Chapter 15

:

The Formation of Sales and Lease Contracts

99

WHAT THIS CHAPTER IS ABOUT
This chapter introduces two parts of the Uniform Commercial Code: Article 2, which covers sales of goods,  and Article 2A, which covers leases. The chapter also includes a section on contracts for an international sale of  goods.

CHAPTER OUTLINE
I. THE SCOPE OF THE UCC
The UCC provides rules to deal with all phases of a commercial sale: Articles 2 and 2A cover contracts for  sales or leases of goods; Articles 3, 4, and 4A cover payments by checks, notes, and other means; Article 7  covers warehouse documents; and Article 9 covers transactions that involve collateral.

II.

THE SCOPE OF ARTICLE 2—SALES
Article 2 governs contracts for sales of goods. A. WHAT IS A SALE? A sale is “the passing of title from the seller to the buyer for a price” [UCC 2–106(1)]. The price may be  payable in money, goods, or services. B. WHAT ARE GOODS? Goods are tangible and movable. Legal disputes concern the following— 1. Goods Associated with Real Estate Goods include minerals or the like and structures, if severance from the land is by the seller (but not  if the buyer is to do it); growing crops or timber to be cut; and other “things attached” to realty but  capable of severance without material harm to the land [UCC 2–107]. Goods and Services Combined a. General Rule Services are not included in the UCC. If a transaction involves both goods and services, a court  determines which aspect is dominant.

2.

b. Special Cases Serving food or drink is a sale of goods [UCC 2–314(1)]. Other goods include unborn animals and  rare coins. C. WHO IS A MERCHANT? UCC 2–104:  Special rules apply to those who (1) deal in goods of the kind involved; (2) by occupation,  hold themselves out as having knowledge and skill peculiar to the practices or goods involved in the  transaction; (3) employ a merchant as a broker, agent, or other intermediary.

III.

THE SCOPE OF ARTICLE 2A—LEASES
Article 2A governs contracts for leases of goods.

100

A. DEFINITION OF A LEASE AGREEMENT A  lease   agreement  is  the   lessor  and  lessee’s   bargain,  in their  words  and deeds,  including   course   of  dealing, usage of trade, and course of performance [UCC 2A–103(k)]. B. CONSUMER LEASES Special provisions apply to leases involving (1) a lessor who regularly leases or sells, (2) a lessee who  leases for a personal, family, or household purpose, and (3) total payments of less than $25,000 [UCC 2A– 103(1)(e)]. C. FINANCE LEASES A finance  lease involves a lessor (financier)  who buys or leases goods from a supplier  and leases or  subleases them to a lessee [UCC 2A–103(g)]. The lessee must perform, whatever the financier does [UCC  2A–407].

IV.

THE FORMATION OF SALES AND LEASE CONTRACTS
The following summarizes how the UCC changes the common law of contracts. A. OFFER An agreement sufficient to constitute a contract can exist even if verbal exchanges, correspondence, and  conduct do not reveal exactly when it became binding [UCC 2–204(2), 2A–204(2)]. 1. Open Terms A sales or lease contract will not fail for indefiniteness even if one or more terms are left open, as long  as (1) the parties intended to make a contract and (2) there is a reasonably certain basis for the court  to grant an appropriate remedy [UCC 2–204(3), 2A–204(3)]. a. Open Price Term 1) If the parties have not agreed on a price, a court will determine “a reasonable price at the  time for delivery” [UCC 2–305(1)]. 2) If either the buyer or the seller is to determine the price, the price is to be fixed in good faith  [UCC 2–305(2)]. 3) If a price is not fixed through the fault of one party, the other can cancel the contract or fix a  reasonable price [UCC 2–305(3)]. b. Open Payment Term When parties do not specify payment terms— 1) Payment is due at the time and place at which the buyer is to receive the goods [UCC 2– 310(a)]. 2) The buyer can tender payment in cash or a commercially acceptable substitute (a check or  credit card) [UCC 2–511(2)]. c. Open Delivery Term When no delivery terms are specified— 1) The buyer normally takes delivery at the seller’s place of business [UCC 2–308(a)]. If the  seller has no place of business, the seller’s residence is used. When goods are located in some  other place and both parties know it, delivery is made there.

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2) If the time for shipment or delivery is not clearly specified, a court will infer a “reasonable”  time [UCC 2–309(1)]. d. Duration of an Ongoing Contract A party who wishes to terminate an indefinite but ongoing contract must give reasonable notice  to the other party [UCC 2–309(2), (3)].

e.

Options and Cooperation Regarding Performance 1) When   no   specific   shipping   arrangements   have   been   made   but   the   contract   contemplates  shipment of the goods, the seller has the right to make arrangements [UCC 2–311]. 2) When   terms   relating   to   an   assortment   of   goods   are   omitted,   the   buyer   can   specify   the  assortment [UCC 2–311].

f.

