Chapter 11 Business Law

April put an advertisement in the newspaper advertising the sale of her computer for $500. Simultaneously, six people responded to the ad by mail with formal written acceptances. April is bound on six contracts to sell her computer for $500.

False

Candy, Inc. signed an agreement with Sweet Plantation. Under the contract, Candy, Inc. agreed to purchase all the sugar cane Sweet Plantation grew during the coming season. This contract will be unenforceable due to its vagueness.

False

If both parties believe they have a binding contract, this belief is controlling if there is later a question about the validity and enforceability of the agreement

False

Nella offers to sell her crop of strawberries, which have just been picked, to Morgan's Market. Since she does not specify a time limit for acceptance, Morgan's can accept the offer the following week, as long as Nella has not revoked it.

False

On Monday, Harry puts an offer in the mail to Sally to sell his guitar for $50. Monday night when jamming with his buddies, he decides he will really miss his old guitar and has second thoughts about selling it. Tuesday morning he puts a revocation in the mail informing Sally he has changed his mind and the guitar is no longer for sale. The revocation is effective on Tuesday morning.

False

Vern Valve Company makes valves for plumbing fixtures. At the beginning of the year, it sends out a price list addressing each one, "To our valued customers." Honest Hank Hardware orders a variety of valves at the prices quoted on the price list. Vern Valve must sell the valves to Honest Hank for the prices quoted on the list.

False

When Olga asks Sven if he wishes to sell his Harley motorcycle, he replies that he would not sell it "for less than $2,000. "Olga replies, "I accept," and hands him $2,000. A contract exists.

False

A letter of intent summarizes progress made during business negotiations, but it does not necessarily create a binding contract

True

According to the UCC, one or more open terms will not cause a sales contract to fail for indefiniteness as long as the parties intended to make a contract and there is a reasonably certain basis for the court to grant an appropriate remedy.

True

If the offer does not specify a type of acceptance, the offeree may accept in any reasonable manner and medium.

True

In seeking to ascertain whether there is a meeting of the minds, the courts look to how a reasonable person would objectively view the language or actions of the parties.

True

Nunnsky's Retail sent out newspaper inserts advertising wool suits for $50. In fact, the store had only two, out-of-style suits for sale at this price. Their other wool suits started at $175. If Nunnsky's acted in bad faith in its advertising, consumers may have protection through state statutes.

True

Revocation is the withdrawal of an offer by the offeror.

True

Software clickwrap and shrinkwrap agreements limiting the manufacturer's maximum responsibility to a refund of the purchase price even if the software destroys your hard drive have generally been found to be binding against consumers

True

You have placed an antique desk up for auction and the auctioneer has not made any special announcements about the sale. You can withdraw the desk at any time before the auctioneer closes the sale by announcement or by the fall of the hammer.

True

Collector Carl displays his beer can collection at the local swap meet. Mary sees the collection and is interested in buying it. Carl says he will sell the collection for $1,500. Mary says she really likes the collection but is only willing to pay $1,000. Which of the following is correct? a. Mary's counteroffer terminates Carl's offer of $1,500. b. If Carl rejects Mary's counteroffer, she can still accept Carl's offer of $1,500. c. Neither offer is valid. Who would ever pay $1,000 or $1,500 for a beer can collection? d. Mary's offer is a firm offer. Carl has an exclusive right to consider her offer for a reasonable period of time.

a. Mary's counteroffer terminates Carl's offer of $1,500.

David and George have a contract wherein George agrees to buy sporting goods and equipment. Since the goods are not to be delivered for several months, they left the price open. Under the UCC, which of the following will be true? a. The price will be the reasonable price based on fair market value of the goods at the time of delivery. b. David has the freedom to set any price he wants considering George was foolish enough to enter into a contract without a price established. c. George has the right to establish a price because he is the buyer. David should have taken steps to protect his sales interest. d. None of the above. The contract is not valid because the terms are not definite and certain.

a. The price will be the reasonable price based on fair market value of the goods at the time of delivery.

