Business Law Final Ch. 12

Fred offers to buy a house, then dies. The sellers are not aware that Fred has died, so they mail an acceptance of his offer to him the day after he dies. Which of the following is true?

Fred's heirs are not in a contract and need not buy the house.

Between Merchants Rule

When an acceptance for a sale of goods contains additional terms that weren't in the offer, between merchants (meaning if both parties are merchants) the additional terms become part of the contract unless: 1. The offer expressly limits acceptance to the terms of the offer, or 2. The additional terms materially alter the offer, or 3. Notification of objection to the additional terms is given (by the offeror) within a reasonable time.

In California, if an auto dealer places an ad for "2019 Toyota Prius LE. Great selection. $22,617 while supplies last!" at least the first five buyers that show up will be able to demand a 2019 Toyota Prius LE for that price because of California's consumer protection statute governing ads for automobile sales.

True

In California, there is a mandatory minimum 3 day cooling off period for car purchases, during which the buyer can return the car for a refund if they choose.

True

In California, there is no universal mandatory cooling off period for contracts; however, for some types of contracts, there are minimum cooling off periods of various lengths.

True

In an offer for a contract, the phrase "you have until Date X to accept" will be interpreted as "you have until Date X to properly dispatch your acceptance" unless clearly stated otherwise in the offer.

True

One of the major differences we have learned between the common law of contracts and UCC Article 2 is that the mirror image rule applies to contracts governed by common law only.

True

One of the major differences we have learned between the common law of contracts and UCC article 2 is that for contracts governed by common law, an express contract will not be formed unless the offer contained all essential terms and those terms were clear and unambiguous; while for goods contracts, the offer must generally contain the quantity, a description of the subject matter, and the identity of the parties, but price need not be present.

True

One of the minor differences we have learned between the common law of contracts and UCC Article 2 is that the rule governing firm offers for the sale of goods by a merchant (UCC 2-205) applies only to offers for sales of goods.

True

One of the minor differences we have learned between the common law of contracts and UCC Article 2 is that the rules governing output contracts and requirements contracts apply only to offers for sales of goods.

True

One of the minor differences we have learned between the common law of contracts and UCC article 2 is is the battle-of-the-forms rules, including the between merchants rule and the knockout rule, which apply only to contracts for the sale of goods.

True

The UCC is silent on how different terms should be handled, so each state has had to come up with a common law rule to fill in this gap in the UCC statutory rules.

True

The case of Hoffman v. Red Owl Stores, Inc. we looked at in chapter 11 was an example of a case in which the court declared that no contract was formed because some of the essential terms of the offer were insufficiently definite.

True

When a jury needs to exercise judgment to use a gap-filler provision to fill in a missing term in a contract for sale of goods, the jury will hear testimony from experts and other witnesses to help them determine what term to replace the open or missing term with. They will need this to evaluate guidelines like "a reasonable price" or "a reasonable time."

True

When there is a valid offer outstanding, it remains effective until it is either terminated or accepted.

True

Who won the case of Travelers Insurance Co. v. Tufte (Minnesota Court of Appeals, 1989) described on slides 68 and 69 of the chapter 12 lecture?

Tuftes Won

Gap-Filler Provisions

UCC rules for supplying missing terms

Chico's bakery produces a cheesecake that Fred really likes, and Fred owns a restaurant. If Fred promises to buy all that he requires of Chico's cheesecake at $15 per cake for the next 12 months:

We would say that the two had entered into an enforceable requirements contract.

In the case of Berry v. Gulf Coast Wings described on slides 9 through 14 of the chapter 12 lecture, would Jodee Berry have won her lawsuit if it had gone to trial?

Yes she would have won her case

If the offeror says "I'll sell you my bicycle for $200, but only if you accept my offer by standing on a chair in the lunchroom tomorrow and reciting a poem about a cow," can the offeror really do that, or could the offeree successfully sue on the basis that the offeror is being unreasonable?

Yes the offeror can do that.

Marge and Vick meet over coffee. At the meeting, Marge asks Vick if he will sell her his used business law textbook for $75. Vick says "I don't know. Give me until tonight to think about it. If I don't text you by 9:00 pm tonight that I've decided not to sell it to you, then I have accepted your offer." Marge hears nothing by the deadline. Are Marge and Vick in a contract?

Yes they are in a contract

Under Common Law

any so-called "acceptance" that adds or changes terms is a defective acceptance, and functions as a rejection and counteroffer.

Courts generally treat advertisements as offers to contract at the price indicated in the ad.

False

Courts generally treat magazine advertisements as offers to contract at the price indicated in the ad.

False

Courts generally treat radio advertisements as offers to contract at the price indicated in the ad.

False

Courts generally treat television advertisements as offers to contract at the price indicated in the ad.

False

Destruction of the subject matter destroys all executory contracts involving that subject matter.

False

If Hewlett-Packard promised to buy all that it requires of the model 7273 DRAM from Fujitsu at $1.73 per unit for a two-year period, we would say they had "entered into an output contract."