Open Quantity Term If parties do not specify a quantity, there is no basis for a remedy. Exceptions include [UCC 2– 306]— 1) Requirements Contract The buyer agrees to buy and the seller agrees to sell all or up to a stated amount of what the  buyer needs or requires. There is consideration:   the buyer gives up the right to buy from  others. 2) Output Contract The seller agrees to sell and the buyer agrees to buy all or up to a stated amount of what the  seller   produces.     Because   the   seller   forfeits   the   right   to   sell   goods   to   others,   there   is  consideration. 3) The UCC Imposes a Good Faith Limitation The   quantity   under   these   contracts   is   the   amount   of   requirements   or   output   that   occurs  during a normal production year.

2.

Merchant’s Firm Offer If   a   merchant   gives   assurances   in   a   signed   writing   that   an   offer   will   remain   open,   the   offer   is  irrevocable, without consideration, for the stated period, or if no definite period is specified, for a  reasonable period (neither to exceed three months) [UCC 2–205, 2A–205]. a. The offer must be written and signed by the offeror. When a firm offer is contained in a form  contract prepared by the offeree, a separate firm­offer assurance must be signed as well.

b. The other party need not be a merchant. B. ACCEPTANCE 1. Any Reasonable Means When an offeror does not specify a means of acceptance, acceptance can be by any reasonable means  [UCC 2–206(1), 2A–206(1)]. Promise to Ship or Prompt Shipment a. Promise or Shipment of Conforming Goods An offer to buy goods for current or prompt shipment can be accepted by a promise to ship or by  a prompt shipment [UCC 2–206(1)(b)].

2.

b. Shipment of Nonconforming Goods Prompt shipment of nonconforming goods is both an acceptance and a breach, unless the seller  (1) seasonably notifies the buyer that it is offered only as an accommodation and (2) indicates  clearly that it is not an acceptance. 3. Communication of Acceptance

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To accept a unilateral offer, the offeree must notify the offeror of performance if the offeror would not  otherwise know [UCC 2–206(2)].

4.

Additional Terms If the offeree’s response indicates a definite acceptance of the offer, a contract is formed, even if the  acceptance includes terms in addition to, or different from, the original offer [UCC 2–207(1)]. This is  contrary to the common law mirror image rule. a. Not Conditioned on the Offeror’s Assent Does the contract include the additional terms? 1) When the Seller or Buyer Is a Nonmerchant Additional terms are considered proposals and not part of the contract.  The contract is on  the offeror’s terms [UCC 2–207(2)]. 2) When Both Parties Are Merchants Additional terms are part of the contract unless (1) the offer expressly states no other terms;  (2) they materially alter the original contract; or (3) the offeror objects to the modified terms  in a timely fashion [UCC 2–207(2)]. b. Conditioned on the Offeror’s Assent If the additional terms are conditioned on the offeror’s assent, the offeree’s response is not an  acceptance. c. Additional Terms May Be Stricken Regardless of what parties write down, they have a contract according to their conduct [UCC 2– 207(3)]. If they do not act in accord with added terms, the terms are not part of a contract.

C. CONSIDERATION An agreement modifying a sales or lease contract needs no consideration to be binding [UCC 2–209(1),  2A–208(1)]. 1. 2. Modification Must Be Sought in Good Faith [UCC 1–203] When a Modification Must Be in Writing to Be Enforceable a. Contract prohibits changes except by a signed writing.

b. If a consumer (nonmerchant) is dealing with a merchant, and the merchant’s form prohibits oral  modification, the consumer must sign a separate acknowledgment [UCC 2–209(2), 2A–208(2)]. c. Any modification that brings a sales contract under the Statute of Frauds must be in writing to be  enforceable [UCC 2–209(3)].

D. STATUTE OF FRAUDS To be enforceable, a sales contract must be in writing if the goods are $500 or more and a lease if the  payments are $1,000 or more [UCC 2–201, 2A–201]. 1. Sufficiency of the Writing  A writing is sufficient if it indicates the parties intended to form a contract and is signed by the party  against whom enforcement is sought. A sales contract is not enforceable beyond the quantity stated.  A lease must identify and describe the goods and the lease term. Transactions between Merchants  The writing requirement is met if one merchant sends a signed written confirmation to the other. a. Contents of the Confirmation

2.

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The confirmation must indicate the terms of the agreement, and the merchant receiving it must  have reason to know of its contents.

b. Objection within Ten Days Unless   the   merchant   who   receives   the   confirmation   objects   in   writing   within   ten   days,   the  confirmation is enforceable [UCC 2–201(2)]. 3. Exceptions  An oral contract for a sale or lease that should otherwise be in writing will be enforceable in cases of  [UCC 2–201(3), 2A–201(4)]— a. Specially Manufactured Goods The   seller   (or   lessor)   makes   a   substantial   start   on   the   manufacture   of   the   goods,   or   makes  commitments for it, and the goods are unsuitable for resale to others in the ordinary course of the  business.

b. Admissions The   party   against   whom   enforcement   of   a   contract   is   sought   admits   in   pleadings   or   court  proceedings that a contract was made. c. Partial Performance Some payment has been made and accepted or some goods have been received and accepted  (enforceable to that extent).

