Commercial Law spring 2009
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Commercial Law spring 2009

Course Number: ACCT 351B, Spring 2011

College/University: Golden Gate

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http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm B. Law 420 Commercial Law Exam #1, Spring 2009 March 5, 2009 Multiple choice portion: Each question is 2 points, total 70 points. Select the best answer. Answer Key to the m/c and essay portions follows the exam. 1. Able entered into an oral contract with Baker for the sale of Able's car for $5,000. Later Baker breached that...

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Law http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm B. 420 Commercial Law Exam #1, Spring 2009 March 5, 2009 Multiple choice portion: Each question is 2 points, total 70 points. Select the best answer. Answer Key to the m/c and essay portions follows the exam. 1. Able entered into an oral contract with Baker for the sale of Able's car for $5,000. Later Baker breached that contract. Able wants to sue to enforce the contract. Under the Statute of Frauds, who is the "party to be charged" in this case? a. Able. b. Baker. c. Both Able and Baker. d. Neither Able nor Baker, because this is a contract for the sale of goods. 2. Chen, a retail seller of fruit, entered into a contract for the purchase of 10 bushels of peaches from Georgina, at a price of $5 per bushel. Delivery was to be in one month. One week after this contract was formed, unexpected cold weather destroyed most of the peach crop and prices doubled. Georgina asked Chen if he would agree to a price increase to $7 per bushel, to help her absorb some of her loss. Chen agreed. However, after the peaches were delivered, Chen refused to pay more than $5 per bushel. a. Chen must pay the higher price because the UCC does not require consideration in this case. b. Chen must pay the higher price because he accepted delivery of the peaches. c. Chen does not have to pay the higher price because the UCC requires consideration in exchange for a promise to pay a higher price than in the original contract. d. Chen does not have to pay the higher price because a valid original contract cannot be modified. 3. Jerry's Hardware Co. (JHC) of Moscow Idaho, a retailer, sent a communication with the heading "Purchase Order" to Chicago Hardware (CH) of Chicago Illinois, a wholesaler. This purchase order was based on a price list that CH had sent four months earlier. JHC's purchase order stated the price, quantity and terms of payment for $5,000 of hardware goods. On the back of JHC's purchase order form there were 16 numbered clauses. None of these clauses dealt with how to resolve a dispute, should one later arise. CH received the purchase order and responded with a communication that had the heading "Order Confirmation". CH's order confirmation stated the same prices, quantities, and terms of payment as those contained in JHC's form. However, on the back of CH's form there was a clause that stated that if a dispute should arise over this transaction, the dispute would be resolved through arbitration. A dispute later arose. How should it be resolved? a. By litigation, because CH proposed an additional term that was not incorporated into the contract. b. By litigation, because CH proposed a different term that was not incorporated into the contract. c. By arbitration, because CH proposed an additional term, that was incorporated into the contract. d. By arbitration, because CH proposed a different term, that was incorporated into the contract. 4. The most important element in determining whether a UCC sales contract has been formed is the: a. presence or absence of a price term. http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm (1 of 14) [7/8/2009 11:37:05 PM] http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm b. issue of whether the terms of the offer and acceptance are exactly alike. c. issue of whether the contract can be fully performed in six months or less. d. intention of the parties to enter into a contract. 