deck_15763116 Flashcards
Question 4: In a famous article written over 50 years ago, Professor Stewart Macaulay reported the results of his empirical study involving dozens of interviews with business people concerning the role that commercial law played in their day-to-day business dealings. Professor Macaulay concluded in his article that the law has less to do with the daily decisions that business people make than do other non-legal factors such as a company’s reputation in an industry. Which of the following describes a way that sales law is nevertheless relevant in business practice?
A. Litigation can serve as a last resort for an aggrieved party when the two sides cannot work out their differences informally.
B. During settlement negotiations, the law provides a background against which parties negotiate so that such negotiations take place “in the shadow of the law.”
C. Business people regularly consult the relevant law to re-write the other side’s contract forms before agreeing to a deal.
D. Both (A) and (B) are true.
E. Answers (A), (B), and (C) are all true.
D. Both (A) and (B) are true.
Question 1: Buyer and Seller, who have never done business with each other before, enter into an installment contract in which Seller agrees to ship to Buyer a series of 10 installments of 100 widgets in each installment. The contract says that Seller will deliver each installment at Seller’s expense to Buyer’s place of business. For the first eight installments, Buyer picks up the widgets at Seller’s place of business. Immediately prior to the date for performance of the ninth installment of widgets, Buyer calls Seller and insists that Seller deliver the widgets to Buyer’s place of business. Which of the following statements is most accurate?
A. Buyer might have to pick up the widgets, because course of performance is relevant to showing waiver of an express term.
B. Seller must deliver the widgets, because express terms of the contract control course of performance.
C. Seller must deliver the widgets, because express terms of the contract control usage of trade.
D. Buyer must pick up the widgets, because course of performance controls express terms.
E. Seller must deliver the widgets, because express terms of the contract control course of dealing.
A. Buyer might have to pick up the widgets, because course of performance is relevant to showing waiver of an express term.
Question 2: Which of the following contracts is least likely to be governed by UCC Article 2?
A. A contract with an artist to buy one of his original sculptures.
B. A contract for the sale of a raffle ticket in which the winning prize is a computer.
C. A contract between a retail buyer and a retail bookstore for the sale of a book.
D. A contract to buy the original Mona Lisa painting from a seller who has not even acquired it yet from the museum that owns the painting.
E. A contract for the sale of natural gas.
B. A contract for the sale of a raffle ticket in which the winning prize is a computer.
Question 3: Caterer agrees to cook, deliver, and serve a fancy steak dinner for Charity Corp’s annual fundraising event for 200 people. The dinner takes place as planned, but several dozen of the steak dinners served by Caterer that night contain meat that is spoiled. A number of Charity Corp’s guests get sick as a result, and Charity Corp suffers significant financial and reputational damage. If Charity Corp sues Caterer for breach of contract damages, will the contract to provide that night’s dinner for Charity Corp be covered by UCC Article 2?
A. Yes, if the court uses the predominant purpose test, but not if the court uses the gravamen of the action test.
B. Yes, if the court uses the gravamen of the action test, but not if the court uses the predominant purpose test.
C. Yes, whether the court uses the gravamen of the action test or the predominant purpose test.
D. No, whether the court uses the gravamen of the action test or the predominant purpose test.
E. No, because UCC Article 2 does not apply to the sale or serving of food products.
C. Yes, whether the court uses the gravamen of the action test or the predominant purpose test.
Question 5: Car Dealership decides to repaint its buildings for the first time in five years. Because Car Dealership does not repaint very often, it mistakenly ends up buying about twice as much paint as it needs for the job. Car Dealership then decides to sell the excess paint to a furniture warehouse down the street. Which of the following statements concerning this sale of excess paint is most accurate?
A. Car Dealership makes an implied warranty of merchantability regarding the paint, because Car Dealership is a merchant by virtue of its knowledge of business practices generally.
B. Car Dealership makes an implied warranty of merchantability regarding the paint, because Car Dealership is not a consumer.
C. Car Dealership makes no implied warranty of merchantability regarding the paint, because although Car Dealership is a merchant generally, in selling the paint Car Dealership is not acting in its mercantile capacity.
D. Car Dealership makes no implied warranty of merchantability regarding the paint, because Car Dealership is not a merchant.
E. Car Dealership makes no implied warranty of merchantability regarding the paint, because this is an isolated sale of paint for Car Dealership.
E. Car Dealership makes no implied warranty of merchantability regarding the paint, because this is an isolated sale of paint for Car Dealership.
Question 6: Lessor and Lessee agree to a lease of a used automobile that has, at the time of the lease’s inception, a remaining useful life of 12 years. The car is currently worth $16,000, and Lessee has no option to terminate the lease. The lease is for four years at $400 per month and Lessee is responsible for maintenance and insurance. At the end of the lease period, Lessee has an option to purchase the car for an amount equal to its fair market value at the time of the purchase option. Which of the following statements about the lease is most accurate?
A. This is probably a true lease, since there appears to be a reasonable likelihood that Lessor will receive the car back at a time when it still has a meaningful residual value.
B. This is probably not a true lease, since a fair-market value purchase option is so attractive that Lessee is almost certain to exercise it and thus will almost certainly become the owner of the car at the end of the lease period.
C. This is probably not a true lease, since Lessee will end up paying lease payments that exceed the value of the car and thus would be unlikely to walk away from the lease at the end of its term after investing that much money in lease payments.
D. This is probably not a true lease, since Lessee has no right to terminate the lease and therefore this case fits within one of §1-203’s categories of “definite disguised sales.”