E. PAROL EVIDENCE 1. The Rule If the parties to a contract set forth its terms in a writing intended as their final expression, the terms  cannot be contradicted by evidence of any prior agreements or contemporaneous oral agreements. Exceptions [UCC 2–202, 2A–202] A court may accept evidence of the following— a. Consistent Additional Terms Such terms clarify or remove ambiguities in a writing.

2.

b. Course of Dealing and Usage of Trade The   meaning   of   an   agreement   is   interpreted   in   light   of   commercial   practices   and   other  surrounding circumstances [UCC 1–205]. c. Course of Performance Conduct that occurs under the agreement indicates what the parties meant by the words in their  contract [UCC 2–208(1), 2A–207(1)].

3.

Rules of Construction Express terms, course  of performance, course  of dealing, and usage of trade are  to be  construed  together when they do not contradict one another. If that is unreasonable, the priority is: (1) express  terms, (2) course of performance, (3) course of dealing, and (4) usage of trade [UCC 1–205(4), 2– 208(2), 2A–207(2)].

F.

UNCONSCIONABILITY 1. What an Unconscionable Contract (or Clause) Is An unconscionable contract or clause is a contract or clause so one­sided and unfair (at the time it  was made) that enforcing it would be unreasonable. What a Court Can Do

2.

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UNIT THREE: SALES AND LEASE CONTRACTS

A court can (1) refuse to enforce the contract, (2) enforce the contract without the unconscionable  clause, or (3) limit the clause to avoid an unconscionable result [UCC 2–302, 2A–108].

V.

CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS

The   1980   United   Nations   Convention   on   Contracts   for   the   International   Sale   of   Goods   (CISG)   governs  contracts for the international sale of goods. A. APPLICABILITY OF THE CISG The CISG is to international sales contracts what UCC Article 2 is to domestic sales contracts (except the  CISG does not apply to consumer sales). The CISG applies when the parties to an international sales  contract do not specify in writing the precise terms of their contract. B. A COMPARISON OF CISG AND UCC PROVISIONS 1. Irrevocable Offers An offer is irrevocable if the offeror states that it is or if the offeree reasonably relies on it as being  irrevocable. The offer is irrevocable even without a writing and consideration [Art. 16(2)]. Statute of Frauds International contracts need not be in writing to be enforceable [Art. 11]. Price Term Must be specified or be determinable from the contract. Mirror Image Rule The terms of the acceptance must mirror those of the offer. Acceptance When an acceptance is sent, an offer becomes irrevocable, but the acceptance is not effective until it is  received. Acceptance by performance does not require notice to the offeror.

2. 3. 4. 5.

TRUE­FALSE QUESTIONS
(Answers at the Back of the Book)
                                                1. 2. 3. 4. 5. 6. Article 2 of the UCC governs sales of goods. Under the UCC, a sale occurs when title passes from a seller to a buyer for a price. The UCC governs sales of services and real estate. Under the UCC, an agreement modifying a contract needs new consideration to be binding. If a contract for a sale of goods is missing a term, it will not be enforceable. An unconscionable contract is a contract so one­sided and unfair, at the time it is made, that enforcing it  would be unreasonable. The CISG is to international sales contracts what Article 2 of the UCC is to domestic sales contracts. Under the UCC, an offer to buy goods can be accepted only by a prompt shipment of the goods.

               

7. 8.

       

9.

A lease agreement is the lessor and lessee’s bargain. No oral contract is enforceable under the UCC.

        10.

FILL­IN QUESTIONS
(Answers at the Back of the Book)
_________________________________________  (Course   of   dealing/Usage   of   trade)   is   a   sequence   of   conduct  between the parties that occurred before their agreement and establishes a common basis for their understanding.  ___________________________________  (Course   of   dealing/Usage   of   trade)   is   any   practice   or   method   of   dealing  having regularity of observance in a place, vocation, or  ______________ (deal/trade) so as to justify an expectation  that it will be observed with respect to the transaction in question. The express terms of an agreement, the course of  dealing, and the usage of trade will be construed to be _________________ (consistent/ inconsistent) with each other  whenever   reasonable.   When   that   is   not   possible,   the  _____________________   _______________  (course   of  dealing/usage of trade/terms in the agreement) prevail.

MULTIPLE­CHOICE QUESTIONS
(Answers at the Back of the Book)
        1. a. b. c. d.         2. a. b. c. d.         3. a. b. c. d.         4. Adam pays Beta Corporation $1,500 for a notebook computer. Under the UCC, this is a bailment. a consignment. a lease. a sale. Alpha Electronics, Inc., sells computers and computer accessories to persons who order them. Alpha is a  merchant with respect to computers only. computer accessories only. computers and computer accessories. none of the above. A­One Products Corporation and Best Manufacturing, Inc., enter into a contract for a sale of goods that  does not include a price term. In a suit between A­One and Best over the price, a court will determine a reasonable price. impose the lowest market price for the goods. refuse to enforce the agreement. return the parties to the positions they held before the contract. Coastal Sales Corporation sends its purchase order form to Delta Products, Inc., for sixty display stands.  Delta responds with its own form. Additional terms in Delta’s form automatically become part of the  contract unless Coastal objects to the new terms within a reasonable period of time.

a.