5. You enter into negotiations to buy a car from Ace Cars (AC). After extensive negotiations you and the AC salesman agree on a price of $23,000 for a specific car on the lot. However, you explain to the salesman that you do not have the money now, but expect to get it within a week. The salesman then promises to hold that offer open for 5 days, to buy that car at that price. You ask for and receive that promise in writing, signed by the sales manager. Is AC's promise to hold its offer open for 5 days legally binding? a. No, because it is a "gift promise", made without consideration. b. No, because it fails to satisfy the requirements of an option contract. c. Yes, because that promise is a UCC firm offer that does not require consideration to be binding. d. Yes, because whenever a seller makes such a promise it is binding for a "reasonable" period of time. 6. If a seller has delivered nonconforming goods that have been rejected by the buyer, the seller has a right to cure: a. Only if the time for performance of the contract has not yet expired. b. Under some circumstances, even if the time for performance of the contract has expired. c. Only if the contract specifically allows for cure. d. Only if the seller can do so within ten days. 7. Under a shipment contract, the seller is required to do all but which of the following? a. Deliver the goods to the city of the buyer. b. Make a contract for the transportation of the goods that is reasonable given the nature of the goods and other circumstances. c. Promptly notify the buyer of the shipment. d. Obtain and promptly deliver or tender to the buyer any document necessary to enable the buyer to obtain possession of the goods from the carrier. 8. When is a buyer considered to have accepted performance regarding goods that are delivered pursuant to a contract? a. After a failure to reject following a reasonable opportunity to inspect the goods. b. After delivery of the goods. c. Only after conduct that shows the buyer's willingness to become owner of the goods. d. Only after making an express acceptance. 9. Revocation of acceptance by the buyer: a. Can occur at any time. b. Can occur without notification to the seller. c. Requires a substantial nonconformity in the goods. d. Is forbidden by UCC Article 2. 10. When does risk of loss pass in a sale of goods that does not involve a common carrier or a bailment? http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm (2 of 14) [7/8/2009 11:37:05 PM] http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm a. Upon tender of delivery for both merchant sellers and nonmerchant sellers. b. Upon tender of delivery for merchant sellers and when goods are received by the buyer in the case of nonmerchant sellers. c. Upon tender of delivery for nonmerchant sellers and when goods are received by the buyer in the case of merchant sellers. d. When goods are received by the buyer for both merchant sellers and nonmerchant sellers. 11. Stone, a merchant in Seattle, contracted with Rose, a merchant in Rochester, for the sale of goods to be shipped by truck. The terms of the contract were "F.O.B. Seattle". Stone delivered the goods to the carrier. After leaving Seattle, the truck containing the goods was never seen again. Stone has demanded payment for the goods and Rose has refused. If Stone sues: a. Rose will win because Rose did not receive the goods. b. Rose will win because under the UCC this was a shipment contract. c. Stone will win because Stone was not at fault in causing the loss. d. Stone will win because under the UCC this was a shipment contract. 12. Which of the following is true about passage of title? a. It occurs at the time and place goods are shipped in a shipment contract. b. It always occurs when the goods leave the hands of the seller. c. It does not occur until the buyer indicates acceptance of the goods. d. It always passes at the same time that risk of loss passes. 13. In a case where goods are to be transported by a carrier, what is the most important factor in determining when risk of loss passes from the seller to the buyer? a. The contract's shipping terms. b. The buyer's insurance policy terms. c. The seller's insurance policy terms. d. When title passes. 14. Persons holding void title (and therefore no title at all) include: a. thieves b. persons who paid with a check that bounced c. people who impersonated others in order to trick the seller into selling the goods to them d. all of the above 15. Michelle sold her car to Barry, taking a personal check for $1,500. Barry knew he had nothing like $1,500 in the bank, so he drove her car straight to Al's Buick and traded it in on a new Buick and drove to Canada. Michelle tried to cash the check twice but it bounced twice. Michelle then saw "her" car at Al's car lot and went to Al's lot to demand the return of her car. Al was not aware of the bounced check. What will be the result? a. Al has to give Michelle the car because she has title. b. Al has to give her the car because Barry was nothing but a thief. c. Al can keep the car because Barry had the power to transfer good title to him. d. Al can keep the car because he paid for it. http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm (3 of 14) [7/8/2009 11:37:05 PM] http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm 16. Under the old common law rule, the risk of loss or damage to goods in a contract for the sale of those goods: a. always falls upon the buyer. b. always alls upon the seller. c. is incurred by the party who had title to the goods at the time of the loss or damage. d. always is split between the buyer and the seller. 