E. This is probably not a true lease, since it is inconsistent with the nature of a true lease that Lessee, rather than Lessor, should be responsible for maintenance and insurance.
A. This is probably a true lease, since there appears to be a reasonable likelihood that Lessor will receive the car back at a time when it still has a meaningful residual value.
Question 7: Same facts as Question 6, except that the lease provides that Lessee has a purchase option of $100 at the end of the four-year lease, and one year into the lease the car is destroyed when a tree falls on top of it. The lease contract provides that Lessee has risk of loss, and Lessee has failed to get insurance. Which of the following statements about the lease is most accurate?
A. This contract is probably a disguised sale, since the destruction of the car guarantees that Lessor will never get the car back at a time when the car has a meaningful residual value.
B. This contract is probably a disguised sale, since this lease now fits within one of §1-203’s “definite disguised sale” categories.
C. This contract is probably a true lease, since we need to measure at the inception of the contract the Lessor’s likelihood of ever getting the car back, and at the inception of the contract nobody knew that the car was going to be destroyed.
D. This contract is probably a true lease, since risk of loss principles dictate that Lessor rather than Lessee should have had the risk of loss.
E. This contract is probably a true lease, since used goods can never be the subject of a disguised sale since some of their residual value has already been spent even prior to the making of the contract.
B. This contract is probably a disguised sale, since this lease now fits within one of §1-203’s “definite disguised sale” categories.
Question 8: In a true lease transaction, Lessor leases a pinball machine to Lessee for five years at $3,000 per year. Just to be safe, Lessor files a UCC Article 9 financing statement in the appropriate place to give notice of its interest in the machine. One year into the lease, Lessee sells the machine to Buyer, a good-faith purchaser, for $25,000. Lessor learns about the sale and sues Buyer for return of the machine. When Lessor sues Buyer, Lessor will
A. win, because lessors in true leases generally defeat even the rights of subsequent good-faith purchasers for value.
B. win, because Lessor was smart enough to give notice to the world of its ownership interest by filing the financing statement and thus cured the “apparent ownership problem.”
C. lose, because the lease agreement did not include a provision in the lease that prohibited Lessee from selling the pinball machine.
D. lose, because by filing the financing statement, Lessor is indicating to anyone who searches the UCC Article 9 files that this transaction is actually a secured sale rather than a true lease.
E. lose, because a paramount policy of the UCC is that we must protect good-faith purchasers in the ordinary course of business.
A. win, because lessors in true leases generally defeat even the rights of subsequent good-faith purchasers for value.
Question 9: Music Store, which both sells and leases new and used musical instruments, enters into a transaction with Musician involving a new violin owned by Music Store. The violin is worth $10,000 and has a predicted useful life of 20 years. The written contract between Music Store and Musician is called a lease and involves Musician paying Music Store $200 per month for 60 months for use of the violin. Musician has no right to terminate this lease during the five-year term. At the end of this lease, Musician has an option to purchase the violin for $10. The contract, which is signed by both parties, includes a bold-faced clause that says, “Both Music Store and Musician acknowledge and intend that this transaction is a true lease rather than a secured sale, and this transaction shall be treated as a true lease for all legal, tax, and business purposes.” Is this transaction a true lease or a disguised sale?
A. A true lease, because the default terms of UCC Article 2A, like all UCC default terms, can be changed as long as both parties agree.
B. A disguised sale, because Musician is obligated to pay a total amount of lease payments that is equal to or greater than the value of the violin.
C. A disguised sale, because the test of UCC §1-203 looks to the actual facts of the transaction rather than the intent of the parties.
D. A disguised sale, because this transaction fits within the “certain disguised sale” test found in UCC §1-203(b)(4).
E. Both (C) and (D) are true.
E. Both (C) and (D) are true.
Question 10: Evaluate the accuracy of the following statement: “If a particular lease transaction gives the lessee the option to terminate the lease at any time, then we can be confident that such a transaction is necessarily a true lease rather than a disguised sale.” That statement is
A. true, because all of the four options under §1-203(b) for a “certain disguised sale” require that the lease not be subject to termination by the lessee.
B. true, because if the lessee has an option to terminate the lease at any time, that means that there is necessarily a reasonable likelihood that the lessor will get the leased goods back at a time when they still have a reasonable residual value in them.
C. true, because both (A) and (B) are true.
D. false, because the terms of the lease could be such that it would make no economic sense for the lessee to exercise its termination right and the lease terms might otherwise make it highly unlikely that the lessor will ever get the leased goods back at a time when they still have a reasonable residual value in them.
E. false, because some true leases give the lessee no option to terminate the lease.
D. false, because the terms of the lease could be such that it would make no economic sense for the lessee to exercise its termination right and the lease terms might otherwise make it highly unlikely that the lessor will ever get the leased goods back at a time when they still have a reasonable residual value in them.
Question 11: Canadian Seller, whose sole place of business is in Toronto, custom-designs computers and makes a contract with Buyer, a Detroit lawyer, for the sale of a $10,000 computer. Seller believes that the computer is for Buyer’s law practice, but in fact it’s for Buyer’s son, who loves computer games and needs a high-end computer to play the latest games. Seller has no reason to know this. Buyer has no reason to know that he is dealing with a seller whose place of business is Canada. The sales contract says nothing about choice of law. This contract
A. will not be governed by the CISG, since the CISG does not cover sales to consumers, even if the seller has no reason to know that the sale is for a consumer purpose.
B. will not be governed by the CISG, since Buyer has no reason to know from the circumstances that he is dealing with a Seller whose place of business is Canada.
