Law Test

If an instrument is made , the party in possession is required only to deliver the instrument to transfer it.

"to bearer"

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

In Deschamps v. Treasure State Trailer Court, Ltd. where Deschamps was sued after he bought a mobile home trailer park and then stopped making payments on it because he claimed the seller told him the water system was in good condition when in fact it required $400,000 of repairs, the supreme court of Montana held that:

Deschamps had to make the full payment because his claims of reliance on verbal information were barred under the parol evidence rule

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

. 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

In a famous old case Sherwood v. Walker, Sherwood sold Walker a cow for $80 that both believed could not produce calves. When it was later discovered the cow could calve, which made her much more valuable, Sherwood sued to get the cow back. You would expect the Supreme Court of Michigan ruled for:

Sherwood; there was a mutual mistake as to an important fact, so the contract was void e.

A commercial instrument where one party has a legal obligation to pay another party a certain sum of money and involves a maker and a payee only is called:

a note

Fernando owes Lucia $8,000. They both realize he is unlikely to be able to repay that much, so Lucia says: "Pay me $5,000 and we'll call it good." Fernando pays the $5,000. This settlement is called:

accord and satisfaction

An effective offer includes which of the following:

all of the other specific choices are correct

A transfer of contract rights to another party is:

assignment

The franchisee follows the business model set out by the parent company, such as McDonald's in which category of franchise:

business format franchising

A good is tangible if

can be seen and touched

A form of check in which the bank is both the drawer and the drawee is called a:

cashier's check

A "draft drawn on a bank and payable on demand" is a:

check

A California winery shipped its Rotgut Red wine to the House of Wines. The wine was improperly bottled, causing the wine to blow its corks and spew wine all over Wines' carpeting. In Wines' suit against the winery, the damages to the carpet will be considered:

consequential damages

In Caley v. Gulfstream Aerospace, the employer told the employees that as a condition of continued employment they had to agree to a new dispute resolution policy that would take effect in two weeks. Caley sued, contending the new policy was not backed by consideration, so there was no enforceable contract. The appeals court held that:

continued employment was consideration; there was a contract

In Hinson v. N&W Construction, where Hinson submitted the low bid to N&W for plumbing work to be part of a larger construction project by N&W, but then refused to do the work when construction was started by N&W, the court held that Hinson's bid:

created liability based on promissory estoppel, so he was liable for the extra costs incurred by N&W

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

disclaimers

A contract made by a person with partial capacity is:

enforceable unless the person with partial capacity exercises the right to disaffirm the contract

requires that directors of a corporation place the interests of the corporation before their own interests.

fiduciary duty of loyalty

An open account means:

full payment is due within a fixed time period

In Fordyce Bank and Trust v. Bean Timberland, the bank lent Bean money to buy timber from landowners. Bean gave the bank security interests in the timber, which he sold to lumber companies that milled the logs into lumber. When Bean defaulted on the loan, the bank tried to collect from the lumber companies because it had a secured interest in the timber. The courts held that the bank:

gets nothing from the timber companies, they were not responsible for the security interests and breached no duty to the bank

If an instrument is found to be negotiable under the UCC, it may be freely traded without concern for any existing contract responsibilities if the instrument is in the possession of a holder in due course. To be a holder in due course, one must:

give value for the instrument, accept it without knowledge of any defects (for example, that it is overdue), and take the instrument in good faith

Article 2 of the UCC covers the sale of:

goods

A shareholder's relation to creditors of the corporation is generally that the shareholder:

has no relation to creditors

In Eagles Landing Development, LLC v. Eagles Landing Apartments, LP, where the LLC built apartments for the LP, but the LLC was not paid for all its work, the LLC sued some limited partners in the LP for payment. The appeals court held that:

limited partners are not liable for the debts of the LP

Shareholders of a corporation have:

limited rights to see the corporation's books and records

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

A smooth talking door-to-door salesman talks you into buying $200 worth of magazine subscriptions. After he leaves you want out of the deal. The contract you signed:

may be rescinded within 3 days under the FTC Cooling-Off Rule

In Certified Fire Protection v. Precision Construction, Precision accepted a winning bid from Certified for it to install a fire suppression sprinkler system. Later the two parties got into a fight over some details in the contract, which was never signed. The courts held that the contract was:

never formed as there were disagreements over major provisions

In the divorce agreement between Ted and Alice, Alice agreed to assume the debt on Ted's credit card. The credit card company agrees to this arrangement. This is an example of:

novation

A(n) has the same contract responsibilities as an assignee under a nonnegotiable instrument.

ordinary holder

In general, limited partners lose their limited liability status by:

participating in managerial decisions in the partnership

A doctrine to avoid injustice that is used by the courts to bind a promisor to promises that a reasonable person would rely upon without consideration, is called:

promissory estoppel

A(n) is a note promising to repay borrowed money, probably with interest.

promissory note

A business is a when it has the ability to take some of the nonpaying customers' property to satisfy the debt.

secured creditor

A counteroffer the original offer

terminates

A 16-year-old goes to a used car dealership and pays $2,000 cash to buy a car off the lot.

the 16-year-old can bring the car back the next day and demand his money back (less damages) because the contract is voidable

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

The rules that regulate and govern the internal operations of a corporation are known as:

the bylaws

The idea that breach of contract generally only allows recovery for profits and costs incurred due to the breach is called:

the economic loss rule

In DeRosier v. Utility Systems of America, Inc. where DeRosier sued Utility Systems of America, Inc. for dumping too much fill dirt on his property, the appeals court held that:

the trial court was right to award DeRosier general damages so he could have the excess dirt removed, but wrong to award additional consequential damages since there was no claim for delay damages in the pleadings or discovery

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

An effective acceptance must be:

unconditional, unequivical, properly communicated

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

The of partnership affairs involves completing any unfinished business and then collecting and distributing the partnership's assets.

winding up

A is issued by the clerk of the court and directs the sheriff to seize and sell any of the debtor's nonexempt real or personal property within the court's jurisdiction.

writ of execution