17. If a buyer and seller agree to a contract for the sale of goods for a price of $300, which later modifications must be in writing in order to be enforceable? a. All later modifications. b. Any later modification increasing the price by $100 or more. c. Any later modification increasing the price by $200 or more. d. No later modification to such a contract needs to be in writing since the original contract did not need to be in writing. 18. For $100 each, Helen agrees with Troy Tech to knit 12 sweaters for the soccer team in their school colors with their names on the front and "Go Tech" on the back. After Helen has almost finished the last sweater, Troy Tech decides it should spend the money on repairs to the locker room instead of on the sweaters. Does Helen's contract have to be in writing for her to enforce it? a. No, because each sweater only cost $100 b. No, because they are specially manufactured sweaters c. Yes, because the total cost is $1,200 d. Yes, because they are specially manufactured sweaters 19. If the time, place, and manner of delivery is not stated in a contract for the sale of goods: a. The place of delivery is the buyer's place of business. b. The contract is void for lack of definiteness. c. The place of delivery is the seller's place of business. d. The seller is obligated to pay for shipping to the buyer's place of business. 20. Able offered to buy automobile batteries from Baker. Able's purchase order was complete and certain as to all material terms except price, which was omitted. If Baker accepts Able's offer, and the price of the automobile batteries is well established in the industry, is there a contract between Able and Baker? a. No contract was formed between Able and Baker. b. A contract was formed between Able and Baker only if it can be proved that the parties intended to enter a contract and that they discussed the price orally or in writing. c. A provisional contract was formed between Able and Baker, but the price will be treated as a proposed addition to the contract which must be accepted by both parties; if they do not later agree on a price, no contract will result. d. A contract was formed between Able and Baker even though the price term was omitted from their offer and acceptance. 21. Under the ____, a buyer may reject goods for even the slightest defect. http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm (4 of 14) [7/8/2009 11:37:05 PM] http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm a. revocation of acceptance rule b. perfect tender rule c. rules for inspection d. excuses for nonperformance 22. Jerry took his Metron 9 alpine skis to REI to have them repaired. REI repairs skis and also sells new and used skis. A new clerk thought that Jerrys skis were part of the REI inventory, and by mistake the clerk sold those skis to Ben. The price was a typical price for those used skis. When Jerry learned of the mistake, he demanded his skis back from Ben. However, Ben loves the skis ands refuses to return them. If a lawsuit were to result between Jerry and Ben, which one would be awarded possession of the skis? a. Jerry, because they are his skis he never sold them. b. Jerry, because he only left the skis with REI for repairs. c. Ben, because he is a good faith purchaser for value. d. Two of the above, a & b, are correct. 23. Maple Interiors, located in Boston, contracted to sell and ship sofas to Peach Furniture, located in Atlanta. The contract stated that the goods were to be shipped "F.O.B. Boston, via XYZ railroad". Maple delivered the sofas to XYZ railroad. They were shipped from Boston but never seen again. Both Peach and Maple had assumed that the other party had the risk of loss, so neither had obtained insurance. Who must bear this loss? a. Peach must bear the loss because the risk passed to it after the sofas were placed on the loading dock at Maple's warehouse. b. Peach must bear the loss because the risk passed to it after the sofas were delivered to XYZ railroad. c. Maple must bear the loss because the goods were never tendered to Peach. d. Maple must bear the loss because in any sale by a merchant, risk does not pass until the actual delivery of the goods to the buyer. 