False

If Hewlett-Packard promised to buy the entire output of model 7273 DRAMs from a named Fujitsu factory at $1.73 per unit for a two-year period, we would say they had "entered into a requirements contract."

False

If an offeree rejects an offer, the law gives them "a reasonable time" to withdraw the rejection without terminating the offer, and just a few seconds will always be considered a reasonable time.

False

If the seller offers you a cooling off period for a car purchase before you agree to buy the car, you will still not be able to demand an opportunity to return the car within that period because there is no cooling off period on car purchases in California, even if the seller offers one.

False

In California, there is a mandatory minimum 3 day cooling off period for cell phone purchases, during which the buyer can return the phone for a refund if they choose.

False

The law assumes that all auctions are without reserve unless clearly stated otherwise.

False

UCC section 2-204 applies to all contracts between merchants. It is not limited just to contracts for the sale of goods.

False

When an item is placed up for sale at an auction, the auctioneer must sell it to the highest bidder.

False

Fred offers to buy a house, and the sellers accept, then Fred dies. Which of the following is true?

Fred's heirs are in a binding contract and will have to buy the house.

Different Terms

Terms that contradict terms in the offer.

Which of the following are effective when properly dispatched in most states?

Acceptances

Who has the power to revoke an offer?

The offeror

Requirements Contract

A contract that obligates a buyer to obtain all of his needed goods of a specified type from the seller at specified unit prices.

Output Contract

A contract that obligates the seller to sell all of his output of specified items at specified unit prices to the buyer, who agrees to accept it.

UCC 2-207

A definite and seasonable expression of acceptance...operates as an acceptance even though it states terms additional to or different from those offered...unless acceptance is expressly made conditional on assent to the additional or different terms. Does not require either party to be a merchant.

Counteroffer

A different proposal made in response to an original offer

Letter of Intent

A letter that summarizes negotiating progress

A meeting of the minds

A situation in which the words and deeds of each party would cause a reasonable and informed person in the other's position to believe that they have made a contract consisting of definite terms, and to have perceived the same set of terms as the other

The Mailbox Rule

Acceptances are effective when properly dispatched

No, Ahn and the wholesaler are not in a contract

Ahn, an interior designer, is working on a hotel project. In the annual catalog of a furniture wholesaler, she sees that sofa beds cost $3,000. Based on the catalog, she sends an order for 100 sofa beds to the wholesaler. The wholesaler notifies Ahn that the price has gone up to $4,000. Are Ahn and the wholesaler in a contract?

Offer

An act or statement that proposes definite terms and permits the other party to create a contract by accepting those terms.

Firm Offer

An offer which, by its own terms, shall be held open for a specified period.

Mirror Image Rule Definition

Any attempt by the offeree to add or change any of the terms of the offer during their acceptance will have the effect of converting the acceptance into a rejection and counteroffer.

Chet will win his lawsuit

At an estate auction held without reserve, Chet is high bidder on a rare cello. The seller considers Chet's bid too low and refuses to sell at that price. Chet sues for breach. Will Chet win his lawsuit?

In order to save time, merchant buyers and sellers often make and accept offers to sell goods on standard or pre-printed forms with boilerplate provisions (sometimes on the back in fine print) which conflict with each other. Under the old mirror image rule, no contract would be formed. This is called the __________ problem.

Battle of forums

In the chapter 12 "chapter opener" case about Bob and Katrina found on pages 285 to 286 of your textbook, at the end of their discussion, were Bob and Katrina in a contract?

No they were not in a contract.

Good Faith

Honesty or sincerity of intention; operating in a way that conforms to all reasonable commercial standards of fair dealing in a given industry, as well as to the law and the public policy goals of the state.

Reasonable time

If the offer specifies no time limit, the offeree will have __________ in which to accept.

Option Contract will be formed

If the offeree pays a non-refundable fee in exchange for a promise to hold an offer open for a specified period, __________ and the offeror will be required to hold their offer open for the offered period.

Wholesaler presents a complete offer to buy a specified number of wheelbarrows to Manufacturer, including a term requiring delivery in 30 days. Offer contains no mirror image requirement. Manufacturer responds "I accept, but delivery will be in 180 days." Is manufacturer's 180 day term a different term or an additional term?

It is a different term

Most states have chosen to adopt __________ to define how different terms between offer and acceptance should be handled when a contract for the sale of goods is formed.

Knockout Rule

Consumer Protection Statutes

Laws protecting consumers from fraud

Marge telephones Vick and leaves a message on his voice mail: "I'll pay $75 for your business law textbook from last quarter. I'm desperate to get a copy, so I will assume you agree unless I hear from you by 6:00 pm tonight." Marge hears nothing by the deadline. Are Marge and Vick in a contract?

No they are not

Wholesaler writes to Manufacturer offering to buy 10,000 Model A wheelbarrows at $50 per unit, payable upon delivery, 30 days from today's date, on these and no other terms. Manufacturer responds "We accept your offer with interest on unpaid balances to accrue from date of delivery at 5% per annum, compounded monthly." Are Wholesaler and Manufacturer in a contract?

