Law 3220 Test 3

A hires B to work for his logging operation, which is dangerous work. A has B sign a contract that says that B will not sue A in the event of injuries that happen on the job. This contract, which is probably illegal is

An exculpatory agreement

In October, Ashton Co. ordered machines from Ross Tool to secure propellers onto airplanes. Delivery was set for December. In November, Clyde told Ashton that its propeller supplier could not ship propellers that would fit the Ross machines. Ashton told Ross that it was canceling the contract for the machines. Ross may sue

Ashton for breach to recover additional expenses not covered by the resale or the salvage

A "draft drawn on a bank and payable on demand" is a

Check

In Griffith v. Clear Lakes Trout, Griffith grew trout for Clear Lakes; the parties got into a dispute over what were "market size" trout, as Clear Lakes wanted larger fish. The court held that

Clear Lakes was incorrect about trade usage regarding "market size" so Griffith had no an obligation to grow larger fish to be in compliance with the contract since both parties had agreed for 3 years that "market size" was 12 to 16 ounces, Clear Lakes was liable for breach of contract when it tried to change the definition of "market size"

A California winery shipped its Rotgut Red wine to the House of Wines. The wine was improperly bottled, causing the wine to blow its corks and spew wine all over Wines' carpeting. In Wines' suit against the winery, the damages to the carpet will be considered

Consequential Damages

In Deschamps v. Treasure State Trailer Court, Ltd., where Deschamps was sued after he bought a mobile home trailer park and then stopped making payments on it because he claimed the seller told him the water system was in good condition when in fact it required $400,000 of repairs, the supreme court of Montana held that

Deschamps had to make the full payment because his claims of reliance on verbal information were barred under the parol evidence rule

Because the UCC's warranty requirements create a tough standard, sellers may wish to reduce their liability by issuing

Disclaimers

___________ requires that directors of a corporation place the interests of the corporation before their own interests.

Fiduciary duty of loyalty

The ______________ means that there are also responsibilities imposed on parties who commit to binding relationships in contracts

Freedom of contract

Article 2 of the UCC covers the sale of

Goods

In Lee v. R&K Marine, where a boat that lee bought became unusable after only three years when it fell apart, and the seller had expressly disclaimed all warranties, the court held

Lee was out of luck because the seller properly disclaimed warranties Lee had no case because the retailer's disclaimer met all the UCC requirements

A(n) ____ is an act, or a promise to act, or the refraining from an action, such as giving up a legal right.

Legal Detriment

A smooth talking door-to-door salesman talks you into buying $200 worth of magazine subscriptions. After he leaves you want out of the deal. The contract you signed

May be rescinded within 3 days under the FTC Cooling-Off Rule

When both parties to an agreement are mistaken as to a material fact, the contract

May be voidable

In Crest Ridge Construction v. Newcourt, where an order for construction materials that Crest Ridge needed was rejected for failure to meet credit terms, and Crest Ridge had to find a higher-cost replacement and sued Newcourt for damages, the appeals court held that

Newcourt was liable as its actions gave Crest Ridge reason to believe the sale had been approved Newcourt was liable for breach of contract because there was sufficient evidence that the two companies had formed a contract under the definition found in the UCC

A court award of $1.00 in damages would be called

Nominal

A(n) _____________ has the same contract responsibilities as an assignee under a nonnegotiable instrument.

Ordinary Holder

A __________ is a note promising to repay borrowed money, probably with interest.

Promissory note

Exemplary damages are also called

Punitive

A business is a _______________ when it has the ability to take some of the nonpaying customers' property to satisfy the debt

Secured creditor

A counteroffer ____ the original offer

Terminates

The rules that regulate and govern the internal operations of a corporation are known as

The Bylaws

If a North Carolina firm contracts to buy toys from China, and the contract does not specify which law applies, in case of dispute, which law will apply

The CISG(Contracts for the International Sale of Goods)

A buyer and seller have been doing business for months without a formal contract. Every Monday, the seller delivers supplies to the buyer's business. Every Thursday, the buyer pays the invoice by mail. Is there a contract between the parties?

Under the UCC, a contract has been formed by the conduct of the parties

A "contract" that does not exist at law, such as a contract to commit a crime, is what kind of contract?