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b. Coastal’s form expressly required acceptance of its terms. c. the additional terms  materially alter the original contract. d. any of the above.         5. a. b. c. d. Mountain Boots, Inc., and National Shoe Company orally agree to a sale of 100 pair of hiking boots for  $5,000. National gives Mountain a check for $500 as a down payment. At this point, the contract is enforceable to at least the extent of $500. fully enforceable because it is for specially made goods. fully enforceable because it is oral. none of the above.

       

6. a. b. c. d.

Apex   Corporation   sells   two   construction   cranes   to   Baker   Company,   which   leases   one   crane   to  Construction, Inc., and gives the other crane to Equipment, Inc.  Article 2A of the UCC applies to the gift only. the lease only. the sale only. the gift, the lease, and the sale. Britney   and   Carl   dispute   the   interpretation   of   an   ambiguous   clause   in   their   contract.   In   a   suit   to  determine the meaning of the clause, the court may accept evidence of consistent additional terms only. consistent additional terms and contradictory terms. contradictory terms only. anything extrinsic to the contract. Eve enters a contract with Fancy Furniture, Inc. In a later suit, Eve claims that a clause in the contract is  unconscionable. If the court agrees, it may enforce, limit, or refuse to enforce the contract or the disputed clause. enforce the contract without the disputed clause only. limit the application of the disputed clause only. refuse to enforce the contract only. Digital Products, Inc., agrees to buy an unspecified quantity of microchips from Excel Corporation. Excel  breaches the contract. Digital can probably enforce the agreement to the amount of a reasonable quantity. enforce the agreement to the amount of Digital’s requirements. enforce the agreement to the amount of Excel’s output. not enforce the agreement. Lyle in Great Britain orally agrees to sell 100 VCRs at $100 each to Maria in Mexico. Britain and Mexico  have adopted the CISG. Lyle fails to deliver. With respect to the deal, Maria can enforce it. not enforce it  because it is not in writing. not enforce it because it is not supported by consideration. not enforce it because the price term is not specified.

       

7. a. b. c. d.

       

8. a. b. c. d.

       

9. a. b. c. d.

        10. a. b. c. d.

SHORT ESSAY QUESTIONS
1. 2. For purposes of UCC Article 2, what is a sale? What are goods? Who, for the purposes of UCC Article 2, is a merchant?

ISSUE SPOTTERS
(Answers at the Back of the Book)

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1. Ace Autos, a car dealer, writes to Beth, “I have a 1999 Honda Civic that I will sell to you for $4,000. This offer  will be kept open for one week.” Six days later, Carl tells Beth that Ace sold the car that morning for $5,000. Did Ace  breach any contract? 2. E­Design, Inc., orders 150 computer desks. Fine Supplies, Inc., ships 150 printer stands. Is this an acceptance of  the offer or a counteroffer? If it is an acceptance, is it a breach of the contract? What if Fine told E­Design it was  sending printer stands as “an accommodation”? 3. Truck Parts, Inc. (TPI), often sells supplies to United Service Company (USC), which services trucks. Over the  phone, they negotiate for the sale of eighty­four sets of tires. TPI sends a letter to USC detailing the terms and two  weeks later ships the tires. Is there an enforceable contract between them?

STARBUCKS COFFEE COMPANY INTERNATIONAL SALES CONTRACT APPLICATIONS
(Answers at the Back of the Book)
The following hypothetical situation and multiple­choice questions relate to your text’s fold­out exhibit of the  international sales contract used by Starbucks Coffee Company.  In that contract, Starbucks orders five hundred tons  of coffee at $10 per pound from XYZ Co.         1. a. b. c. d.         2. a. b. c. d.         3. a. b. c. d.         4. a. b. c. d.         5. Starbucks and XYZ would have an enforceable contract even if they did not state in writing  the amount of coffee ordered. the price of the coffee. both a and b. none of the above. If Starbucks and XYZ did not include a “DESCRIPTION” of the coffee as “High grown Mexican Altura,”  then the delivered coffee must meet Starbuck’s subjective expectations of their quality. Starbuck’s description of the goods in ads, on labels, and so on. XYZ’s description of the goods in ads, on labels, and so on. XYZ’s subjective belief in their quality. Starbucks’s incentive to pay on time, according to the terms of this contract, is the clause titled CLAIMS. GUARANTEE. PAYMENT. PRICE. XYZ’s incentive to deliver coffee that conforms to the contract is the clause titled CLAIMS. GUARANTEE. PAYMENT. PRICE. Until the coffee is delivered to its destination, the party who bears the risk of loss is

a. b. c. d.

Bonded Public Warehouse. Green Coffee Association Starbucks. XYZ.