No they are not in a contract

Wholesaler writes to Manufacturer offering to buy 10,000 Model A wheelbarrows at $50 per unit, payable upon delivery, 30 days from today's date. Manufacturer responds "We accept your offer with interest on unpaid balances to accrue from date of delivery at 5% per annum, compounded monthly, conditional upon your acceptance of this additional term." Are Wholesaler and Manufacturer in a contract?

No they are not in a contract.

Martha telephones Joe and leaves a message on his answering machine, asking if Joe would consider selling his vacation condo on Lake Tahoe. Joe faxes a signed letter to Martha saying "There is no way I could sell the condo for less than $150,000." Martha promptly send Joe a cashier's check for that amount, on which she has written "I accept your offer to sell me your condo on Lake Tahoe for $150,000." Are Joe and Martha in a contract?

No, Martha and Joe are not in a contract.

Suppose that Indiana State University offers you a job as a faculty member of the Art History department, with a start date of July 1. If you write back to the Dean of that department as follows, will it function as a rejection and counteroffer?: "I am currently considering your generous offer of employment, but I was just wondering: would you be open to possibly changing the start date to July 15?"

No, it will not function as a rejection and counteroffer. The University's offer will be preserved by that inquiry.

Zachary says to Sharon, "Come work in my English language center as a teacher. You'll work 35 hours a week for six months starting Monday. We'll work out a fair hourly wage after you bring me a copy of your resume and salary history." Is this a valid offer for a contract?

No, this is not a valid offer for a contract. It is missing the essential term of price; or in this case, wage rate.

Mirror Image Rule

Requires that acceptance be on precisely the same terms as the offer

Which of the following are effective when received in most states?

Revocations, rejections, and offers

In the case of Raffles v. Wichelhaus described on slides 6 through 8 of the chapter 12 lecture, how did the court rule?

The court ruled that Wichelhaus would not have to accept and pay for the cotton that arrived on the second ship called the Peerless.

Offeree

The person to whom an offer is made to.

Offeror

The person who makes an offer

No, Chevaliers did not win their lawsuit

The town of Sanford, Maine, decided to auction off a lot it owned. The town advertised that it would accept bids through the mail, up to a specified date. Arthur and Arline Chevalier mailed in a bid that turned out to be the highest. When the town refused to sell them the lot, they sued. Did the Chevaliers win their lawsuit?

Gloria's bakery produces a chocolate espresso cake that Phil really likes, and Phil owns coffee shop. If Phil promises to buy Gloria's entire output of chocolate espresso cake at $15 per cake for the next 12 months:

The two are in an enforceable output contract.

An offeree accepts by saying or doing something that a reasonable person would understand to mean that she definitely wants to take the offer, and in that instant, the rights and duties of the parties change dramatically.

True

Consumer protection statutes generally make it illegal for retailers to practice "bait-and-switch," offering no customers or fewer than a reasonable number of customers the low advertised price and trying to switch everyone else to a higher price.

True

Courts generally treat advertisements either as invitations to bargain or as solicitations for offers to buy.

True

Destruction of the subject matter does not destroy a contract, but the buyer might be discharged from the contract if the seller was negligent in allowing the subject matter to be destroyed.

True

For all contracts, meaning both those governed by common law and those governed by UCC Article 2, courts require that a reasonable person in the position of the offeree would have construed the words and actions of the offeror to indicate that the offeror intended to make an offer; otherwise the court will conclude that no offer was made and therefore no contract was formed.

True

For both output and requirements contracts, the framers of the UCC solved the "vague quantity" problem by imposing obligations on the party who might otherwise take unfair advantage of the vagueness of the agreed quantity term. One of those obligations is an duty to "act in good faith".

True

For contracts governed by common law rules at least, all of the essential terms of the offer must be definite, otherwise a court will declare that no valid offer was made and therefore no contract was formed, even if the parties believe they formed a contract.

True

For goods contracts, UCC 2-207 rejects the mirror image rule and allows a contract to be formed even if the acceptance contains both additional and/or different terms than the offer.

True

Northrop is a huge defense firm. Litronic manufactures printed circuit boards. Northrop requested Litronic to submit an offer to sell them certain boards. Litronic sent its offer form, stating a price and including its preprinted warranty clause, which limited its liability to 90 days. Northrop orally accepted the offer, then sent its own purchase order form, which contained a warranty clause holding the seller liable with no time limit. Six months after the goods were delivered, Northrop discovered they were defective. Northrop sued, but Litronic claimed it had no liability because the 90 days had expired. Are Northrop and Litronic in a contract?

Yes they are in a contract.

Zachary says to Sharon, "Come work in my English language center as a teacher. You'll work 35 hours a week for six months starting Monday. When you arrive Monday, I'll let you roll three six-sided dice and I'll pay you the resulting number of dollars per hour, or minimum wage, whichever is higher." Is this a valid offer for a contract?

Yes this is a valid offer for a contract

Contracts Governed by common law only

courts require that all essential terms be present in the offer; otherwise the court will conclude that no offer was made and therefore no contract was formed.

UCC Section 2-204, paragraph three

states that even though one or more terms are left open, a contract does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.