by

a. trade custom b. the apparent intentions of the parties c. the availability of transportation services

Under the UCC, the seller's basic obligation includes being concerned with:

a. what the goods are used for after they leave the seller's possession b. the future financial solvency of the buyer c. the financing of the purchase

UCC's damage measures are designed to put the seller in:

as good a position as if the buyer had performed contractual obligations

1.___of the Uniform Commercial Code governs the law of commercial sales.

b. Article 2

Sales law developed in medieval Europe was known as:

b. lex mercatoria

A buyer who receives goods that are nonconforming may reject them as a breach of contract and withhold payment. This is referred to as:

buyer's right of rejection

UCC Article 2 has been adopted:

c. by 49 states

A(n) is created by a seller's promise or guarantee as to the quality, safety, performance, or durability of goods being sold

express warranty

Article 2 of the UCC covers the sale of:

goods

After a breach of contract by a buyer, expenses associated with stopping delivery, transporting and taking care of the goods after the breach, returning or reselling the goods are all examples of:

incidental damages

Article 2A of the UCC, recently adopted by most states, expands the UCC to cover:

leases of personal property

. Andrea offered to buy apricots from Aramos. The offer was for 10 tons at $1.20 per pound to be transported to Andrea's warehouse in Aramos trucks. Aramos accepted the offer, but said that the goods would be transported in Andrea's trucks. A dispute later arose and Aramos refused to sell the apricots, asserting that no contract existed. If Aramos sues, it:

loses if it can be shown that the parties intended to form a contract even though the acceptance contained different terms from those of the offer

. Under the UCC, oral testimony

may be used to explain trade dealings

Suppose two parties to a contract that is under the UCC decide to make a significant change in the contract, obligating the seller to provide more goods. When the terms of the contract change, it requires:

no consideration

A buyer ordered custom made equipment. The delivery date was not set, but the seller promised to do the job in a reasonable time. When the equipment was not ready when the buyer hoped, the buyer cancelled the order. The seller demanded payment. You would expect the court to hold that:

no delivery date was fixed, but the seller worked on the equipment and so will be paid for the work done up to time of cancellation

Language that attempts to dismiss an express warranty is when the disclaimer is inconsistent with the warranty

not effective

If, when considering a contract under the UCC, the court needs to resolve a term that is not clearly specified, the courts prefer to look to:

past dealings of the party

Ready Construction buys a computer system from Ace that Ace will also service. Two years after the sale, a disagreement develops. Ace has determined that the common law of contracts favors it. Article 2 favors Ready. Ace should:

realize that the agreement is for the sale of goods so it must be covered by Article 2, so work to settle on the best terms possible or show that the value of the system is greater than the value of the service

. Article 2 provides minimum requirements that goods must satisfy to be merchantable, including that the goods must be:

reasonably fit for the purposes for which they are being sold

When reclaiming and reselling goods does not fully compensate a seller for a buyer's breach of contract, damages are the remedy. Damages are to put the seller in as good a position as if the buyer had fulfilled its obligations. The seller is also allowed to seek incidental damages for recovery of costs resulting from the breach. Those costs may include expenses for:

stopping delivery, transporting and handling the goods after the breach or returning or reselling the goods

Most states accept the UCC's provisions on most topics because

the benefits of lowering the costs of doing business across state lines was so great

In Orkal Industries v. Array Connector, where Orkal bought parts from Array by sending an order form, but Array confirmed with its own form that contained different terms. Orkal did not object to the different terms until litigation arose later at which point the added terms mattered. The courts held that under the UCC:

the buyer, Orkal, controlled the terms, so the original order form controls; Array could have forced a change by requiring Orkal to recognize its different terms, but it failed to do so

It is customary for new car dealers to clean and check new cars prior to delivery to customers. Danver Chevrolet fails to do those checks before delivering a new car to a buyer. A check would have revealed that the exhaust was going into the passenger compartment. While driving, the buyer is overcome by carbon monoxide and crashes.

the dealer may be liable to a buyer for damages under a breach of an implied warranty arising from trade usage

. If a good has been stolen and is then sold to an unsuspecting buyer:

the good title does not pass to the buyer