Textbook quiz

The Uniform Commercial Code (UCC) is which type of law? a. Statutory law b. Common law c. Case law d. Criminal law status: incorrect (0.0) correct: a your answer: c feedback: Incorrect. The UCC is statutory law, although there is a body of case law that interprets various provisions of the UCC. 2 The Uniform Commercial Code (UCC) attempts to provide which of the following: a. guidelines for making common law contracts that deal with the sale of land. b. guidelines for all international contracts for the sale of securities. a consistent and integrated framework of rules to deal with all aspects of commercial c. transactions. a consistent body of rules for dealing with criminal violations of the law that involve either d. securities or government bonds. status: correct (1.0) correct: c your answer: c feedback: Correct. The UCC attempts to provide a logical legal framework for these kinds of commercial transactions that applies throughout the states. 3 In order for the rules contained in the UCC to apply to a contract for the sale of goods, the goods must: a. be for retail use only. b. consist of some unique personal service.

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c. be tangible, that is, have physical existence. d. be considered real property. status: correct (1.0) correct: c your answer: c feedback: Correct. The goods sold must be tangible, unlike stocks or bonds. 4 If Jim sells Smith copper that he removed from land that he owns in Colorado, this contract: a. will be covered by Article 2 of the UCC. b. will be covered by Article 2A of the UCC. c. will be covered by Article 3 of the UCC. d. will be covered by the common law. status: correct (1.0) correct: a your answer: a feedback: Correct. Jim is selling a good that he has separated from the land. 5 If you sublease your automobile to a friend, this contract is covered by: a. Article 2 of the UCC. b. Article 2A of the UCC. c. Article 6 of the UCC. d. the common law because it involves an intangible good. status: correct (1.0) correct: b your answer: b feedback: Correct. Article 2A covers leases and subleases. 6 To qualify as a consumer lease, three elements must exist. Which of the following is not one of those elements? a. The lessor must regularly engage in the business of leasing or selling. b. The total lease payments must be less than a dollar amount set by state statute. c. The lessee must lease the goods "primarily for a personal, family, or household purpose."

d. The lessee must agree to have a third party finance the lease. status: correct (1.0) correct: d your answer: d feedback: Correct. This arrangement need not exist for a consumer lease to arise. 7 Suppose that Frank, who is in the business of selling antiques, agrees to sell Keith an antique chest of drawers worth more than $2,500. Keith agrees to buy the chest and signs a contract for the purchase. The price of the chest, however, is left out of the contract. In this situation: a. there is a contract as long as the court can determine a reasonable price at the time of delivery. b. there is a contract only if Frank refuses to name a price. c. there is a contract only if Keith is able to produce evidence that Frank defrauded him. d. there is no contract because parties cannot leave the price term out of the contract. status: incorrect (0.0) correct: a your answer: d feedback: Incorrect. The parties almost certainly do have a contract, because it would not be difficult for a court to determine a reasonable market price for the drawers. 8 Pam, who sells specialty foods and kitchen equipment in her store, sends Martin a signed letter offering to sell him, and only him, all her stock of high-quality kitchen knives and indicates that her offer will remain open for ten days. This is known as: a. an output contract. b. a requirement contract. c. a firm offer. d. a revocable offer. status: correct (1.0) correct: c your answer: c feedback: Correct. This is a firm offer that Pam gives Martin.

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9 The UCC has Statute of Frauds provisions governing: a. the sale of land. b. the sale of interests in land, such as rights-of-way. c. the sale of intangible property. d. the sale of goods priced at more than $500. status: correct (1.0) correct: d your answer: d feedback: Correct. The UCC has Statute of Frauds provisions that require a contract for the sale of goods priced at more than $500 to be in writing. 10 If Edward, who paints signs for a living and is located in Seattle, Washington, sells a sign worth $2,000 to Claire, who lives in Aix-en-Provence, France, this contract would be governed by: a. the Convention on Contracts for the International Sale of Goods. b. the UCC for the State of Washington. c. the UCC for Canada. d. the common law. status: correct (1.0) correct: a your answer: a feedback: Correct. Contracts for the sale of goods between individuals or firms located in different countries are governed by this 1980 international agreement. Article 2 of the Uniform Commercial Code (UCC) governs: a. contracts for the sale of land. b. contracts for the sale of goods. c. negotiable instruments. d. bulk sales. status: not answered () correct: b your answer:

2 Daniel contracts with Mary to provide him with expert legal advice on the sale of his business. Daniel's contract with Mary is governed by: a. Article 2 of the UCC. b. Article 6 of the UCC. c. Article 2A of the UCC. d. the common law of contracts. status: not answered () correct: d your answer: 3 In order for the rules contained in the UCC to apply to a contract for the sale of goods, the goods must: a. be for retail use only. b. consist of some unique personal service. c. be tangible--that is, have physical existence. d. be considered real property. status: not answered () correct: c your answer: 4 If Jim sells Smith copper that he removed from land that he owns in Colorado, this contract: a. will be covered by Article 2 of the UCC. b. will be covered by Article 2A of the UCC. c. will be covered by Article 3 of the UCC. d. will be covered by the common law. status: not answered () correct: a your answer:

