The Money Law 19

Kobayashi Ltd. contracts with Software Development Corp (SDC) to develop a new software platform for its customer relationship management system. SCD is not able to deliver the product in a timely manner and Kobayashi Ltd. cancels its contract. If SDC sues, which of the following law applies to this contract in a jurisdiction that follows the predominant factor test? a. Common law. b. UCC Article 2. c. UCC Article 2a. d. UCC Article 9.

a. Common law. Correct. Common law would apply to this contract because the transaction involved the rendition of a service (writing the code) with a good incidentally involved (the final software product).

Which of the following is not true about auctions? a. The UCC provides that if an auction sale is advertised or announced in explicit terms to be with reserve, the auctioneer may not withdraw the article put up for sale unless no bid is made within a reasonable time. b. Unless an auction is advertised as being without reserve, the sale is with reserve. c. A bidder may retract his bid at any time prior to acceptance by the auctioneer. d. If the auctioneer knowingly receives a bid on behalf of the seller and notice has not been given that the seller reserves the right to bid at the sale, the bidder to whom the goods are sold can avoid the sale.

a. The UCC provides that if an auction sale is advertised or announced in explicit terms to be with reserve, the auctioneer may not withdraw the article put up for sale unless no bid is made within a reasonable time. Correct. This statement is not true; if the sale is with reserve, the auctioneer can withdraw the goods at any time. See "Auctions 19-3d."

Bob telephoned the office supply store and agreed to buy 90 reams of paper at $5 each. He then realized what a good buy this was and called the store with a request to modify the contract to read 200 reams of paper. What is the consequence? a. The modified contract is unenforceable. b. The modified contract is void. c. The modified contract is valid and enforceable. d. There is no consideration, so the contract is void.

a. The modified contract is unenforceable. Correct. The modified contract is unenforceable. A contract for the sale of goods costing more than $500 is not enforceable unless it is in writing. The original order was an oral contract for $450; the modified order was an oral contract for $1,000, requiring the contract to be in writing to be enforceable.

The Code defines __________ as "honesty in fact in the conduct or transaction concerned." a. good faith b. unconscionability c. merchantability d. entrusting

a. good faith Correct. Good faith is defined as "honesty in fact in the conduct of transaction concerned." See "Good Faith 19-2a."

Solomon pays Henry's Bike Shop $150 for a bicycle. This is an example of a: a. sale. b. lease. c. option. d. novation.

a. sale. Correct. Henry's Bike Shop transferred title to the bike to Solomon.

Trailers R Us enters into an agreement with Mobile Hot Dogs, a food vendor, for the manufacture of a new trailer for food vending services. Trailers R Us includes a provision in the fine print of the agreement that there are no warranties included with the sale and that Mobile Hot Dogs agrees to waive its rights to sue or arbitrate over any matters. This clause likely constitutes: a. substantive unconscionability. b. procedural unconscionability. c. failure to perform in good faith. d. breach of the statue of frauds.

a. substantive unconscionability. Correct. The limitation of contractual remedies would likely constitute substantive unconscionability.

An "option" is defined as a contract by which: a. the offeror is bound to hold open an offer for a specified amount of time. b. the offeror is bound to hold open an offer for an unspecified amount of time. c. the offeree is bound to hold open an offer for a specified amount of time. d. the offeree is bound to hold open an offer for an unspecified amount of time.

a. the offeror is bound to hold open an offer for a specified amount of time. Correct. The offeror is bound to hold open an offer for a specified amount of time. See "Definiteness of an Offer 19-3a."

Which of the following is true regarding unconscionability under the Code? a. It is defined in Article 2 as "monstrously extortionately harsh, showing no regard for conscience." b. The Code denies or limits enforcement of an unconscionable contract for the sale of goods. c. Unconscionability may be substantive, but it cannot be procedural. d. All of these are correct.

b. The Code denies or limits enforcement of an unconscionable contract for the sale of goods. Correct. The Code denies or limits enforcement of an unconscionable contract for the sale of goods. See "Unconscionability 19-2b."

Laura orally agrees to buy 50 smartphones from Smartphones, Inc. for $25,000. Smartphones delivers 25 smartphones to Laura, who receives and accepts them. Which of the following is correct with regard to this transaction? a. Laura can enforce the contract for the additional 25 smartphones. b. The contract is enforceable to the extent of the 25 machines that have been received and accepted. c. The entire contract is in violation of the statute of frauds and cannot be enforced. d. This is a bad deal, and is therefore commercially unconscionable from the beginning and unenforceable.

b. The contract is enforceable to the extent of the 25 machines that have been received and accepted. Correct. The contract is enforceable to the extent of the 25 smartphones that have been received and accepted.

Which of the following transactions is governed by Article 2 of the UCC? a. The sale of an apartment complex. b. The sale of oranges to be picked from a 10-acre grove. c. The sale of common stock of a soft drink company. d. A contract to receive medical services in a hospital.

b. The sale of oranges to be picked from a 10-acre grove. Correct. The sale of oranges to be picked from a 10-acre grove is the sale of goods, and is governed by Article 2 of the UCC. See "Goods 19-1a."

