Ch 20 Business Law

The UCC imposes special business standards on casual and inexperienced sellers and buyers. T/F

False

Under the "partial performance" exception to the UCC, an oral contract for goods worth more than $500 is enforceable if the goods are designed to partially perform a specific function. T/F

False

Under the UCC, if a contract for a sale of goods does not specify the quantity, a court will objectively determine what is a reasonable quantity. T/F

False

When no delivery terms are specified in a contract for a sale of goods, there is no basis for determining a remedy. T/F

False

The United Nations Convention on Contracts for the International Sale of Goods (CISG) is the uniform international sales law of countries that account for more than two-thirds of all global trade. T/F

True

Under the UCC, an offeree can accept an offer to buy goods by a prompt shipment of conforming goods. T/F

True

Under the UCC, an offeror must be notified within a reasonable time that the offeree has accepted. T/F

True

A firm offer by a merchant may be oral. T/F

False

Goods associated with real estate never fall within the scope of UCC Article 2. T/F

False

Intangible property has conceptual existence and thus comes under Article 2. T/F

False

Raul agrees to ship to Ben one hundred ceiling fans for $5,000. Raul initials his notes of the deal, which include the terms, and files the notes in his office. Ben initials his own notes of the deal, which include the terms, and files the notes in his office. Raul fails to ship the fans. Against Raul, as a contract, the deal is​ a. enforceable, because under the UCC a contract need not written. b. enforceable, because Raul's initialed notes are a sufficient writing. c. enforceable, because Ben's initialed notes are a sufficient writing. d. not enforceable.

b. enforceable, because Raul's initialed notes are a sufficient writing.

Dian, an agent for Expo Motors, Inc., writes a letter to Flynn on November 1 stating that she will sell him a 2017 Subaru Outback for $25,000 between November 1 and December 31. Dian's letter to Flynn is a. a merchant's firm offer. b. an acceptance. c. an option contract. d. none of the choices.

a. a merchant's firm offer.

Ferris is refinishing his kitchen floor and needs a floor sander to complete the job. Ferris's neighbor Gena suggests that he call Home Repair Rentals, Inc. Home Repair leases Ferris a floor sander. In this transaction, the lessor is a. ​Ferris. b. Gena. c. Home Repair. d. none of the parties.

c. Home Repair

Josefina owns a condominium that she leases to Katrina. Josefina gives her daughter Lucia $450 on her sixteenth birthday. Josefina sells her car to her neighbor Maria for $1,500. UCC Article 2 covers a. ​the lease with Katrina. b. the gift to Lucia. c. ​the sale to Maria. d. all of the choices.

c. the sale to Maria

Stitches Corporation enters into a contract to sell denim clothing to Trend Fashion Company, which in turn sells the clothing to consumers. In contrast to standards that apply to consumers, the UCC imposes on merchants a. ​less strict legal standards. b. special business standards. c. stricter ethical standards. d. the same overall standards.

b. special business standards.

UCC Article 2 applies to sales transactions between all buyers and sellers. T/F

True

Under the UCC, parties to sales and lease contracts are free to establish whatever terms they wish. T/F

True

Under the UCC, prompt shipment of goods is considered an acceptance of an offer to buy the goods. T/F

True

Under the UCC, the meaning of any agreement must be interpreted in light of commercial practices. T/F

True

The UCC requires that the mirror image rule be followed for all acceptances. T/F

False

Generally, acceptance of an offer to lease goods may be made in any reasonable manner and by any reasonable means. T/F

True

The UCC imposes some different rules on merchants. T/F

True

The UCC requires a contract modification to be supported by new consideration. T/F

True

The UCC views the entire "commercial transaction for the sale of and payment for goods" as a single legal occurrence. T/F

True

To be characterized as a "good" under the UCC, an item of property must be movable. T/F

True

Under the UCC, good faith means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade. T/F

True

A contract for the sale of minerals is considered to be a contract for the sale of goods if the severance is to be made by the seller. T/F

True

A course of performance is the conduct that occurs under the terms of a particular agreement. T/F