Vivian goes to an auction and sees a rare antique lamp that is an identical match to one she already has. At the proper time she bids on the lamp and is the highest bidder. Even though she is the highest bidder, the auctioneer refuses to accept her bid and withdraws the lamp from the auction. Can the auctioneer do that? a. Unless otherwise stated, the auctioneer had the right to withdraw the item before the fall of the hammer. b. Generally, the auctioneer must sell to the highest bidder. Vivian will get the lamp. c. Generally, the auctioneer is the offeror and the bidders are the offerees so there is a contract and Vivian will get the lamp. d. Most auctions are without reserve and therefore the auctioneer cannot withdraw the lamp.

a. Unless otherwise stated, the auctioneer had the right to withdraw the item before the fall of the hammer

If Morales and Rolfes Supply negotiate for the purchase and sale of a supply of fuel for a three-year period for Morales' business: a. the contract may indicate a method for determining the price, without stating a definite price. b. Morales and Rolfes must depend on the UCC's gap-filler provisions to determine a price since the fuel is a "good" covered by Article 2 of the UCC. c. the contract price must remain the same for the entire three-year contractual period. d. their contractual requirements regarding definiteness would be the same under the UCC and the common law.

a. the contract may indicate a method for determining the price, without stating a definite price

Regency Construction placed an order for two hundred 2 x 4s from Lumber Jack. If the place of delivery and time for shipping the goods are not specified, the UCC provides: a. the place of delivery is Lumber Jack's and the time for delivering the lumber is a reasonable time based on normal trade practice. b. the place of delivery is Regency Construction and the time for shipping is within 30 days. c. the place of delivery is Lumber Jack's and the time for delivering the lumber is within 30 days. d. there is no contract because having more than one open term made the offer too indefinite.

a. the place of delivery is Lumber Jack's and the time for delivering the lumber is a reasonable time based on a normal trade practice

The Johnsons decided to sell their summer cabin on Beech Lake. They sent flyers out to all who previously had expressed an interest in buying the cabin stating that they were planning on selling their cabin. The flyer described the location of the property, the size of the lot, and the price. If one of the recipients responds by sending a letter accepting, an agreement: a. will not be formed because the flyer was sent out as an invitation to negotiate. b. will be formed because the first to respond gets the property. c. will be formed because the price is included. d. will not be formed because of the parol evidence rule.

a. will not be formed because the flyer was sent out as an invitation to negotiate.

Seth told the salesperson at Outdoor Times that he wanted a sleeping bag that would keep him comfortable if the temperature drops to 10 degrees Farenheit at night. The salesperson told Seth there were two styles that would meet his needs and Seth chose one. If the salesperson did not give Seth a written warranty with the sleeping bag: a. no warranties will be included in the purchase. b. Seth will still receive a warranty of merchantability and a warranty of fitness for a particular purpose. c. Seth will receive a warranty of fitness for a particular purpose because the salesperson gave the warranty orally. d. Seth will receive only a warranty of merchantability.

b. Seth will still receive a warranty of merchantability and a warranty of fitness for a particular purpose.

Oxtron, Inc. sent the following price list to its customers. Which statement is correct? a. These price quotes would generally be considered offers. b. These price quotes would generally not be considered offers. c. These price quotes would generally be considered output contracts. d. These price quotes would generally be considered requirements contracts.

b. These price quotes would generally not be considered offers

Hensley and Boyer have been negotiating for several months over issues related to the purchase and sale of some real estate. They draft a letter of intent which: a. protects both parties by ensuring the other side is serious and creates a binding agreement on the issues on which the parties have agreed thus far. b. may or may not be an offer, depending on the exact language and whether the document indicates that the parties have reached an agreement. c. has no legal effect, but provides a record for the parties as to where the negotiations stand. d. courts will consider to be a valid offer which the other party must accept if offered in good faith.

b. may or may not be an offer, depending on the exact language and whether the document indicates that the parties have reached an agreement.

