Business Law - Chapter 19

Which of the following contracts is most likely to be declared unconscionable?

A. A consumer sales contract which charges 300 times the fair market value of the goods

Betty's BBQ orally contracts with Denny's Design House for 10,000 match-books at the price of 10 cents per matchbook. The matchbooks are to be em-bossed with a logo to be designed by Denny's Design promoting Betty's BBQ. Price, payment terms, delivery terms are agreed upon between the parties. Denny's Design creates the logo, gets Betty's BBQ's approval of the design and begins applying the logo on the matchbook covers. Denny's Design has almost finished the order when Betty's BBQ calls to say it has decided to make the eatery a smoke-free restaurant and cancels the order. Denny's Design sues, but Betty's BBQ states that the agreement is unenforceable under the statute of frauds. Who wins?

A. Denny's Design House wins. This situation falls under an exception to the statute of frauds

If Edmund and Kaylin have a writing mistakenly showing a sale and pur-chase of goods for $10,000 when the price should have been $1,000, a court will:

A. Enforce the agreement, relying on oral testimony to determine the correct price

Under the UCC statute of frauds, the writing for a sale of goods must:

A. State quantity

ABC Siding, Inc. manufactures aluminum siding. ABC enters into a contract to deliver siding to Slippery Siding, Ltd., a retailer of aluminum siding. The written agreement insists that all modifications to the agreement be in writing and signed by both parties. This prohibition against oral modifications is:

A. Valid regardless of whether the clause is signed separately

Harriett raises and sells hippos. In order to keep her hippos happy and healthy, she feeds them Hippo Chow, which she buys from the local pet store. Under the UCC, Harriett is:

B. A merchant of hippos, but not of Hippo Chow

UCC Section 2-204 provides three important rules that enable parties to make a contract quickly and informally. These include all but which of the following?

B. A writing sufficient under the statute of frauds may be a simple memo, a letter, or informal note, but need not itself be a contract

Stanziano Construction needs a backhoe to complete a project. If it pays Hofmann Rentals for temporary use of the equipment, the transaction will be governed by:

B. Article 2A of the UCC

The difference between the UCC requirement of good faith and doctrine of unconscionability is that:

B. Good faith focuses on the parties' behavior as they perform the contract

Tri, a full-time college student, sold his car to Don, another student. In the performance of this contract, Tri:

B. Has a duty of good faith which means honesty in fact

A requirements contract is a contract:

B. In which the seller provides all the goods that the buyer needs

Which of the following types of property would be classified as "goods" under Article 2 of the UCC?

C. A computer

Which of the following contracts requires a writing under the UCC, Article 2?

C. A toy manufacturer contracted to sell dolls valued at $10,000 to a department store

In a "mixed contract," one involving a sale of both goods and services, the court will:

C. First determine the dominant purpose of the contract. If the sale of goods dominates the contract, then the court will apply the law of the UCC, Article 2. If the sale of services dominates the contract, the court will apply the common law

Dean Builders agrees to purchase all of its sump pump requirements for the new houses it builds from Satisfactory Sump Pump, Inc. These two business have had similar agreements the last three years and Dean's requirements have averaged 100 sump pumps per year. This year there was an unusually wet spring and Dean's requirements doubled to 200 sump pumps. Because of the high demand of sump pumps, the market price of the pumps tripled. Sat-isfactory Sump Pump, Inc. delivers 100 pumps at $75, the contract price. Satisfactory has exhausted its inventory and cannot deliver any more, so Dean buys the other 100 pumps from other suppliers at $225 each. Dean sues Satisfactory Sump Pump, Inc. for the additional expense. What is the most likely result?

C. Satisfactory Sump Pump, Inc. wins; requirements contracts are governed by a good faith stand-ard, and it was unreasonable for Dean to demand so many addi-tional pumps

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

C. That title to the goods pass be-tween the seller and the buyer and that a price be paid for the goods

Price's Department Store contracted to buy 1,000 drop-waist velour dresses in heather gray from TriColor. Subsequently, TriColor called and asked to ship mink-colored dresses instead of heather gray. Price agreed, in writing, to the change. Which statement is correct?

C. The modification is enforceable

Which of the following is true regarding an open price term?

C. The price is the "reasonable" price at the time of delivery

In which of the following situations is the seller a merchant under Article 2 of the UCC?