C. will be governed by the CISG, since Seller thinks that it is selling the computer for Buyer’s business and has no reason to know otherwise.
D. will be governed by the CISG because Buyer and Seller have places of business in different Contracting States.
E. will not be governed by the CISG as both (A) and (B) are true.
B. will not be governed by the CISG, since Buyer has no reason to know from the circumstances that he is dealing with a Seller whose place of business is Canada.
Question 12: Which of the following sales would not be covered by Article 2 of the UCC?
A. Six bushels of pears from the seller’s orchard to be picked by the seller.
B. Six bushels of pears from the seller’s orchard to be picked by the buyer.
C. A house (but not the land on which it sits) to be severed by the buyer and moved to the buyer’s land.
D. A house (but not the land on which it sits) to be severed by the seller and moved to the buyer’s land.
E. Both (C) and (D) would not be covered.
C. A house (but not the land on which it sits) to be severed by the buyer and moved to the buyer’s land.
Question 13: Merchant Buyer (“Buyer”) sends a purchase order to Merchant Seller (“Seller”) for two dozen widgets at Seller’s standard price to be delivered in one month to Buyer’s place of business. Buyer’s purchase order says that all of the UCC remedies, including consequential damages, will be available to Buyer in the event of a breach by Seller. Seller sends a timely acknowledgment form that purports to accept Buyer’s offer. However, Seller’s form conspicuously disclaims any consequential damages, adds a term saying that all disputes will be subject to arbitration, and then closes with a boldface clause that says that “Seller’s acceptance of Buyer’s offer is expressly made conditional on Buyer’s assent to any different or additional terms contained in this acceptance.” Neither Buyer nor Seller reads the other side’s form closely, and Seller ships the two dozen widgets to Buyer the next month. Buyer accepts and pays for the widgets. Do Buyer and Seller have a contract at this point?
A. Yes, and the contract was formed at the point when Seller sent Buyer the acknowledgment form, despite the different and additional terms that were included in Seller’s form.
B. Yes, and the contract was formed at the point when Seller shipped the widgets, since that act by Seller served as a clear acceptance (through conduct) of Buyer’s offer to purchase the widgets.
C. Yes, but the contract was not formed until Buyer accepted and paid for the widgets.
D. No, because Seller’s form was clear that Buyer had to assent to Seller’s different and additional terms, and Buyer did not in fact assent.
E. No, because if we enforce this contract, we are simply returning to the common law’s “last-shot” doctrine.
C. Yes, but the contract was not formed until Buyer accepted and paid for the widgets
Question 14: Same facts as Question 13. If there is a problem with the widgets, will Buyer be eligible to recover from Seller for consequential damages?
A. No, because Seller made it clear that its acceptance of Buyer’s offer was expressly conditional on Buyer’s assent to any different or additional terms in Seller’s offer, and Seller’s consequential damages disclaimer was clearly a different term.
B. No, because even though Buyer and Seller are both merchants, Seller’s disclaimer of consequential damages is a material alteration of Buyer’s offer and therefore does not become part of the contract.
C. No, because after knocking out both Buyer’s and Seller’s terms on remedies, we are left with the UCC gap-filler term, which does not allow Buyer to recover consequential damages.
D. Yes, because Seller’s conduct in shipping the widgets was an implicit acceptance of all the terms of Buyer’s offer, including Buyer’s right to recover consequential damages.
E. Yes, because Buyer’s and Seller’s forms do not agree on remedies, and therefore we go with the UCC gap filler on remedies, which does allow consequential damages for Buyer.
E. Yes, because Buyer’s and Seller’s forms do not agree on remedies, and therefore we go with the UCC gap filler on remedies, which does allow consequential damages for Buyer.
Question 15: Same facts as Question 13. If there is a problem with the widgets, will Seller’s arbitration clause be effective?
A. No, because Buyer’s form did not have an arbitration clause, and the UCC gap filler for dispute resolution does not restrict the aggrieved party to arbitration.
B. No, because this was a contract between merchants, and Seller’s additional term of arbitration was a material alteration of Buyer’s offer.
C. Yes, because when Buyer accepted and paid for the widgets, Buyer was thereby accepting all of the terms in Seller’s acknowledgment form, including the arbitration clause.
D. Yes, because Seller’s form could not have been more clear that Seller was conditioning its acceptance on Buyer’s assent to any additional or different terms in Seller’s form, and the arbitration clause was an additional term in Seller’s form.
E. Yes, because even though Buyer’s form did not include an arbitration clause, the UCC gap filler for dispute resolution says that an aggrieved buyer must arbitrate its claims against a breaching seller.
A. No, because Buyer’s form did not have an arbitration clause, and the UCC gap filler for dispute resolution does not restrict the aggrieved party to arbitration.
Question 16: Merchant Buyer (“Buyer”) and Merchant Seller (“Seller”) make an oral agreement (with witnesses present) for the purchase and sale of 20 widgets for a total cost of $40,000. The two parties agree as part of the oral contract that Seller will not be responsible for any consequential damages that Buyer may incur due to problems with the widgets. The day after the oral agreement, each side sends a signed written confirmation to the other side. The written confirmations agree on the quality, quantity, price, and delivery terms that were all part of the oral contract. However, Seller’s confirmation specifically says that Seller is not responsible for consequential damages
(consistent with the oral agreement) whereas Buyer’s confirmation says that Seller is responsible for consequential damages (contrary to the oral agreement). Neither party reads the other party’s confirmation closely, and the two parties perform their respective sides of the contract during the following week. Three months later, one of the widgets malfunctions in Buyer’s factory and causes consequential damages that Buyer would now like to recover from Seller. In a suit by Buyer against Seller for consequential damages, will Buyer’s consequential damages term in its confirmation be enforceable by Buyer?