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5 When merchants are involved in commercial transactions that involve the sale of goods, they are held to certain standards. When casual (nonmerchant or consumer) buyers or sellers are involved: a. they are held to less rigorous standards than merchants. b. they are held to more rigorous standards than merchants. c. they are treated exactly like merchants. d. their transactions are not covered by the UCC. status: not answered () correct: a your answer: 6 If you lease an automobile from an automobile dealer, this contract is covered by: a. Article 2 of the UCC. b. Article 2A of the UCC. c. Article 6 of the UCC. d. the common law, because it involves an intangible good. status: not answered () correct: b your answer: 7 The effect of open terms on a contract covered by the UCC is that: a. the contract will be void because of the open terms. b. the contract will be valid if it involves the sale of land. the contract will be valid if the parties intended to form a contract and there is a reasonable c. basis for a court to grant a remedy. d. the contract will be valid as long as the parties expressed some interest in negotiating. status: not answered () correct: c your answer:

8 Pam, who sells specialty foods and kitchen equipment in her store, sends Martin a signed letter offering to sell him, and only him, all of her stock of high-quality kitchen knives. Pam specifies that her offer will be open for ten days only. Pam's offer is known as: a. an output contract. b. a requirements contract. c. a merchant's firm offer. d. a revocable offer. status: not answered () correct: c your answer: 9 Joe Allen, who is in the business of painting commercial signs, agrees over the telephone to paint a sign for Miller's business. The sign will read "Miller's Mighty Muffin Shop." The cost of the sign will be $1,000. After Allen paints the sign, Miller decides that he doesn't want it. In this case: a. Allen is stuck with the sign. b. the contract is invalid because it was oral. c. the contract, even though it was oral, is enforceable. d. the contract is unconscionable. status: not answered () correct: c your answer: 10 The UCC has Statute of Frauds provisions governing: a. the sale of land. b. the sale of interests in land, such as rights-of-way. c. the sale of intangible property. d. the sale of goods priced at more than $500. status: not answered () correct: d your answer:

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The Uniform Commercial Code (UCC) attempts to provide: a. guidelines for making common law contracts that deal with the sale of land. b. all international contracts for the sale of securities. a consistent and integrated framework of rules to deal with all aspects of c. commercial transactions. a consistent body of rules for dealing with criminal violations of the law that d. involve either securities or government bonds. status: not answered () correct: c your answer: 2 In order for the rules contained in the UCC to apply to a contract for the sale of goods, the goods must: a. be for retail use only. b. consist of some unique personal service. c. be tangible, that is, have physical existence. d. be considered real property. status: not answered () correct: c your answer: 3 If Jim sells Smith copper that he removed from land that he owns in Colorado, this contract: a. will be covered by Article 2 of the UCC. b. will be covered by Article 2A of the UCC. c. will be covered by Article 3 of the UCC. d. will be covered by the common law. status: not answered () correct: a your answer: 4 If you sublease your automobile to a friend, this contract is covered by: a. Article 2 of the UCC.

Your AnswerCorrect?Correct AnswerDescription 1.ayes Statutory law. 2.cyes A consistent and integrated framework of rules to deal with all aspects of commercial transactions. 3.dyes by all states, in whole or in part. 4.byes contracts for the sale of goods. 5.dyes the common law. 6.cyes be tangible, that is, have physical existence. 7.ayes will be covered by Article 2 of the UCC. 8.dyes will be covered by the common law. 9.dnoathey are not held to less rigorous standards than merchants. 10.dnobwhether Ready was a merchant for purposes of the UCC. 11.byes Article 2A of the UCC. 12.cyes a lessor. 13.dyes The lessee must agree to have a third party finance the lease. 14.ayes A finance lease. 15.cyes the contract will be valid if the parties intended to form a contract and there is a reasonable basis for a court to grant a remedy. 16.bnoathere is a contract as long as the court can determine a reasonable price at the time of delivery. 17.dyes Keith would take delivery of the drawers at Frank's store. 18.dnocthey probably do not have a contract at all. 19.byes an output contract. 20.cyes a firm offer. 21.bnocThey have a contract for the sofa only. 22.ayes an agreement modifying a contract for the sale or lease of goods needs no consideration to be binding. 23.dyes the sale of goods priced at more than $500. 24.ayes course of performance. 25.ayes the Convention on Contracts for the International Sale of Goods.

Chapter 14 The Formation of Sales and Lease Contracts
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/sw /blaw /blt/blt6e 10 Quiz Results for B

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yes

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instructor

Quiz Results for B

Your Full Name: Your Email Address: (required) The Email address of an instructor to mail your quiz results to: 1. The Uniform Commercial Code (UCC) is which type of law?

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a. Statutory law. b. Common law. c. Case law. d. Criminal law. 2. The Uniform Commercial Code (UCC) attempts to provide which of the following? a. Guidelines for making common law contracts that deal with the sale of land. b. All international contracts for the sale of securities. c. A consistent and integrated framework of rules to deal with all aspects of commercial transactions. d. A consistent body of rules for dealing with criminal violations of the law that involve either securities or government bonds. 3. The UCC has been adopted: a. by approximately half of the states in the United States. b. by the industrialized states of the Northeast and SW Legal. c. by a few states. d. by all states, in whole or in part. 4. Article 2 of the UCC governs: a. contracts for the sale of land. b. contracts for the sale of goods. c. negotiable instruments. d. bulk sales. 5. Daniel contracts with Mary to provide him with expert legal advice on the sale of his business. Daniel's contract with Mary is governed by: a. Article 2 of the UCC. b. Article 6 of the UCC. c. Article 2A of the UCC. d. the common law. 6. In order for the rules contained in the UCC to apply to a contract for the sale of goods, the goods must: a. be for retail use only. b. consist of some unique personal service. c. be tangible, that is, have physical existence. d. be considered real property. 7. If Jim sells Smith copper that he removed from land that he owns in Colorado, this contract:

