320_midterm_m_choice_answers_06

320_midterm_m_choice_answers_06 - Business Law I Fall 2006...

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Business Law I Midterm Exam Fall 2006 Multiple Choice Answer Key PART II. (35 points – 45 minutes) Please answer the following multiple choice questions on the answer sheet provided. If there is a fact pattern on the page, any questions on the page relate to that fact pattern. Sam Farmer has been selling onions to Bob’s Steak Joint for 20 years. Bob’s is a franchise of 10 steak restaurants that uses the onions to make onion rings. Sam and Bob’s current contract was signed in May, 2004 and is a five-year contract. It provides that Sam will be paid the market price for onions plus a 5% premium and that all of Sam’s onions will be sold to Bob’s. It also provides that Bob’s can reject delivery of a shipment if the onions are not of satisfactory quality for the buyer’s purposes. The contract contains an integration clause and requires that all modifications be made in writing. In September, 2006, the Outback Steakhouse Co. purchased Bob’s Steak Joint and began converting all of the restaurants to Outback Steakhouse restaurants. As part of the deal, effective October 1, 2006, Bob’s Steak Joint assigned all of it contracts with suppliers to Outback. An Outback representative has been to see Sam to explain that Outback needs a special kind of onion for its trademark appetizer, the “Bloomin’ Onion.” To be used in this dish, an onion has to be very large but it otherwise tastes the same as a “normal” onion. They come from the same seeds as a regular onion but it takes longer to produce a crop of these special onions since they take longer to grow and the yield is smaller than with the average onion [you get fewer bushels per acre]. Outback Steakhouses do not have onion rings on their menu. 1. Sam does not want to do business with Outback so he would like to know if he will be breaching a contract if he refuses to grow the onions that Outback wants. Which of the following statements best reflects Sam’s legal position? a. Sam will have to comply with Outback’s request because there is no basis on which to avoid the Outback/Bob contract – it is enforceable. b. Sam will have to comply with the Outback request because the contract that Bob assigned to Outback now gives Outback the right to reject onions purely because the buyer finds them “unsatisfactory.” True, except for argument in d. c. Sam can argue that he does not have to perform because he received no consideration in exchange for the requirement that he produce a special kind of onion. Bob-Sam contract said S had to perform to B’s satisfaction.
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