A. Yes, because under §2-207(1) and §2-207(2), Buyer’s confirmation term on consequential damages and Seller’s confirmation term on consequential damages cancel each other out, leaving the UCC gap filler on consequential damages.
B. Yes, because this is a situation where we have a contract by conduct, and therefore §2-207(3) tells us that we must use the terms on which the two writings agree and then use the UCC gap fillers for the other terms, which here would include consequential damages.
C. Yes, because Seller’s consequential damages disclaimer in the oral contract will be unenforceable due to the Statute of Frauds.
D. No, because once the conflicting terms in the two confirmations get knocked out, the terms in the oral contract, including Seller’s consequential damages disclaimer, will prevail.
E. No, because Buyer’s consequential damages term in its written confirmation is a material alteration of the damages term in the oral contract.
D. No, because once the conflicting terms in the two confirmations get knocked out, the terms in the oral contract, including Seller’s consequential damages disclaimer, will prevail.
Question 17: Same facts as Question 16, except this time, Seller (but not Buyer) sends a written confirmation. In Seller’s written confirmation, nothing is said about consequential damages, but Seller’s confirmation does include a term requiring that all disputes in this contract will be settled by arbitration. The mode of dispute resolution was not mentioned at all in the oral contract. When Buyer brings a lawsuit for damages against Seller, will Seller be able to enforce the arbitration clause in its written confirmation?
A. No, because this is a contract by conduct and under §2-207(3), the contract consists of terms on which the written confirmation agrees with the oral contract plus UCC gap fillers.
B. No, because any additional terms in Seller’s confirmation are mere proposals, and this proposal by Seller was not specifically accepted by Buyer.
C. Yes, but only if arbitration is not a material alteration of the oral contract.
D. Yes, whether or not arbitration is a material alteration of the contract, because materiality is irrelevant here.
E. Both (A) and (B) are true.
C. Yes, but only if arbitration is not a material alteration of the oral contract.
Question 18: Merchant Buyer (“Buyer”) sends a purchase order to Merchant Seller (“Seller”), who is located in a different country. Both countries are CISG signatories. Buyer’s purchase order requests three dozen widgets for a specific price, states that all remedies for breach will be available to Buyer (including consequential damages), and says nothing about the mode of dispute resolution. Seller responds with an acknowledgment form that agrees on price, quantity, and delivery terms, but purports to disclaim consequential damages and, in addition, requires arbitration as the mode of dispute resolution. At this point, Seller has not shipped the widgets and Buyer has not paid for them. Which of the following statements best describes the legal state of affairs at this point under the CISG?
A. There is a contract, and Seller’s terms will control since the CISG follows the common law’s “last shot” doctrine.
B. There is a contract, but Seller’s consequential damages disclaimer and arbitration clause will not become part of the contract since both terms would be considered by the CISG to be “material alterations” of Buyer’s offer.
C. There is a contract, but whether Seller’s additional and different terms will control will depend on whether Buyer makes a timely objection to those terms.
D. There is no contract, even though there would be one at this point if this case were handled under UCC §2-207.
E. There is no contract, just as there would be no contract if this case were handled under UCC §2-207.
D. There is no contract, even though there would be one at this point if this case were handled under UCC §2-207.
Question 19: Same facts as Question 18, except that after receiving Seller’s acknowledgment form, Buyer sends full payment in advance to Seller for the widgets without objecting to any of Seller’s terms in the acknowledgment form. Seller has not yet shipped the goods. Which of the following statements best describes the legal state of affairs at this point under the CISG?
A. There is no contract yet, because Seller still has not shipped the goods and we need conduct by both sides in order to have a contract here under the CISG.
B. There is a contract, and Buyer’s terms will control since Buyer’s payment was the “last shot” in this battle of forms and conduct.
C. There is a contract, and Seller’s terms will control since Seller’s acknowledgment form constituted an acceptance of Buyer’s offer that will bind Buyer as to any additional or different terms that appeared in Seller’s form.
D. There is a contract, and whether Seller’s terms will control will depend on whether Buyer objects to Seller’s additional and different terms prior to Seller shipping the goods to Buyer.
E. There is a contract, but not for the reasons given in either (C) or (D).
E. There is a contract, but not for the reasons given in either (C) or (D).
Question 20: Residential Home Buyer (“Buyer”) and Home Seller (“Seller”) enter into a standard written home sales agreement for a price of $200,000. The sales contract includes a home inspection clause that reads as follows: “This agreement is conditional upon the inspection of the property (as long as such inspection takes place within 14 days of this contract’s signing) by a home inspector of the purchaser’s choice and expense, and receipt of a report satisfactory to him or her, in his or her sole and absolute discretion.” Buyer immediately hires Home Inspector, who inspects the home within the specified time frame and prepares a report that indicates that the house’s roof needs replacing. Buyer then learns that a new roof for this house would cost $25,000. Which of the following statements accurately describes Buyer’s rights with respect to this contract after Buyer learns all of the above?
A. Buyer can require the Seller to replace the house’s roof and then complete the house sale for $200,000.
B. Buyer can require the Seller to reduce the house’s sale price to $175,000 if Seller will not replace the roof.
C. Both (A) and (B) are true.
D. Buyer can require the Seller to repair the roof if Seller will neither replace the house’s roof nor lower the purchase price to reflect the faulty roof.