24. Inga runs a Swedish health spa in Connecticut. She orders 100 loofah sponges from a company in California. They are sent F.O.B. Hartford, Connecticut, but they never arrive at Inga's. What is the consequence? a. Inga has to pay anyway since it was a destination contract. b. The California company is required to bear the loss. c. The California company and Inga will have to split the loss since they did not specify in their contract when the risk of loss would pass to Inga. d. It cannot be determined from the information given who has the risk of loss. 25. Under the UCC, an entrusting of goods to a merchant who deals in that kind of goods gives the merchant: a. The power to transfer all rights of the entrustor to a buyer in the ordinary course of business. b. The power to transfer clear title to a buyer in the ordinary course of business. c. The power to transfer voidable title to a buyer in the ordinary course of business. d. The power to transfer clear title to any purchaser. http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm (5 of 14) [7/8/2009 11:37:05 PM] http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm 26. When does risk of loss pass in a sale of goods that does not involve a common carrier or a bailment? a. Upon tender of delivery for both merchant sellers and nonmerchant sellers. b. Upon tender of delivery for merchant sellers and when goods are received by the buyer in the case of nonmerchant sellers. c. Upon tender of delivery for nonmerchant sellers and when goods are received by the buyer in the case of merchant sellers. d. When goods are received by the buyer for both merchant sellers and nonmerchant sellers. 27. Circuit Electronics, Inc., accepts performance of a shipment of CD players from Delta Devices, Inc. When Circuit soon discovers a major defect in the players, it properly revokes its earlier acceptance, and ships the goods back to Delta. The players are destroyed before they are returned to Delta. This loss is suffered by: a. Circuit. b. Delta. c. Circuit and Delta equally. d. None of the above. 28. Richard, a surgeon, has entered into a contract for the sale of his car to Betty. This contract was formed and signed on February 28. The contract calls for Richard to deliver the document of title to the car to Betty on March 2 and to deliver the car to her on March 6. Betty is to pay for the car on March 3, after she has received the document of title. Under the default provisions of the Code, when does Betty become the owner of the car? a. February 28. b. March 2. c. March 3. d. March 6. 29. A merchant is a person who: a. Deals in goods of the kind involved in the transaction. b. By his or her skill or occupation, holds himself or herself out as being an expert regarding the goods in the transaction. c. Employs an expert as his or her agent. d. Any of the above would qualify a person as a merchant. 30. In a contract for the sale of goods, in which the offeror is a merchant and the offeree is a nonmerchant, what is the effect of minor additional terms contained in an acceptance? a. A contract will be formed incorporating the minor addtional terms of the acceptance. b. No contract is formed, and the purported acceptance will be treated as a counteroffer. c. A contract will be formed, but only the if parties resolve the differences in the offer and the acceptance. d. A contract will be formed, and the minor additional terms will be treated as mere proposals. 31. Birch entered into an oral contract to sell firewood to Maple for a price of $600. After a big jump in the price of firewood Birch refused to deliver. Maple purchased substitute firewood at a higher price then sued Birch for the difference. At the trial, Birch defended by testifying that an oral contract had indeed http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm (6 of 14) [7/8/2009 11:37:05 PM] http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm been entered into, but that the contract was unenforceable due to a violation of the U.C.C. Statute of Frauds. a. Birch will win because the oral contract was for the sale of goods for more than $500. b. Birch will win because an oral contract of this type constitutes fraud. c. Birch will lose because a contract of this type does not require that the U.C.C. Statute of Frauds must be satisfied. d. Birch will lose because Birch's testimony satisfies the U.C.C. Statute of Frauds. 32. Alice, a retailer of electronic equipment, purchased 50 DVD players from a wholesaler. The purchase contract called for the goods to be delivered to Alice's retail store. When the shipment arrived, Alice discovered that only 49 DVD players were included in the shipment. a. Alice must accept the shipment if the wholesaler simply made an innocent mistake. b. Alice must accept the shipment because the defect is trivial but she may deduct the cost of one DVD player. c. Alice can reject the entire shipment if she wants to. d. Two of the above are correct. 33. A buyer in Atlanta enters into a sales contract with a seller in Chicago. If the contract does not mention the place for delivery of the goods, the place of delivery will be: a. at the seller's business or residence in Chicago. b. as stated in all destination contracts. c. at the buyer's business or residence in Atlanta. d. irrelevant, since the contract is void due to indefiniteness. 