True

A court can refuse to enforce a contract that the court deems to have been unconscionable at the time it was made. T/F

True

ESSAY Clean Machines Company makes washing machines. Over the phone, Clean offers to sell Dealers Appliance Outlet one hundred model EZ2000 washers at a price of $150 per unit. Clean says that it will keep the offer open for ninety days. Dealers responds that within two or three weeks it will decide whether to accept. One week later, Clean faxes, and Dealer receives, notice that the offer is withdrawn. Dealer immediately phones Clean to accept the $150-per-unit offer. When Clean refuses to deliver at that price, Dealer files a suit. Clean asserts, first, that there is no contract and, second, that if there is a contract, it is unenforceable. Discuss Clean's assertions.

Clean's contention that there is no contract between it and Dealer is correct. An offeror can revoke an offer at any time before acceptance without liability unless the offer is irrevocable. For this offer to be considered irrevocable, Dealer would have to prove that it had an option, which requires consideration, or that the offer was irrevocable under UCC provision that applies to merchants' firm offers. Neither of these applies. Dealer gave no consideration for the offer to be kept open, and thus no option was created. And, for the offer to be irrevocable without consideration, Clean—a merchant—would have had to give assurance that the offer would remain open for ninety days in a signed writing. Because the assurance was made orally, the offer was revocable. Thus, Dealer's receipt of Clean's revocation (withdrawal) of the offer before Dealer's acceptance terminated the offer, and no contract was formed. Clean's contention that even if a contract was created, the contract is unenforceable is also correct. Under the UCC's Statute of Frauds, any contract for the sale of goods priced at $500 or more must be in writing, be supported by written evidence such as a memorandum, or be the object of an applicable exception (such as written confirmation between merchants, specially ordered or manufactured goods, admission under oath, or partial performance completed) to be enforceable. The contract in this question is for a sale of goods (washing machines) priced at $500 or more ($15,000). It was not in writing; nor is there a writing signed by Clean that an oral contract was formed. Also, none of the exceptions apply. Thus, even if Dealer could prove that an oral contract had been made, the contract could not be enforced against Clean's defense of the Statute of Frauds.

A merchant's firm offer is revocable at any time before acceptance. T/F

False

For an item to be characterized as a "good" under the UCC, it must be intangible. T/F

False

A lessor is a party who acquires a right to the possession and use of goods under a lease. T/F

True

A lessor is a party who transfers the right to the possession and use of goods under a lease. T/F

True

A merchant is a person who deals in goods of the kind involved in the sales contract or who holds herself or himself out as having skill or knowledge peculiar to the practices or goods being purchased or sold. T/F

True

Goods associated with real estate often fall within the scope of Article 2. T/F

True

ESSAY Key of G Products, Inc., offers to sell to Harmony Company one hundred MP3 players at $50 a piece, subject to certain specific delivery dates. Harmony replies with a signed purchase order that reads, "Accept your offer for 100 I-appliances at $50 each. Must be delivered to our warehouse." Key of G does not respond or deliver the goods. Harmony files a suit for breach of contract, to which Key of G answers that there is no contract because Harmony's purchase order contained additional terms and is not signed by Key of G. Can Harmony recover? Explain.

Yes, Harmony can recover. Additional or different terms in an unconditional acceptance, which is otherwise definite and timely, are interpreted as proposals for additional terms to a contract, unless the contract is between merchants. In that situation, the terms become part of the contract unless (1) the offer expressly limits acceptance to its terms, (2) the additional terms materially alter the contract, or (3) the offeree objects to the additional terms within a reasonable time. Here, the offer did not expressly limit the acceptance, the extra terms did not materially change the contract, and Key of G did not object within a reasonable time. If either or both of the parties is not a merchant, a contract is formed according to the terms of the original offer. Thus, here, the additional term (delivery to Harmony's warehouse) would have become part of the contract even if one or both parties had not been merchants. Key of G's Statute of Frauds claim (that the purchase order was not signed by Key of G) also fails. For a contract for a sale of goods between merchants, when one party sends a written confirmation within a reasonable time after terms have been reached orally, the confirmation is binding unless the recipient objects within ten days of receipt. The merchant receiving the communication must have reason to know its contents, but it needs to be signed only by the party who sends it. Here, Key of G received the signed writing, but did not object within the ten days.

