BUS311_chapter_07

But with regard to the remaining four undelivered

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Unformatted text preview: rug arrives, he accepts it and informs the seller that he will be sending her a check for $2,000, but that he does not wish to receive the remaining four rugs. With respect to the rug that he accepted, he must pay the contract price of $2,000. But with regard to the remaining four undelivered rugs in the oral contract, he need not accept their delivery unless the contract was evidenced by a signed writing. The fourth exception only applies if both parties are merchants. The UCC states that if the parties make an oral contract, and then one sends the other a confirming memorandum sufficient in its terms (in other words, something in writing that contains the material terms of the agreement) and the other receives the memo, knowing what it is, and does not object within ten days, the oral contract is enforceable. This sounds complicated, but in practice the rule is simply dealing with things such as telephone orders followed up by an invoice. Example 7.21. Buyer orders by telephone $1,000 worth of sugar. Seller accepts the order in the same phone call. Seller then sends Buyer an invoice that states the terms of the agreement. Buyer receives it and does not object within ten days. Seller then ships the sugar, and Buyer now claims there is no enforceable agreement. Seller will counter with the confirming memo exception, and the contract is enforceable. 7.3 Modification of the Sales Contract A nother important change to the common law of contracts made by the UCC is in the area of contract modifications. At common law, such modifications are generally invalid unless they are supported by additional consideration, such as an additional payment. The UCC, however, liberalizes the validity of voluntary modifications to sales contracts. Voluntary Modification (§ 2-209) Under the UCC, voluntary modifications to a sales contract are valid and binding, as long as they are sought and given in good faith, even absent additional consideration. Example 7.22. Buyer agrees to buy all the gasoline she needs for her fleet of taxicabs from seller for $3.10 per gallon for a period of two years at a time when the average price of gasoline is $3.00 per gallon. After the first year of this requirements contract, a regional conflict breaks out in the Middle East and the price of gasoline jumps by 33 percent to an average cost of $4.00 per gallon. The seller then asks buyer to pay $4.00 per gallon of gas until the situation stabilizes, and buyer agrees. Even though buyer is not obligated to pay the increase under the contract, once she agrees to do so, rog80328_07_c07_134-156.indd 146 10/26/12 5:52 PM Section 7.4 Modification by Operation of Law CHAPTER 7 she will be bound by the new terms of their modified agreement, even though under the common law of contracts the agreement to pay the $.90 per gallon increase would not have been binding, since it is not supported by consideration. Keep in mind that the buyer in the last example is under no obligation to agree to the modification of the sales contract suggested by the selle...
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This test prep was uploaded on 04/09/2014 for the course BUS 311 taught by Professor Parker during the Spring '10 term at Ashford University.

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