E. Although Buyer cannot require Seller to replace the roof, Buyer can choose to avoid the contract if Seller refuses to replace the roof.
E. Although Buyer cannot require Seller to replace the roof, Buyer can choose to avoid the contract if Seller refuses to replace the roof.
Question 21: Merchant Buyer (“Buyer”) and Merchant Seller (“Seller”) enter into an oral contract (with witnesses present) for the sale of six red widgets for $10,000 each, delivery to take place in two months. Two days following that oral agreement, Buyer sends Seller a signed confirmation letter that contains all of the terms of the oral agreement, including price and quantity, but says that the widgets are to be blue. Seller reads the confirmation letter two days after it is received and
remembers that the oral agreement required red widgets. At this point in time, which of the following statements accurately describes the legal state of affairs?
A. Neither side can enforce the contract because of the statute of frauds.
B. Seller can enforce the contract, but not Buyer.
C. Buyer can enforce the contract, but not Seller.
D. Both sides can enforce the contract.
E. Neither side can enforce the contract because the terms in Buyer’s confirmation are not completely correct.
B. Seller can enforce the contract, but not Buyer.
Question 22: Same facts as Question 21, except that two weeks after receiving Buyer’s signed confirmation, Seller sends Buyer a signed writing in which Seller says, “I object to your confirmation because the terms you included are not consistent with what we had talked about.” Buyer receives Seller’s signed writing and reads it. At this point in time, which of the following statements accurately describes the legal state of affairs?
A. Neither side can enforce the contract because of the statute of frauds.
B. Seller can enforce the contract, but not Buyer.
C. Buyer can enforce the contract, but not Seller.
D. Both sides can enforce the contract.
E. Neither side can enforce the contract because following Seller’s written objection, it is clear that there was no meeting of the minds.
D. Both sides can enforce the contract.
Question 23: Same facts as Question 21, except that Buyer’s written confirmation to Seller differs from the oral contract not only as to color (blue instead of red) but also as to number of widgets (two instead of six). As soon as Seller receives and reads Buyer’s signed confirmation, Seller objects
in writing to Buyer as to both the color and the quantity stated in Buyer’s confirmation. Buyer immediately writes back that the oral contract was indeed for two blue widgets and not six red widgets. If Seller wishes to enforce the oral contract at this point, on what terms can Seller enforce the contract?
A. For two blue widgets.
B. For two red widgets.
C. For six blue widgets.
D. For six red widgets.
E. Buyer cannot enforce this oral contract at all.
B. For two red widgets.
Question 24: Merchant Buyer (“Buyer”) and Merchant Seller (“Seller”) make an oral contract for the sale of an industrial-size drill press machine for use in Buyer’s manufacturing facility. The terms agreed upon in the oral contract include price, delivery terms, warranties, and a promise from Seller to Buyer that for two years Seller will service the machine at Buyer’s facility once each month for no extra charge. Prior to shipping the machine, Seller sends Buyer a signed written confirmation of their oral agreement for sale of the machine. The confirmation includes price, delivery terms, and warranties, but is silent on Seller’s oral promise to service the machine monthly for no extra charge. Buyer receives the confirmation and files it away without reading it. Seller ships the machine and Buyer pays for it. When Buyer asks Seller to come out and service the machine, Seller says that this was not a part of their contract. In a lawsuit against Seller, will Buyer be allowed to introduce evidence of Seller’s promise to service the machine for no extra charge?
A. No, because that is the kind of term that if agreed upon would certainly have been included in Seller’s written confirmation.
B. No, unless a court determines that this is a consistent additional term.
C. Yes, unless the confirmation contained a conspicuous merger clause.
D. Yes, but only if this term is a usage of trade in this industry.
E. Yes, even if the confirmation did contain a conspicuous merger clause and even if this term is not a usage of trade in this industry.
E. Yes, even if the confirmation did contain a conspicuous merger clause and even if this term is not a usage of trade in this industry.
Question 25: Same facts as Question 24, except that instead of sending the signed confirmation, Seller has Buyer sign a written contract along with Seller that includes the very same terms that were in the confirmation described in Question 24. Assume for this question that the written contract did not include a merger clause. In a lawsuit against Seller, will Buyer be allowed to introduce evidence of Seller’s promise to service the machine for no extra charge?
A. Yes, as long as a court determines that this is a consistent additional term.
B. Yes, but only if this is the kind of term that if agreed upon would certainly have been included in the written contract.
C. Yes, but only if this term is a usage of trade in this industry.
D. No, even if this term is a usage of trade in this industry.
E. No, because this term was only an oral promise by Seller and therefore is unenforceable under the statute of frauds.
A. Yes, as long as a court determines that this is a consistent additional term.
Question 26: Same facts as Question 24, except that instead of sending the signed confirmation, Seller has Buyer sign a written contract along with Seller that includes the very same terms that were in the confirmation described in Question 24. Assume for this question that the written contract included a conspicuous and well-drafted merger clause. Also assume for this question that in this industry, the custom is that sellers will always provide two years of free monthly servicing of the drill-press machine at no extra charge to the buyer. In a lawsuit against Seller, will Buyer be allowed to introduce evidence of Seller’s separate promise to service the machine for no extra charge (as distinct from introducing evidence of the relevant usage of trade to the same effect)?