34. Fran leaves a pair of her recently purchased shoes at a shoe store so that they might be dyed for a wedding. The shoe store accidentally sells Fran's shoes to Jan, who has no knowledge that the shoes belong to someone else. Fran can recover from: a. Jan only. b. The shoe store only. c. Either Jan or the shoe store. d. None of the above. 35. Bill, who owned a vintage Jaguar XK150 roadster, sold this car to George. George paid for the car with a check that was drawn on a closed account. Before the check bounced, George sold the Jaguar to Barry, who had been searching for exactly that model car for four years. Barry paid $15,000 for the Jaguar, which was approximately the market price. George told Barry that he, George, had owned the car for five years, and Barry believed him. George then cashed Barrys check, and has not been seen since. After Georges check bounced, Bill tried to recover his car from Barry. Who is entitled to possession of this car? a. Bill, because he never transferred clear title to the car to George. b. Bill, because he only transferred voidable title to the car to George. c. Barry, because he purchased the car in good faith. d. Two of the above are correct, a and b. http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm (7 of 14) [7/8/2009 11:37:05 PM] http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm Essay portion: Each question is 15 points, total 30 points. Remember that all legal rules used must include a statement of the legal requirements of that rule. 1. Gray Communications desired to build a television tower. After a number of negotiation sessions conducted by telephone between Grey and Kline Iron, the parties reached an oral agreement on January 1, under which Kline would build a tower for Grey for a total price of $1,485,368. The work was to be completed within six months. On January 2, Kline sent a written document, referred to as a proposal, for execution by Grey. The proposal contained the terms of the oral agreement. It also indicated that it had been prepared for immediate acceptance by Grey and that prior to formal acceptance it could be modified or withdrawn without notice. A few days later, without having executed the proposal, Grey advised Kline that a competitor had provided a lower bid for construction of the tower. Grey requested that Kline explain its higher bid price, which Kline failed to do. Grey then advised Kline by letter that Kline would not be retained to construct the tower. Kline then sued Grey for breach of contract. Required: a. Was an enforceable contract formed between Kline and Grey? If so, how, and if not, why not? b. Does it matter whether the Court will use Common Law or UCC contract rules in deciding this case? Why or why not? 2. Regan received a letter from Chase, the material portion of which stated: Chase hereby places an order with you for fifty cases of Red Top Tomatoes, $10 per case; ship them C.O.D. Promptly upon receipt of the letter Regan shipped the tomatoes (conforming goods) to Chase. While en route, the railroad car carrying the tomatoes was struck by lightning and was wrecked. Chase refused to pay for the tomatoes, and Regan brought a lawsuit against Chase to recover the purchase price. Chase defended on the ground that as the shipment was C.O.D., neither title to the tomatoes nor risk of loss passed until their delivery to Chase. Required: a. Which party had title to the tomatoes when they were destroyed? Why? b. Which party had risk of loss to the tomatoes when they were destroyed? Why? B. Law 420 Commercial Law Exam #1, Spring 2009 March 5, 2009 Answer Key, multiple choice portion. A discussion/explanation of question #34 follows the ans. key. 1. b 2. a 3. c 4. d http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm (8 of 14) [7/8/2009 11:37:05 PM] http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm 5. c 6. b 7. a 8. a 9. c 10. a,b,c,d 11. d 12. a 13. a 14. a 15. c 16. c 17. c 18. b 19. c 20. d 21. b 22. c 23. b http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm (9 of 14) [7/8/2009 11:37:05 PM] http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm 24. b 25. a 26. c 27. b 28. d 29. d 30. d 31. d 32. c 33. a 34. b 35. c Question #34: This was the only question on the exam that received three feed-back comments. This question deals with UCC 2-403 (2), the entrusting section. The issue is whether of not Fran can "recover" from either the shoe store or from Jan. The rule of 403(2) is that if goods are entrusted to a merchant/dealer, the merchant/dealer has the power (not the right) to convey to a buyer in the ordinary course the same quality of title that the entrustor had. In this case the entrustor is Fran, and the problem says that she recently purchased the shoes. We are not told whether the party that sold those shoes to Fran had good