Refined Metals Company and Superior Fabrication, Inc., enter into a contract under which Refined agrees to deliver a certain quantity of sheet metal to Superior each month. The contract does not include a price term. In a suit between the parties over the price, a court will a. determine a reasonable price. b. impose the lowest market price. c. impose the highest market price. d. return the parties to the positions they held before the contract.

a. determine a reasonable price.

Fact Pattern 20-1 Farmers Produce, Inc., and Growers Market enter into a contract for the delivery of locally grown fruits and vegetables. The parties use a standard Farmers Produce form that contains some of the terms the parties agree on but not others. Some of the produce spoils before it can be cooked, served, and eaten, or sold. Growers Market refuses to pay for the spoiled goods. Refer to Fact Pattern 20-1. Farmers Produce responds that it did not waive payment for spoiled goods in the parties' previous transaction. Farmers Produce is arguing that the court should take into account a. the course of dealing. b. the course of performance. c. the usage of trade. d. none of the choices.

a. the course of dealing.

In a dispute over a sale involving a bicycle, Dain argues that as to this deal Ed's Hobby Shop, where Dain bought the bike, is a merchant. A court may determine whether Ed's is a merchant by assessing whether a.​ it has sold any bikes within the last year. b. it holds itself out by occupation as having knowledge or skill unique to the bike in the transaction. c. ​its owner enjoys biking. d. it subscribes to Bike, a biweekly trade magazine.

b. it holds itself out by occupation as having knowledge or skill unique to the bike in the transaction.

Fact Pattern 20-1 Farmers Produce, Inc., and Growers Market enter into a contract for the delivery of locally grown fruits and vegetables. The parties use a standard Farmers Produce form that contains some of the terms the parties agree on but not others. Some of the produce spoils before it can be cooked, served, and eaten, or sold. Growers Market refuses to pay for the spoiled goods. Refer to Fact Pattern 20-1. Farmers Produce files a suit against Growers Market, claiming that the buyer assumed the risk of the spoilage of the unsold goods. The court may allow evidence of this term if it finds that the parties' contract is a. fully integrated. b. not fully integrated. c. none of the choices. d. a complete and final statement of their agreement.

b. not fully integrated.

Jack sells a grand piano to Kyle for $5,000 and a gold ring to Lauren for $999. A writing is required to enforce the sale of a. the piano only. b. the piano and the gold ring. c. neither the piano nor the gold ring. d. the gold ring only.

b. the piano and the gold ring.

Marine Expeditions, Inc., pays Nate's Boats $4,000 to use an oceangoing vessel for a month. For the purposes of the UCC, this is a. a merchant's firm offer. b. an option contract. c. a lease. d. a sale.

c. a lease

Car n' Truck Body & Paint Company orders custom paint from Diverse Hues Inc., but Diverse does not deliver. Car n' Truck will probably be unable to enforce the agreement if the parties omitted a. a price term. b. a delivery date. c. a quantity term. d. shipping arrangements.

c. a quantity term.

Leslie pays Mobile Electronics $600 for a new phone. Under the UCC, this is a. a merchant's firm offer. b. a lease. c. a sale. d. ​a requirements contract.

c. a sale

Manufacturing Corporation orders twelve safety videos from Productions, Inc., which delivers the videos. This is most likely a. a gift. b. a lease of goods. c. a sale of goods. d. a service contract.

c. a sale of goods

Sara and Tim enter into a contract for a sale of orchids. With respect to the specific contractual provisions set out in the UCC, these parties may a. agree to different terms only to a reasonable extent. b. agree to different terms unless they "get caught." c. agree to whatever terms they wish. d. not agree to different terms.

c. agree to whatever terms they wish.