Void

A _______ is issued by the clerk of the court and directs the sheriff to seize and sell any of the debtor's nonexempt real or personal property within the court's jurisdiction

Writ of Execution

Fernando owes Lucia $8,000. They both realize he is unlikely to be able to repay that much, so Lucia says: "Pay me $5,000 and we'll call it good." Fernando pays the $5,000. This settlement is called

accord and satisfaction

16-year-old Green bought a car that he later wanted to return for a full refund. If the dealer refuses a court is likely to hold that

as a minor Green can disaffirm the contract and be given a refund, less the value of the benefits received from the use of the car

A transfer of contract rights to another party is

assignment

The franchisee follows the business model set out by the parent company, such as McDonald's in which category of franchise:

business format franchising

A good is tangible if

can be seen and touched

In Caley v. Gulfstream Aerospace, the employer told the employees that as a condition of continued employment they had to agree to a new dispute resolution policy that would take effect in two weeks. Caley sued, contending the new policy was not backed by consideration, so there was no enforceable contract. The appeals court held that

continued employment was consideration; there was a contract

In Hinson v. N&W Construction, where Hinson submitted the low bid to N&W for plumbing work to be part of a larger construction project by N&W, but then refused to do the work when construction was started by N&W, the court held that Hinson's bid

created liability based on promissory estoppel, so he was liable for the extra costs incurred by N&W was liable for damages based on a theory of promissory estoppel, not breach of contract Hinson was liable for the value of the contract because N&W relied on his verbal quote of $92,000

Early sales law was governed by state law. This created a significant legal challenge for managers because

different rules developed across the states

A contract made by a person with partial capacity is

enforceable unless the person with partial capacity exercises the right to disafirm the contract

In Fordyce Bank and Trust v. Bean Timberland, the bank lent Bean money to buy timber from landowners. Bean gave the bank security interests in the timber, which he sold to lumber companies that milled the logs into lumber. When Bean defaulted on the loan, the bank tried to collect from the lumber companies because it had a secured interest in the timber. The courts held that the bank

gets nothing from the timber companies, they were not responsible for the security interests and breached no duty to the bank Since there was abundant evidence that purchasing gatewood without performing a lien search was the standard practice in the timber industry, the timber companies had no duty to perform a lien search and so there was no breach of duty

A shareholder's relation to creditors of the corporation is generally that the shareholder

has no relation to creditors

Andrea offered to buy apricots from Aramos. The offer was for 10 tons at $1.20 per pound to be transported to Andrea's warehouse in Aramos' trucks. Aramos accepted the offer, but said that the goods would be transported in Andrea's trucks. A dispute later arose and Aramos refused to sell the apricots, asserting that no contract existed. If Aramos sues, it

loses if it can be shown that the parties intended to form a contract even though the acceptance contained different terms from those of the offer

In Certified Fire Protection v. Precision Construction, Precision accepted a winning bid from Certified to install a fire suppression sprinkler system. Later the two parties got into a fight over some details in the contract, which was never signed. The courts held that the contract was

never formed as there were disagreements over major provisions a binding contract was never formed because the parties did not agree on some major terms needed for an agreement a binding contract was never formed because the parties, despite not signing, clearly intended to comply with the terms originally agreed to in the document

In the divorce agreement between Ted and Alice, Alice agreed to assume the debt on Ted's credit card. The credit card company agrees to this arrangement. This is an example of

novation

In general, limited partners lose their limited liability status by

participating in managerial decisions in the partnership

A doctrine to avoid injustice that is used by the courts to bind a promisor to promises that a reasonable person would rely upon without consideration, is called

promissory estoppel

A(n) is a note promising to repay borrowed money, probably with interest

promissory note

An example of an equitable remedy is

specific performance

In Orkal Industries v. Array Connector, where Orkal bought parts from Array by sending an order form, but array confirmed with its own for that contained different terms. Orkal did not object to different terms until litigation arose later at which point the added terms mattered. The courts held under the UCC that

the buyer, Orkal, controlled the terms, so the original order form controls; Array could have forced a change by requiring Orkal to recognize its different terms, but failed to do so

The idea that breach of contract generally only allows recovery for profits and costs incurred due to the breach is called

the economic loss rule

In DeRosier v. Utility Systems of America, Inc. where DeRosier sued Utility Systems of America, Inc. for dumping too much fill dirt on his property, the appeals court held that

the trial court was right to award DeRosier general damages so he could have the excess dirt removed, but wrong to award additional consequential damages since there was no claim for delay damages in the pleadings or discovery

A buyer and a seller would like to enter into a contract for the sale of goods. In his offer the buyer does not specify a price. The seller agrees with the arrangement

there is a contract under Article 2 because it allows the parties to enter into a contract even though the price is to be determined later

The UCC's purpose is

to simplify, clarify and modernize the law governing commercial transactions

An effective acceptance must be

unconditional unequivocal properly communicated

Balls, Inc. sells all baseballs needed by Major League Baseball (MLB). MLB agrees that prices and quantities will be determined at the beginning of each year. After 4 years, MLB decides its needs fewer balls and demands it be allowed to buy less. Balls demands MLB buy as much as in years before. If MLB sues under the UCC it will likely

win if the contract modification is sought in good faith

The __________ of partnership affairs involves completing any unfinished business and then collecting and distributing the partnership's assets.

winding up