title, but the most common circumstance (and students should always assume the most common circumstance in a multiple choice question) is that Fran purchased the shoes from their owner, therefore Fran had good title to the shoes. She then entrusted them to a merchant/dealer, and Jan appears to be a buyer in the ordinary course from the merchant/dealer. Therefore, Jan gets the same quality of title that Fran had - good title. Ownership of the shoes has thus passed to Jan. Where does that leave Fran? She can not sue and recover anything from Jan, because the shoes now belong to Jan. However, the shoe store violated Fran's rights when it sold Fran's shoes; therefore Fran can sue and recover the value of the shoes from the store. http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm (10 of 14) [7/8/2009 11:37:05 PM] http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm Returning to the question, answer "b" correctly states that Fran can recover from the shoe store only. Perhaps some students were tripped up by the word "recover", thinking that it meant recover the shoes (only) as opposed to the shoes or money damages. This emphasizes the importance of close, critical reading. Problem #8 at the end of Chapter 23, which we discussed in class, presents a similar situation. ANSWER KEY TO THE ESSAY QUESTIONS The following are examples of good answers to the essay questions on this exam. They are not the best answers, or perfect answers, or the only good answers. I recommend using the IRAC format because the IRAC format will evoke the most information, and it will facilitate complete answers,; but some students use other formats successfully. If a non-IRAC format is used, however, the student must make sure that all the content of an IRAC answer is contained in his/ her essay. This includes a statement of the issues, the content of all rules used, and conclusions that are supported by an analysis in which the requirements of each rule are shown to be either present or absent in the facts of the problem. Essay question #1: This rich question presents several issues. I will deal with each issue separately, and then I will address the required responses. Issue #1: Whether this mixed case, involving both goods and services, will be governed by the UCC or by the Common Law (CL)? Rules: In most state the predominant purpose rule will determine whether the UCC of the CL will govern. The predominant purpose rule seeks the primary, or predominant purpose that the buyer had in entering into the contract. In most cases, the court will determine where most of the money was spent; it will apply the UCC if most of the money was spent on the sale of goods portion of the contract. Analysis: The facts of the question do not tell us about the relative costs of the iron and other building materials, and the labor (services) that go into the construction of the TV tower. If most of the cost is for goods, then the court will use the UCC to decide this case; otherwise it will use the CL. It seems likely that most of the cost is for goods, so probably the UCC will govern this transaction. Conclusion: Probably this case will be governed by the UCC. ***** Issue #2: Whether or not an enforceable contract was formed? http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm (11 of 14) [7/8/2009 11:37:05 PM] http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm Rules: An enforceable contract under the UCC requires that the Statue of Frauds rule must be satisfied. That rule states that if the price of the goods is $500 or more, then there must evidence to support an oral contract. That evidence can take the form of a writing signed by the party to be charged, or by delivery & acceptance of the goods, or by payment & acceptance of payment for the goods, or by an admission in court by the party to be charged that the oral contract exists, or, if both parties are merchants, by a written, signed confirmation, sent to the party to be charged, where the party to be charged fails to object within 10 days of receiving it. Analysis: In this case we have an oral contract formed on Jan. 1. The price exceeds $500, so the Statute of Frauds requires evidence of the oral contract in order to make it enforceable. The only evidence allowed by the rule that might apply in this case is the merchant to merchant confirmation rule. However, there are three problems that prevent the proper application of the M-M exception: first, we must determine whether the proposal of Jan. 2 is a confirmation or something else - a new offer perhaps. A confirmation simply confirms a prior agreement. Here, the language of the proposal seems to imply that no agreement had been reached; this would allow Kline to modify or withdraw the proposal. This sounds more like an offer than a confirmation of an existing