C. Zompa Inc., a toy manufacturer, contracted to sell dolls to TonTon Department Store.

Office Plus, an office supply store, ordered 600 blank CDs from Curtis Co., a manufacturer of computer products. Office Plus placed the order using a preprinted purchase order form; Curtis acknowledged the order by sending a preprinted acceptance form back to Office Plus. Unlike Office Plus' form which says nothing about packaging, Curtis's form specifies that the CDs will be packaged in cases of 10 CDs per box, 10 boxes per case. Which statement is correct?

Curtis's packaging term is an ad-ditional term and therefore a part of the contract unless Office Plus promptly objects to the term.

During the development of commercial law centuries ago, businessmen throughout England and Europe:

D. All of the above A. Settled disputes in trade organizations rather than in civil courts B. Relied on a body of rules which became known as the 'lex mercatoria' C. Began to treat their own customs as law

The stated purpose(s) of Article 2 of the UCC is/are:

D. All of the above are correct A. To simplify the law governing sales B. To permit the continued development of business practices through custom and usage C. To make the laws governing sales uniform among the various states

To simplify, clarify, and modernize the law governing commercial transac-tions, the UCC permits the use of "open terms" in sales contracts. In the use of "open terms," which of the following is true?

D. All of the above are true A. The court will use market value and other comparable sales to de-termine what a reasonable price would have been at the time of delivery if the parties have not settled the price in the contract B. If time of payment is not men-tioned in the contract, payment within a commercially reasonable time is presumed C. If the contract permits the buyer or seller to determine the price during contract performance, the UCC requires the party to do so in good faith

Wayne agrees over the phone to sell L.J. Cartwright 1,000 yards of 1-inch diameter rope. Wayne honestly believes that L.J. Cartwright offered to pay $1.00 per yard whereas L.J.Cartwright actually offered to pay 75 cents per yard. If the parties subsequently take their dispute to court, the fact that L.J.Cartwright admits on the stand that he offered to pay Wayne 75 cents per yard will:

D. Both A and C are correct A. Prevent L.J.Cartwright from us-ing the statute of frauds to nullify the contract C. Make it possible for Wayne to enforce the contract to sell 1,000 yards of rope at a price of 75 cents per yard

Newt, a gun dealer, offers to sell a rare civil war musket to Rush, another dealer, for "$15,000, insurance and shipping paid by buyer." Rush responds, "I accept. Insurance and shipping costs divided equally between seller and buyer." The parties:

D. Have a contract and, in the major-ity of states, the different terms will cancel each other out

Elizabeth worked as a salesperson in a carpet store. She was in the process of divorcing her husband and needed some money. Elizabeth sold her wedding ring. Elizabeth is considered a merchant with regard to the sale of the ring.

False

Leasing goods is an insignificant part of business, so its rules are governed by extensions of the UCC Article related to sales rather than having a separate article of the Code to cover leasing.

False

Lian contracted for financial services from E-wise. This contract is governed by Article 2 of the UCC.

False

Lorene, an artist, orally agrees to sell Sabrina a painting for $600. While Lorene is busy talking on the phone, Sabrina writes her a note on the back of an envelope she finds in her purse. The signed note states that she will stop by the studio to pick up the painting within the week. Sabrina changes her mind about the painting, and when Lorene sues to enforce the contract, Sa-brina defends on the basis of the statute of frauds. Sabrina will succeed with this defense.

False

Megan agrees to sell Neff her quartz watch but they do not specify a price. In such a case, the court would not enforce the agreement because all of the essential terms are not present.

False

The UCC does not apply to contracts for the sale of goods if the value of the goods is less than $500.

False

The UCC has abolished the common law requirement of consideration in all contracts involving the sale of goods.

False

The UCC is federal legislation enacted by Congress.

False

Uncle Brandon promises to give his motorcycle to you at the end of the month. This transaction is governed by UCC, Article 2, because a motorcycle is within the definition of "goods."

False

Zubair, Inc. leased the 34th floor in an office building in downtown Pitts-burgh. This contract is governed by Article 2A of the UCC.

False

If the seller has made a substantial beginning in manufacturing cus-tom-ordered goods, then an oral contract may be enforceable regardless of the amount of money involved in the contract.

True

In a mixed contract involving goods and services, Article 2 of the UCC will govern if the predominant purpose is the sale of goods.

True

Rachel Retailer sends a preprinted purchase order offering to buy goods from Snidley Supplier. Snidley acknowledges Rachel's offer with a preprinted acceptance form. The terms of the two forms do not mirror each other. To analyze whether an enforceable contract exists, one must first determine whether the new language in the acceptance is an additional term or a different term.

True

The UCC imposes a duty of good faith in the performance of all contracts.

True

Under the UCC, a merchant is frequently held to a higher standard of conduct than a non-merchant.

True