Jacob offers to sell Bill a collection of baseball cards. For their transaction to be a sale under the UCC, Bill a. must pay for the cards in cash. b. must pay for the cards with services. c. may pay for the cards with cash, goods, or services. d. must pay the fair market value of the cards.

c. may pay for the cards with cash, goods, or services.

Downtown Contractors LLC and Equipment Rental Corporation are parties to an oral agreement for a one-year lease of a crane with payments totaling more than $10,000. They may satisfy the Statute of Frauds by a. mutually agreeing not to commit fraud. b. repeating the terms in a phone call. c. setting out the terms in a memo. d. shaking hands on the deal.

c. setting out the terms in a memo.

Swift Trucking, Inc., and Trailer Rents Corporation are parties to an oral agreement for a one-year lease of six doublewides with payments totaling more than $40,000. They may satisfy the Statute of Frauds by a. mutually agreeing not to commit fraud. b. repeating the terms in a phone call. c. setting out the terms in a memo. d. ​shaking hands on the deal.

c. setting out the terms in a memo.

Quinn enters into a series of agreements with Reba involving a sale of a Suite Dreams Motel, including the land, building, furnishings, shares of stock in Suite Dreams Company, and a contract with Trudy to create an ad campaign. Reba suspects that Quinn may be misrepresenting the facts. The UCC Statute of Frauds governs a. the sale of any of the property evidenced by a writing. b. the entire deal, including the marketer's services. c. the sale of the furnishings priced at $500 or more. d. the sale of the land and the building.

c. the sale of the furnishings priced at $500 or more.

Great Harvest Farms offers to sell Hearty Bakeries, Inc., fifty bushels of wheat. Hearty's representative Ilene responds, "We agree to buy fifty bushels only if the wheat is Grade A quality." Between Great Harvest and Hearty Bakeries a. a contract is formed. b. a contract is formed only if Great Harvest can deliver the wheat fast. c. ​Ilene's statement is not an acceptance. d. Ilene's statement is an acceptance.

c. ​Ilene's statement is not an acceptance.

Fact Pattern 20-1 Farmers Produce, Inc., and Growers Market enter into a contract for the delivery of locally grown fruits and vegetables. The parties use a standard Farmers Produce form that contains some of the terms the parties agree on but not others. Some of the produce spoils before it can be cooked, served, and eaten, or sold. Growers Market refuses to pay for the spoiled goods. Refer to Fact Pattern 20-1. Growers Market contends that the practice in the trade with respect to payment for spoiled produce justifies its refusal to pay. Growers Market is arguing that the court should take into account a. the course of dealing b. the course of performance. c. ​the usage of trade. d. none of the choices.

c. ​the usage of trade.

Coffee Roasters, Inc., sells whole bean and ground coffee to Delicioso Deli under an existing contract. When the cost of coffee beans increases, Delicioso agrees to a price increase, but later wants to cancel the contract. Delicioso may a. cancel the contract immediately. b. cancel the contract only after accepting a final shipment. c. cancel the contract only on reasonable notice. d. not cancel the contract.

d. not cancel the contract.

Toro, S.A., which is based in Mexico, enters into a contract for the purchase of portable livestock fencing from United Fencing Company, which is based in the United States. This contract is governed by a. Mexican law. b. the provisions in the laws of both countries that are similar. c. the Uniform Commercial Code. d. the United Nations Convention on Contracts for the International Sale of Goods.

d. the United Nations Convention on Contracts for the International Sale of Goods.

Global Outfitters Outlet and Holly, a consumer, enter into a contract for a sale of camping gear. If the contract includes a clause that is perceived as grossly unfair to Holly, its enforcement may be challenged under a. the mirror image rule. b. the principle of fair trade. c. the predominant-factor test. d. the doctrine of unconscionability.

d. the doctrine of unconscionability.