contract. A second problem exists if Kline tries to use the proposal as a confirmation: the fact that Grey objected to it within the 10 day period. A third problem is that the facts do not tell us whether the proposal document was signed. If it was not, it fails under the UCC's M-M exception rule. For all of these reasons, it appears that the requirements of the M-M exception rule have not been met by Kline in this case. Conclusion: A valid but unenforceable contract was formed. (It is valid because legality, capacity, consideration and agreement are present in the oral contract). ****** Issue #3: Whether or not the Common Law would give the same result as the UCC? Rules: The Statute of Frauds of the CL requires a writing, signed by the party to be charged, in all important contracts. These include sales of real estate, guarantee contracts, and long term contracts. Long term is defined as requiring more than one year to complete performance. Analysis: If the court were to determine that the primary purpose of this contract was services, it would be important if it required more than one year to perform. However, the facts tell us that work was to be completed in only six months. This makes it a short term contract, that does not need a writing to make enforceable; the oral contract is fully enforceable. As we have seen in issue #2, above, under the UCC an unenforceable contract resulted. Whereas under the CL an enforceable contract resulted. http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm (12 of 14) [7/8/2009 11:37:05 PM] http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm Conclusion: The CL would give a different result from the one provided by the UCC. ****** Now turning to the requirements of this question: (a) Whether an enforceable contract was formed will depend upon whether the Court determines that the sale of goods or the sale of services was the predominant purpose of the buyer. If the primary purpose was goods, then the UCC applies, and no enforceable contract results. If the primary purpose was services, then the CL applies, and an enforceable contract results. (b) It does matter whether the Court will use the UCC or CL, per above. Essay question #2: This question is much more straightforward than question #1. Issue #1: Was this a shipment contract or a destination contract? Rules: (1) A shipment contract is the default. In the absence of clear language indicating that the parties intended a destination contract, it will be considered a shipment contract. (2) C.O.D. is a payment term and has no effect on whether the contract is shipment or destination. Analysis: There is no clear language in this case indicating that the parties intended a destination contract. The default therefore prevails. Conclusion: This contract was a shipment contract. ****** Issue #2: Whether or not title to the tomatoes had passed to the buyer at the time they were destroyed? Rules: (1) In the absence of agreement, title passes when the seller has completed his/her performance obligation with regard to the physical delivery of the goods. (2) The sellers obligation with regard to physical delivery of the goods in a shipment contract is to put the goods in the possession of a carrier, if a carrier will be used for transportation. Analysis: In this case the parties did not have an agreement with regard to when title should pass. Therefore the UCC default rules apply. Since this was a shipment contract, the seller has performed its obligation with regard to physical delivery by putting the goods in the hands of the railroad, a common carrier. At that point title passed to the buyer. Since the tomatoes were http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm (13 of 14) [7/8/2009 11:37:05 PM] http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm destroyed at a later point in time, the buyer had title when then were destroyed. Conclusion: Title had passed to the buyer at the time the goods were destroyed. ****** Issue #3: Whether or not the risk of loss had passed to the buyer at the time the goods were destroyed? Rules: Risk of loss in a shipment contract passes to the buyer when the seller delivers conforming goods to the carrier. Analysis: The loss occurred after the seller delivered conforming goods to the carrier, so the buyer had the risk of loss at the time the tomatoes were destroyed. Conclusion: Risk of loss had passed to the buyer at the time the goods were destroyed. Turning now to the question's requirement: (a) The buyer had title to the tomatoes when they were destroyed, per above. (b) The buyer had risk of loss to the tomatoes when they were destroyed, per above. http://www.cbe.uidaho.edu/wegman/420%20exams/420%20Spring%202009%20-%201web.htm (14 of 14) [7/8/2009 11:37:05 PM]

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