A. Yes, and Buyer will also be able to introduce evidence of the relevant usage of trade to the same effect.
B. Yes, but Buyer will not be able to introduce evidence of the relevant usage of trade to the same effect.
C. No, but Buyer will at least be able to introduce evidence of the relevant usage of trade to the same effect.
D. No, and nor will Buyer be able to introduce evidence of the relevant usage of trade to the same effect.
E. Yes, but only if Buyer is also allowed by the court to introduce evidence of the relevant usage of trade to the same effect.
C. No, but Buyer will at least be able to introduce evidence of the relevant usage of trade to the same effect.
Question 27: Merchant Buyer (“Buyer”) and Merchant Seller (“Seller”) agree orally to the sale of a dozen widgets at a price of $20,000 and with stated delivery terms. Buyer is located in Chicago, and Seller is located in Montreal. Buyer and Seller agree orally that Illinois law and not the CISG will apply to their contract. After concluding the oral agreement, Buyer sends Seller a written and signed confirmation which repeats all of the terms of their oral contract, but states that the CISG will apply rather than Illinois law. Seller comes to you and says that he does not want to perform this contract unless Illinois law rather than the CISG will apply to the contract. Can Seller enforce the oral contract as originally agreed to, including the application of Illinois law?
A. No, because Illinois law would prohibit introduction of the parol evidence concerning the orally agreed-to choice of law provision.
B. No, because the CISG would prohibit introduction of the parol evidence concerning the orally agreed-to choice of law provision.
C. No, because Illinois law’s statute of frauds rule would require Seller to rely on the confirmation as its writing to satisfy the statute of frauds, and that confirmation says that the CISG will apply.
D. Yes, because neither the CISG’s nor Illinois’ parol evidence rule would bar introduction of that oral term on choice of law, nor would either law’s statute of frauds rule prohibit the enforcement of this oral contract by Seller.
E. Both (A) and (B) are true.
D. Yes, because neither the CISG’s nor Illinois’ parol evidence rule would bar introduction of that oral term on choice of law, nor would either law’s statute of frauds rule prohibit the enforcement of this oral contract by Seller.
Question 28: Same facts as Question 27, except now assume that Seller has decided that he does not wish to perform this contract no matter which law will apply. Three weeks pass after Seller receives Buyer’s confirmation, but Seller fails to object to the terms of the confirmation. If Buyer wishes to enforce this oral contract and Seller denies its existence, will Buyer be able to enforce the contract?
A. No, because Buyer will not be able to satisfy Illinois law’s statute of frauds since Buyer lacks a writing signed by Seller.
B. No, because Buyer will not be able to satisfy the CISG’s statute of frauds since Buyer lacks a writing signed by Seller.
C. Yes, because the CISG does not require sales of goods contracts to be in writing.
D. Yes, because under Illinois law’s statute of frauds, Buyer will be able to satisfy the “merchant’s exception” under UCC §2-201(2) due to Seller’s lack of timely objection to Buyer’s written confirmation.
E. Yes, for the reasons stated in both (C) and (D).
C. Yes, because the CISG does not require sales of goods contracts to be in writing.
Question 29: Lessor and Lessee enter into a five-year oral lease agreement of a residential house in which Lessee agrees to pay rent of $2,000 per month to occupy the house. The terms of this oral lease are that Lessee is responsible for all maintenance of the house during the course of the lease period, reflecting the below-market monthly lease payment of $2,000 for this house. Lessor also grants Lessee as part of this oral lease an option to purchase the house no sooner than three years into the lease and no later than by the end of the five-year lease period. The purchase price of this oral option is an amount that is equal to the then-fair-market-value of the house (as determined by a third-party appraiser) minus the total of any lease payments made by Lessee up to that point. After four years of occupying the house, making lease payments, and maintaining the house, Lessee seeks to exercise the option to purchase. Lessor has changed his mind and denies ever having
offered the purchase option as part of the oral lease agreement. Will Lessee likely prevail if Lessee seeks to enforce the purchase option?
A. No, because the common law statute of frauds would require that Lessee get such a promise in writing in order to enforce it.
B. No, because the common law parol evidence rule would prevent Lessee from introducing evidence of the purchase option.
C. No, for both of the reasons stated in (A) and (B).
D. Yes, because in this case Lessee’s payments of $2,000 each month were in fact payments towards the purchase price and therefore constituted part performance of the purchase option.
E. Yes, because in this case Lessee’s maintenance of the property was detrimental reliance that creates an exception to the common law statute of frauds.
A. No, because the common law statute of frauds would require that Lessee get such a promise in writing in order to enforce it.
Question 4: Buyer buys a new car from Car Dealer. The sales contract for the car does not include any disclaimers of warranty. Buyer’s adult son (“Son”), who still lives at home, borrows Buyer’s car. While Son is driving the car, the brakes on the car malfunction and Son suffers personal injuries in the ensuing accident. Son sues Car Dealer for damages for personal injuries on a theory of breach of implied warranty. Putting aside Magnuson-Moss and tort law, which of the following is true?
A. In a §2-318 Alternative A jurisdiction, Son loses for lack of vertical privity.
B. In a §2-318 Alternative A jurisdiction, Son loses for lack of horizontal privity. C. In a §2-318 Alternative A jurisdiction, Son wins because that Alternative allows him to overcome his vertical privity problem.
D. In a §2-318 Alternative A jurisdiction, Son wins because that Alternative allows him to overcome his horizontal privity problem.
E. In a §2-318 Alternative C jurisdiction, Son loses because he cannot show any property damage or economic loss.
D. In a §2-318 Alternative A jurisdiction, Son wins because that Alternative allows him to overcome his horizontal privity problem.