Jamie offered to buy Kevin's bike. Jamie is the: a. offeree. b. offeror. c. mortgagor. d. trustee.

b. offeror.

Dick offers to sell Jane his 1955 Thunderbird convertible. Before Jane can accept the offer, lightning strikes the car and it is totally destroyed. Which of the following is true? a. Jane can still accept the offer and John must find a 1955 Thunderbird to sell. b. The offer is terminated by law. c. Dick can still revoke his offer so long as he does so before Jane accepts. d. Jane can still accept the offer. She will be entitled to the insurance proceeds.

b. the offer is terminated by law.

A seller's form clearly states no warranty is included. The buyer's form states that the seller warrants the goods for one year. In this case: a. no contract can be created. b. the warranty term is a "different term," and the majority of states hold that a contract can be formed but the contradictory terms cancel each other out. c. the warranty term is an "additional term" that becomes part of the contract in most states. d. the warranty term is a "different term," which in most states becomes part of the contract unless the seller promptly objects.

b. the warranty term is a "different term," and the majority of states hold that a contract can be formed but the contradictory terms cancel each other out.

Acme Co. offers to buy 1000 widgets from Widget World Co. The written offer provides for 1000 at $10 per widget, to be delivered May 1. The offer has no other provisions. Widget World sends a written acceptance. However, the acceptance also states that if any claim arises under this contract, Widget World must be notified within 10 days. Acme does not object to this provision. Both parties are merchants. Which of the following best describes this situation? a. No contract exists. The purported acceptance contains additional terms, so it is a counteroffer, which has not been accepted. b. No contract exists if the additional terms are construed to be material terms. c. A contract exists. If the additional terms are construed to be material, they are not part of the contract. If the additional terms are not material, they are part of the contract. d. A contract exists, but the additional terms are not part of the contract no matter what.

c. A contract exists. If the additional terms are construed to be material, they are not part of the contract. If the additional terms are not material, they are part of the contract.

Travel Lust offered to sell 10 round-trip tickets to Elaine. Travel Lust stated that the acceptance must be in writing by USPS next-day service. Which of the following acceptances will create a contract between Travel Lust and Elaine? a. Elaine calls Travel Lust and states that she will buy the tickets. b. Elaine sends a fax to Travel Lust stating she will buy the tickets. c. Elaine sends a letter by USPS next-day service to Travel Lust stating that she will buy the tickets. d. All of the above responses will create a contract between Travel Lust and Elaine since they constitute reasonable means of communication.

c. Elaine sends a letter by USPS next-day service to Travel Lust stating that she will buy the tickets.

Jack mails an offer to Joan that states, "I offer to sell you my car for $2000. If I don't hear from you in 10 days, I will assume you are willing to buy the car for the stated price." Jack hears nothing by the deadline and assumes he has a deal. What is the result? a. Jack has a deal. His offer was intended and contains definite terms. b. Jack has a deal. Joan should have responded saying she is not interested in the car if she didn't want to be bound to the offer. c. Joan is not bound. Generally an offeree must say or do something to accept an offer. d. Joan is not bound. Ten days is not a reasonable amount of time to consider the offer and accept by mail.

c. Joan is not bound. Generally an offeree must say or do something to accept an offer.

Floyd offers to sell his 1967 Ford Mustang convertible to Tim. Before they conclude their negotiations, Floyd dies. Which of the following is true? a. Floyd's heirs must sell the car to Tim. b. Floyd's heirs must continue to negotiate the offer and sell the car, if a reasonable price can be determined. c. The offer terminates automatically upon Floyd's death. d. There is a contract if Tim accepts before learning of Floyd's death.

c. The offer terminates automatically upon Floyd's death.