Jennifer and Avonti Ltd. have dealt with each other for many years. Jennifer's Boutique orders 100 scarfs at $2.00 each from Avonti Ltd. Avonti sends back a confirmation letter with an additional, nonmaterial term. There is: a. no contract, but a counteroffer. b. a contract with the additional term unless Jennifer objects. c. a contract with the additional term only if Jennifer agrees. d. a contract without the additional term.

b. a contract with the additional term unless Jennifer objects. Correct. There is a contract with the additional term unless Jennifer objects.

The definition of "usage of trade" includes: a. a sequence of previous conduct between the parties that may fairly be regarded as establishing a common basis of understanding for interpreting their expressions and agreement. b. a practice regularly observed and followed in a place, vocation, or trade. c. separate rules that apply to transactions between merchants. d. All of these are correct.

b. a practice regularly observed and followed in a place, vocation, or trade. Correct. Usage of trade is defined as a practice regularly observed and followed in a place, vocation, or trade. See "Expansion of Commercial Practices 19-2c."

Mary's Cupcake Shop bakes and sells various types of cupcakes. In remodeling the office areas of its business, Mary's Cupcake Shop purchased tile from the Tile Shop, Inc. Under the Uniform Commercial Code, Mary's Cupcake Shop is a merchant of: a. cupcakes and carpet. b. cupcakes, but not carpet. c. carpet, but not cupcakes. d. neither cookies cupcakes nor carpet.

b. cupcakes, but not carpet. Correct. Mary's Cupcake Shop is a merchant only as to cupcakes.

Brown & Co enters into a contract with ATM Industries for the sale of 1,000 shirts at $6 per shirt. In order for Brown & Co to successfully sue ATM industries in the event of a breach of the agreement, all of the following are required except: a. a written agreement indicating that a sale or contract to sell has been made. b. the price of the goods. c. the quantity of the goods involved in the transaction. d. the signature of the defendant.

b. the price of the goods. Correct. Parties may enter into a contract for the sale of goods even though they have not reached an agreement on price.

Gabe has agreed to buy Sarits's car, but the two have not agreed on the price. When there is no agreement as to price in a contract for a sale of goods, what effect does it have on the contract? a. The price is whatever the seller decides. b. The price is a reasonable price at the time of making the contract. c. The price is a reasonable price at the time of delivery. d. There is no contract, because the agreement is not definite and certain enough.

c. The price is a reasonable price at the time of delivery. Correct. The price is a reasonable price at the time of delivery.

Mary's Cupcake Shop bakes and sells various types of cupcakes. On July 5, Billy's Grocery Company orally agreed to buy 2,000 cupcakes from Mary's for $1,000. On July 10, Mary's sent Billy's a written confirmation of the cupcake sale. Billy's received the letter on July 12, filed it, but did not respond. On July 28, Mary's shipped the cupcakes to Billy's Grocery Company and the cupcakes arrived on July 29. Billy's refused to accept delivery and Mary sued. Under the Uniform Commercial Code: a. the contract is not enforceable because of the statute of frauds. b. the contract is enforceable, but only for $500, not for $1,000. c. the contract is enforceable because Billy did not object to the confirmation within ten days. d. the contract is enforceable because of the rule concerning specially manufactured goods.

c. the contract is enforceable because Billy did not object to the confirmation within ten days. Correct. Bill failed to object within ten days of Mary's written confirmation. Therefore, it is an enforceable agreement.

A "sale" of goods happens when: a. the parties agree. b. the parties sign the contract. c. title to the goods is passed. d. a promise to transfer title is made.

c. title to the goods is passed. Correct. A sale of goods occurs when title to the goods is passed from the seller to the buyer. See "Sale 19-1b."

A merchant is defined as a person who: a. is a dealer in a particular type of goods. b. by his occupation holds himself out as having knowledge or skills peculiar to certain goods or practices. c. employs an agent or broker whom he holds out as having such knowledge or skill. d. All of these are correct.

d. All of these are correct. Correct. All of these are definitions of a merchant. See "Sales by and between Merchants 19-2d."

A contract that does not satisfy the writing requirement of the Article 2 statute of frauds, but which is otherwise valid, is enforceable in which of the following situations? a. Where the goods have been delivered and accepted. b. Where payment has been accepted. c. Where the goods have been specially manufactured and are not suitable for resale in the ordinary course of business. d. All of these are correct.

d. All of these are correct. Correct. All of these are situations where the contract would be enforceable. See "Statute of Frauds 19-5a."

Check My Work The CISG applies to: a. negotiable instruments. b. goods bought for household use. c. sales by auction. d. the international sale of goods.

d. the international sale of goods. Correct. The CISG applies to the international sale of goods. See "Governing Law 19-1d."