Question 2: Same facts as Question 1, except that Sam asks for a used treadmill in the $3,000 price range and tells Frieda that the most important feature for him in a treadmill is that it has excellent cushioning for shock absorption (due to Sam’s history of tendonitis in both of his knees). As a result, Frieda recommends that Sam purchase a used NordicTrack Elite 9700 Pro treadmill for that purpose. When Sam purchases that used treadmill, has Frieda made an implied warranty of merchantability with that sale?
A. Yes, because Frieda is a merchant with respect to goods of this kind.
B. Yes, because Sam was relying on Frieda’s skill and judgment in buying this particular treadmill for his special purpose.
C. Yes, for both of the reasons stated in (A) and (B).
D. No, because there is no implied warranty of merchantability with the sale of used goods.
E. No, because an implied warranty of fitness for a particular purpose supersedes an implied warranty of merchantability.
A. Yes, because Frieda is a merchant with respect to goods of this kind.
Question 1: Second Wind Sports is a sporting goods retailer that sells both used and new sporting goods equipment. Sam Sedentary visits the store one day and tells the manager on duty, Frieda Fitness, that he is looking to buy a new treadmill in the $3,000 price range because he has decided that he would like to improve his aerobic fitness. Frieda suggests for him a True Brand PS100 Model treadmill. Frieda tells Sam that in her many years of selling treadmills, she believes that the True PS100 is the best treadmill in Sam’s price range. Sam listens closely and decides to purchase the treadmill. Has Frieda made an implied warranty of fitness for a particular purpose in this sale to Sam?
A. Yes, because Frieda is a merchant with respect to goods of this kind.
B. Yes, because Sam was clearly relying on Frieda’s skill or judgment to help select for him this particular treadmill.
C. Yes, for both of the reasons stated in (A) and (B).
D. No, because most people buy treadmills to improve their aerobic fitness.
E. No, because Frieda’s express warranty about the treadmill supersedes any implied warranty that she might have made.
D. No, because most people buy treadmills to improve their aerobic fitness.
Question 3: Tanya’s Tires sells new and used tires for automobiles. Carl Customer buys a set of four new high-end tires from Tanya for $200 each. Three days after the sale, Carl notices that one of his new tires is flat. Upon further examination, he sees that the tire has a slow leak due to a nail in the tire. Carl believes the nail was already in the tire when he bought the tire, but he cannot prove that. He returns the tire to Tanya and threatens to sue her for breach of the implied warranty of merchantability if she does not replace the tire. If Tanya wants to resist Carl’s claim for breach of the implied warranty of merchantability, would it be helpful for her to prove that her mechanics closely inspect each tire for nails or other foreign objects before installing the tires on a customer’s car?
A. No, because warranty liability is strict liability rather than negligence, and therefore the seller’s due care is irrelevant to warranty liability.
B. No, because it is possible that Tanya’s mechanics might have failed to notice the nail in the tire despite their inspection.
C. Yes, because that evidence would be relevant to the question of whether the nail was already in the tire at the time Tanya sold it to Carl.
D. Yes, because being a warrantor is not the same thing as being an insurer of goods.
E. Both (C) and (D) are true.
E. Both (C) and (D) are true.
Question 5: Same facts as Question 4, except suppose Car Dealer’s contract with Buyer includes a conspicuous and properly drafted disclaimer of the implied warranty of merchantability. Putting aside Magnuson-Moss and tort law, which of the following statements is true?
A. In a §2-318 Alternative A jurisdiction, Son wins because Car Dealer cannot successfully disclaim the implied warranty of merchantability vs. the intended beneficiaries of that Alternative.
B. In a §2-318 Alternative A jurisdiction, Son loses.
C. In an Alternative C jurisdiction, Son wins because Son suffered personal injuries.
D. Both (A) and (C) are true.
E. Both (B) and (C) are true.
B. In a §2-318 Alternative A jurisdiction, Son loses.
Question 6: Same facts as Question 4, but now suppose that Car Dealer’s contract with Buyer includes the following conspicuous disclaimer: “Seller’s warranties, whether express or implied (and including the implied warranty of merchantability), extend only to the immediate buyer of the car and not to any other individuals.” Assume also for this question that in addition to Son suffering personal injuries, Son’s new iPhone is destroyed in the accident. Son sues Car Dealer for breach of warranty, seeking damages for both his personal injuries and the loss of his iPhone. Putting aside Magnuson-Moss and tort law, which of the following statements is true?
A. In a §2-318 Alternative A jurisdiction, Son can recover for his personal injuries but not the loss of his iPhone.
B. In a §2-318 Alternative C jurisdiction, Son can recover for his personal injuries but not the loss of his iPhone.
C. In a §2-318 Alternative B jurisdiction, Son cannot recover for either his personal injuries or the loss of his iPhone.
D. In a §2-318 Alternative C jurisdiction, Son can recover for both his personal injuries and the loss of his iPhone.
E. Both (A) and (B) are true.
E. Both (A) and (B) are true.
Question 7: Same facts as Question 4, but now suppose that there is a written Five-Year Limited Warranty and that Magnuson-Moss applies. In this variation, Son suffers no personal injuries in the accident, but Son’s new iPhone is destroyed in the accident. Son sues Car Dealer for loss of his $500 iPhone. Which of the following statements is true?