Bob signed an agreement with Joe under which Bob agreed to purchase all the hay that Joe grew during the coming growing season. This contract will be: a. unenforceable due to its vagueness. b. unenforceable due to the difficulty of devising an appropriate remedy for a breach. c. enforceable as long as both parties act in good faith and Bob doesn't suddenly demand more hay than what was reasonably estimated. d. unenforceable unless state real estate law makes an exception.

c. enforceable as long as both parties act in good faith and Bob doesn't suddenly demand more hay than what was reasonably estimated

On January 8, Quastrar, Inc. sent Hylavian Company a letter offering to sell $10,000 in restaurant supplies. On January 18, Hylavian mailed a letter to Quastrar accepting the offer. Quastrar received the acceptance letter on January 20. On January 17, Quastrar sent a letter revoking the offer. Hylavian received this letter on January 21. A contract between Quastrar and Hylavian: a. was not formed because the revocation was effective before the acceptance was sent. b. was not formed because the revocation was effective before the acceptance was received. c. was formed on January 18. d. was formed on January 20.

c. was formed on January 18.

Which of the following offers are considered to be irrevocable for a given period? a. Firm offers. b. Option contracts. c. A writing signed by a merchant offering to hold open an offer for the sale of goods for a stated period. d. All of the above.

d. All of the above.

Which of the following are generally considered to be legal offers? a. Placing an item up for auction. b. Catalog advertisements. c. Price lists. d. None of the above are generally considered offers.

d. None of the above are generally considered offers.

Wally owns 200 acres of land. Wally offers to sell the land to Robert for $1,500 per acre. Robert replies that he does not need 200 acres of land but would like to buy 40 acres at $1,500 per acre. Wally agrees to sell but does not identify which 40 acres. Later, Wally refuses to sell any land to Robert. What is the result? a. Robert wins; this is an enforceable contract with complete and definite terms. b. Robert wins; the UCC will decide which 40 acres are to be sold. c. Wally wins; the original offer was not intended to be an offer but merely an invitation to negotiate. d. Wally wins; this agreement is too indefinite since it does not identify which 40 acres are to be sold.

d. Wally wins; this agreement is too indefinite since it does not identify which 40 acres are to be sold.

John owns a thoroughbred horse named Prince Charming that just ran in the Kentucky Derby. Prince Charming came in last, much to John's frustration and embarrassment. John exclaims in a loud voice, "I'm selling that horse to the first person who hands me $100 bucks!" John has: a. made an offer to anyone within hearing distance and will be bound by his offer to the first person who produces $100. b. made a firm offer and will be bound by his offer for a reasonable period of time. c. made an acceptance to the first person who can produce $100. d. not made an offer because under the circumstances a reasonable person would not conclude that John had intent to make an offer.

d. not made an offer because under the circumstances a reasonable period would not conclude that John had intent too make an offer.

If an offer specifies no time limit in which to accept: a. the offeree has 30 days to respond. b. the offeree has 10 days to respond. c. the offer is not valid and therefore it does not matter when the offeree responds. d. the offeree has a reasonable period during which to accept.

d. the offeree has a reasonable period during which to accept.

The intent of the offeror to extend an offer to the offeree is generally determined by reference to: a. the beliefs of the offeror. b. the subjective intention of the offeror. c. the assumptions of the offeror. d. the words and conduct of the offeror.

d. the words and conduct of the offeror.

In which case is the offer still valid at the time the acceptance is made? a. Hal offered to sell a book to Sid. Hal died, and Sid sent an acceptance two days later. b. By-Waste Co. telephones XXX Co. offering to dispose of XXX Co.'s chemical waste by a particular method. XXX says it has another way to dispose of the waste. Then XXX finds out the method it planned to use violates environmental protection statutes, so it sends a letter of acceptance to By-Waste. c. Ray offers to sell his AT&T stock for a particular price by May 1. On May 2, Kathy agrees to buy the stock. d. In a face-to-face transaction, Pat offers to sell Mike his stereo and Mike accepts. e. All of the above.

e. All of the above