Over the course of a year, Retail Marketers, Inc., sells goods from its inventory and one of its warehouses. In exchange, Retail receives checks and other items that substitute for cash, which Retail uses to repay a loan from Savings Bank. Article 2 of the UCC governs a. the checks. b. the payment of the loan. c. the sale of the buildings. d. the sale of the goods.

d. the sale of the goods

The terms of a fully integrated contract can be contradicted by evidence of any prior agreements. T/F

False

In interpreting a commercial agreement, a court will assume that the usage of trade was taken into account when the agreement was phrased. T/F

True

Talk, Inc., offers to buy from Ultra Corporation 1,000 smartphones. Without notifying Talk, Ultra timely ships phones of a different quality. With respect to the offer and a possible contract, this shipment is an acceptance and a. a breach. b. an accommodation. c. complete performance. d. a counteroffer.

a. a breach.

Under the UCC, an oral contract for a sale of goods is enforceable if goods have been received and accepted. T/F

True

Fresh Dairy, Inc., is the offeror and Gelato Ice Cream Company is the offeree under a unilateral sales contract in which Hector's Helado Corporation is also interested. Gelato is not notified of Fresh Dairy's performance within a reasonable time. Gelato a. may treat the offer as having lapsed. b. must assume that Fresh Dairy has started to perform. c. must contact Fresh Dairy. d. must notify Hector's.

a. may treat the offer as having lapsed.

Clean Mouth Clinic offers to buy from Dental Supplies Company a certain quantity of floss and other items for a certain price. Dental can accept the offer by a. a material alteration of the terms within a reasonable time. b. a promise to ship or a prompt shipment of the goods. c. a prompt shipment of the goods only. d. a shipment of nonconforming goods with a notice of accommodation.

b. a promise to ship or a prompt shipment of the goods.

Containers, Inc., sends its standard order form to Distribution Corporation to evidence a sale of packing materials. Distribution responds with its own standard purchase order form. Additional terms in the purchase order automatically become part of the contract unless a. ​the terms materially alter the original contract. b. the original offer expressly required acceptance of its terms. c. the offeror objects to the new terms within a reasonable time. d. any of the choices.

d. any of the choices.

According to the UCC, one open term will cause a sales contract to fail for indefiniteness.​ T/F

False

If the parties to a contract for a sale of goods have not agreed on a price, a court will determine a reasonable price at the time for delivery. T/F

True

Medico Inc. enters into a contract to sell medical supplies to New Hospital Corporation, which sells some of the items to Physicians Clinic, which later sells them to Oscar, a patient and consumer. Article 2 of the UCC applies to the sales transactions between a. all buyers and sellers. b. Medico and New Hospital only. c. New Hospital and Physicians Clinic only. d. Physicians Clinic and Oscar only.

a. all buyers and sellers.

Curt enters into a contract with Drivers Lease Company for a three-year lease of a car. This contract is subject to a. none of the choices. b. Article 2A of the UCC. c. Article 11 of the CISG. d. the common law only.

b. Article 2A of the UCC.

Rice River Farms offers to sell Sensei Sushi Restaurants, Inc., five hundred bushels of rice. Sensei responds, "We agree to buy five hundred bushels only if the rice is Grade A quality." This statement is a. a breach. b. a counteroffer. c. a confirmation. d. an acceptance.

b. a counteroffer.

Brad buys a bulldozer from Construction Equipment Corporation, which he leases to Deep Digg, Inc. In this situation, the lessee is a. ​Brad. b. Construction Equipment Corporation. c. Deep Digg, Inc. d. none of the choices.

c. Deep Dig, Inc

Refined Grains, Inc., agrees to sell to Sunny Cereal Company a certain quantity of refined oats each week but no mention is made of where the goods are to be delivered. In general, the UCC requires that the delivery take place at a. a neutral place of business halfway between the parties' locations. b. a "reasonable" place of delivery. c. Refined's place of business. d. Sunny's place of business.

c. Refined's place of business.

Rally Corporation enters into a contract to sell ski gear to Sno-Sports Inc., which sells a pair of the skis to Tyra, a consumer, who later sells them to Upton, another consumer. Article 2 of the UCC applies to the sales transactions between a. all of the buyers and sellers. b. Rally and Sno-Sports only. c. Sno-Sports and Tyra only. d. Tyra and Upton only.

a. all of the buyers and sellers