a. will be covered by Article 2 of the UCC. b. will be covered by Article 2A of the UCC. c. will be covered by Article 3 of the UCC. d. will be covered by the common law. 8. Now assume that Jim sells Smith the right to remove the copper, not the copper itself. In this case, the contract: a. will be covered by Article 2 of the UCC. b. will be covered by Article 2A of the UCC. c. will be covered by the land provisions of Article 4. d. will be covered by the common law. 9. When merchants are involved in commercial transactions that involve the sale of goods, they are held to certain standards. When casual buyers or sellers are involved: a. they are not held to less rigorous standards than merchants. b. they are held to more rigorous standards than merchants. c. they are treated exactly like merchants. d. their transactions are not covered by the UCC. 10. In the case of Ready Trucking, Inc. v. BP Exploration & Oil Co., the issue had to do with: a. which UCC article--Article 2 or Article 2A--applied to the case. b. whether Ready was a merchant for purposes of the UCC. c. whether the UCC or the common law applied to the circumstances. d. whether fuel was a good or a service. 11. If you sublease your automobile to a friend, this contract is covered by: a. Article 2 of the UCC. b. Article 2A of the UCC. c. Article 6 of the UCC. d. the common law because it involves an intangible good. 12. One who leases goods to another is called: a. a lessee. b. a bailee. c. a lessor. d. a bailor. 13. To qualify as a consumer lease, three elements must exist. Which of the following is not one of those elements? a. The lessor must regularly engage in the business of leasing or selling. b. The total lease payments must be less than a dollar amount set by state statute.

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c. The lessee must lease the goods "primarily for a personal, family, or household purpose." d. The lessee must agree to have a third party finance the lease. 14. Ellen wants to lease a large tent for use in her catering business. Unfortunately, Ellen doesn't have the cash necessary to buy the tent. Instead, she convinces Lyn to buy the tent. Lyn then rents the tent to Ellen. What kind of a lease has been created? a. A finance lease. b. A consumer lease. c. A utility lease. d. A trade usage lease. 15. The effect of open terms on a contract covered by the UCC is that: a. the contract will be void because of the open terms. b. the contract will be valid if it involves the sale of land. c. the contract will be valid if the parties intended to form a contract and there is a reasonable basis for a court to grant a remedy. d. the contract will be valid as long as the parties expressed some interest in negotiating. 16. Suppose that Frank, who is in the business of selling antiques, agrees to sell Keith an antique chest of drawers worth more than $2,500. Keith agrees to buy the chest and signs a contract for the purchase. The price of the chest, however, is left out of the contract. In this case: a. there is a contract as long as the court can determine a reasonable price at the time of delivery. b. there is a contract only if Frank refuses to name a price. c. there is a contract only if Keith is able to produce evidence that Frank defrauded him. d. there is no contract because parties cannot leave the price term out of the contract. 17. Assume that in the previous question, Keith and Frank do set a price of $3,150 for the drawers, but they fail to specify when and where delivery will take place. Under the UCC, what happens? a. Nothing, the open delivery term invalidates the contract. b. Frank must deliver the drawers to his own home, where Keith will pick them up. c. The drawers must be delivered to Keith's home. d. Keith would take delivery of the drawers at Frank's store. 18. Now suppose that Keith doesn't purchase a chest of drawers from Frank, but instead buys "antique silver candlesticks." In their sales contract, Frank and Keith do not specify just how many antique silver candlesticks Keith will purchase. In this case: a. they have a valid contract with an open delivery term. b. they have valid contract with an open price term. c. they probably do not have a contract at all. d. they have an output contract.

19. If Lisa offers to sell all of the white chocolate macadamia nut brownies that she makes to Pam, who needs them to sell in her specialty foods store, Lisa and Pam have created: a. a requirements contract. b. an output contract. c. a void contract. d. an invalid open quantity contract. 20. Pam, who sells specialty foods and kitchen equipment in her store, sends Martin a signed letter offering to sell him, and only him, all her stock of high-quality kitchen knives and says that her offer will remain open for ten days. This is known as: a. an output contract. b. a requirement contract. c. a firm offer. d. a revocable offer. 21. Suppose that Sally offers to sell her sofa to her friend Brian. Sally does not sell furniture for a living. If, after Sally offers the sofa to Brian for $750, Brian says, "I'll take it and I want you to throw in the coffee table along with it," under the UCC, what kind of contract do Sally and Brian have? a. They have no contract because of the mirror image rule. b. They have a contract for the sofa and coffee table. c. They have a contract for the sofa only. d. They have no contract. 22. Under the common law, the rule is that any agreement modifying a contract must be supported by new consideration. Under the UCC: a. an agreement modifying a contract for the sale or lease of goods needs no consideration to be binding. b. this rule is unchanged. c. consideration need not exist for either a contract or a contract modification. d. the concept of consideration has been largely replaced by the concept of title. 23. The UCC has Statute of Frauds provisions governing: a. the sale of land. b. the sale of interests in land, such as rights-of-way. c. the sale of intangible property. d. the sale of goods priced at more than $500. 24. Under the UCC, the terms of a written contract may be explained or supplemented by consistent additional terms or by course of dealing, usage of trade, or: a. course of performance. b. what the offeree said to the offeror during contract negotiations.