A. In a §2-318 Alternative A jurisdiction, Son wins even without the help of Magnuson-Moss.
B. In a §2-318 Alternative A jurisdiction, Son loses even with the help of Magnuson-Moss.
C. In a §2-318 Alternative A jurisdiction, Son wins but only due to Magnuson-Moss.
D. In a §2-318 Alternative C jurisdiction, Son loses even with the help of Magnuson-Moss.
E. In a §2-318 Alternative C jurisdiction, Son wins but only due to Magnuson-Moss.
C. In a §2-318 Alternative A jurisdiction, Son wins but only due to Magnuson-Moss.
Question 8: Same facts as Question 7, but Son would like to use Magnuson-Moss to sue Car Dealer in federal court for breach of the written warranty and to recover attorney’s fees if he wins his case. Regarding Son’s prospects for prevailing on those two issues—federal jurisdiction for his lawsuit and recovery of attorney’s fees if he wins—which of the following statements is true?
A. Son can sue in federal court, but cannot recover attorney’s fees even if he wins.
B. Son cannot sue in federal court, but can recover attorney’s fees if he wins.
C. Son can sue in federal court, and can recover attorney’s fees if he wins.
D. Son cannot sue in federal court, but he can recover attorney’s fees whether he wins or loses.
E. Son cannot sue in federal court, and cannot recover attorney’s fees even if he wins.
B. Son cannot sue in federal court, but can recover attorney’s fees if he wins.
Question 9: Law School purchases a standard coffee maker from Appliance Store for use in Law School’s faculty lounge. The coffee maker includes a warranty that would qualify as a written warranty under the Magnuson-Moss Act. After two weeks of use, the coffee maker leaks badly and destroys the expensive new carpet in the faculty lounge, causing $5,000 worth of damages. Assume that the coffee maker would qualify as a “consumer product” under the Magnuson-Moss Act. Law School would like to bring a civil action in state court under the Magnuson-Moss Act for damages to the carpet due to breach of the written warranty given by Appliance Store on the coffee maker. Would Law School be eligible to bring such a suit under Magnuson-Moss?
A. Yes, because Law School was damaged by the failure of a warrantor to comply with a written warranty on a consumer product.
B. No, because Magnuson-Moss is a federal statute and therefore any lawsuit under Magnuson-Moss can only be brought in federal court.
C. No, because even though the coffee maker is a consumer product, Law School is not a consumer. D. No, because Magnuson-Moss does not allow damages for economic loss such as the damages to Law School’s carpet.
E. Both (B) and (D) are true.
A. Yes, because Law School was damaged by the failure of a warrantor to comply with a written warranty on a consumer product.
Question 10: Lessee needs a new widget production machine for its factory. Lessee approaches Seller and chooses a machine from Seller’s inventory that suits Lessee’s needs. Lessee then convinces Bank to purchase the machine from Seller and lease it to Lessee for 10 years. The machine has an expected useful life of 20 years. Lessee has final approval rights over the sales contract between Seller and Bank, which makes no promises about the performance of the machine and says nothing about warranties. Bank purchases the machine, which is delivered directly to Lessee’s factory. After one month, the machine breaks down and needs extensive maintenance in order to function effectively. Lessee sues both Seller and Bank for recovery of the maintenance costs. What is the likely outcome of that lawsuit?
A. Lessee will prevail vs. Bank for breach of implied warranty, but will not prevail vs. Seller because of lack of vertical privity.
B. Lessee will not prevail vs. Bank for breach of implied warranty, and will not prevail vs. Seller because of lack of vertical privity.
C. Lessee will prevail vs. Bank for breach of implied warranty, and will also prevail vs. Seller for breach of implied warranty (subject to no double recovery).
D. Lessee will not prevail vs. Bank for breach of implied warranty, but will prevail vs. Seller for breach of implied warranty.
E. Lessee will not prevail vs. Bank for breach of implied warranty, but will prevail vs. Seller for breach of express warranty.
D. Lessee will not prevail vs. Bank for breach of implied warranty, but will prevail vs. Seller for breach of implied warranty.
Question 11: Same facts as Question 10, except that the sales contract between Seller and Bank includes a conspicuous disclaimer of the implied warranty of merchantability. When the machine breaks down and needs repairs after one month, must Lessee continue making lease payments to Bank even while the machine is not functioning?
A. Yes, because Lessee’s promises to make lease payments to Lessor are now irrevocable and independent of the performance of the leased goods.
B. Yes, but Lessee will still have a right to recover against Seller for breach of the implied warranty of merchantability.
C. Yes, and Lessee will not even have a right to recover against Seller for breach of the implied warranty of merchantability.
D. Both (A) and (C) are true.
E. No, because Lessee can at least insist that the machine is functioning before it needs to continue making rent payments to Bank.
D. Both (A) and (C) are true.
Question 12: Same facts as Question 10, except suppose that the machine has an expected useful life of 10 years, and that Lessee has no right to terminate the lease. Now when Lessee sues both Seller and Bank for recovery of the maintenance costs, what is the likely outcome of that lawsuit?
A. Lessee will prevail vs. Bank for breach of implied warranty, but will not prevail vs. Seller because of lack of vertical privity.
B. Lessee will not prevail vs. Bank for breach of implied warranty, and will not prevail vs. Seller because of lack of vertical privity.
C. Lessee will prevail vs. Bank for breach of implied warranty, and will also prevail vs. Seller for breach of implied warranty (subject to no double recovery).
D. Lessee will not prevail vs. Bank for breach of implied warranty, but will prevail vs. Seller for breach of implied warranty.
E. Lessee will not prevail vs. Bank for breach of implied warranty, but will prevail vs. Seller for breach of express warranty.
A. Lessee will prevail vs. Bank for breach of implied warranty, but will not prevail vs. Seller because of lack of vertical privity.