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c. what the offeror said to the offeree during contract negotiations. d. course of contractual duty. 25. If Edward, who paints signs for a living and is located in Seattle, Washington, sells a sign worth $2,000 to Claire, who lives in Aix-en-Provence, France, this contract would be governed by: a. the Convention on Contracts for the International Sale of Goods. b. the UCC for the State of Washington. c. the UCC for Canada. d. the common law.
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Question 1

1 out of 1 points Two parties' prior dealing may be considered to resolve an ambiguity in a contract between them. Selected Answer: True Correct Answer: True

Question 2 An oral contract may be enforceable under the UCC. Selected Answer: True Correct Answer: True Question 3

1 out of 1 points

1 out of 1 points Rita, the manager of the State University (SU) soccer team, orally agrees to lease a certain number of specially made SU banners from Top Banners, Inc. This lease is enforceable only if Top has made a substantial start on making the banners and Selected Answer: Correct Answer: the banners are not suitable for others in the course of Top's business. the banners are not suitable for others in the course of Top's business. 1 out of 1 points The rules governing firm offers apply to certain merchants only. Selected Answer: False Correct Answer: False

Question 4

Question 5 Selected Answer: True Correct Answer: True Question 6

1 out of 1 points A lessor is one who sells the right to the possession and use of goods under a lease.

1 out of 1 points US Products Company and Vital Manufacturing, Inc., enter into a contract for the sale of a certain quantity of machine parts. The UCC reads into this contract is the concept of Selected Answer: Correct Answer: good faith. good faith. 0 out of 1 points Kelly offers to buy 1,000 gallons of oil from Jim for fifty cents per gallon. Jim believes Kelly offers $1 per gallon and orally agrees to the sale. When the parties later dispute the price in court, Jim's claim of $1 and Kelly's testimony that she offered fifty cents Selected Answer: Correct Answer: prevents the enforcement of any contract between these parties. supports an enforceable contract for a price of fifty cents per gallon. 1 out of 1 points In effect, the United Nations Convention on Contracts for the International Sale of Goods requires that the terms of the acceptance mirror those of the offer. Selected Answer: True Correct Answer: True

Question 7

Question 8

Question 9

1 out of 1 points Under the UCC, an offer to buy goods can be accepted only by a prompt shipment of the goods. Selected Answer: False Correct Answer: False

Question 10

1 out of 1 points Overseas Corporation, an American firm, orally agrees to sell six large freezers to Pisa Pizza, Ltd., in Italy. Overseas fails to deliver. Under the CISG, Pisa Pizza can

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Selected Answer: Correct Answer: Question 11

enforce the agreement. enforce the agreement. 1 out of 1 points

A contract for the sale of stock is subject to Article 2. Selected Answer: False Correct Answer: False Question 12 1 out of 1 points A court can refuse to enforce a contract that the court deems to have been unconscionable at the time it was made. Selected Answer: True Correct Answer: True Question 13 0 out of 1 points Fine Coffee Company agrees to buy an unspecified quantity of coffee beans from Global AgriCorp. Global breaches the contract. Fine can most likely Selected Answer: Correct Answer: Question 14 enforce the agreement to the extent of a reasonable quantity. not enforce the agreement. 1 out of 1 points Tasty Pastries, Inc., and other bakers refer to a "baker's dozen" as consisting of a collection of thirteen baked goods. This is an example of Selected Answer: Correct Answer: Question 15 usage of trade. usage of trade. 0 out of 1 points Roy's Chick'n Shack orders chicken from Standard Food Supplier, but Standard does not deliver. Roy's will probably be unable to enforce the agreement if the parties Selected Answer: did not limit the duration of the deal.

Correct Answer: Question 16

did not specify a quantity term. 1 out of 1 points

ABC Motors, Inc., sells the right to the possession and use of a motor vehicle under a lease. As defined in the UCC, ABC is Selected Answer: Correct Answer: Question 17 a lessor. a lessor. 1 out of 1 points When an offer does not specify a means of acceptance, it can be accepted by any means reasonable under the circumstances. Selected Answer: True Correct Answer: True Question 18 Article 2A covers leases, but not subleases, of goods. Selected Answer: False Correct Answer: False Question 19 The UCC imposes a good faith limitation on output contracts. Selected Answer: True Correct Answer: True Question 20 A lease agreement is the lessor and lessee's bargain. Selected Answer: True Correct Answer: True 1 out of 1 points 1 out of 1 points 1 out of 1 points

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