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9. (a) If the specified means of delivery becomes impractical, a seller has the right to substitute a different means of delivery. The truck strike made shipment by truck impractical and Yost’s substitution of delivery by rail was permissible. Answer (b) is incorrect because payment is not dependent on passage of title. If the goods were nonconforming title would pass to the buyer upon delivery, but the buyer would not be obligated to pay. Answers (c) and (d) are incorrect because the buyer may not return the goods when seller has made a proper substituted delivery.
10. (b) A buyer has the right to inspect prior to payment, except in a C.O.D. sale. Answer (a) is incorrect because the place of delivery if none is stated is the seller’s place of business. Answer (c) is incorrect because payment may be made by personal check. Answer (d) is incorrect because the seller is entitled to payment upon delivery, unless seller specifically agreed to credit terms.
11. (c) A buyer may always reject nonconforming goods. In a C.O.D. sale the buyer must pay before the buyer receives the goods or inspects, thus (a), (b) and (d) are incorrect.
12. (b) A seller has the right to cure, the right to correct nonconforming deliveries. If the seller can cure on time, the seller need only notify the buyer. Kirk can cure its nonconforming delivery by notifying Nix it will deliver the correct freezer by June 23. Answer (a) is incorrect because Kirk must notify Nix of its intent to cure.
Answer (c) is incorrect because a buyer may reject nonconforming deliveries. Answer (d) is incorrect because Kirk has the right to cure.
13. (a) UCC Sales requires all parties to act in good faith. Answer (b) is incorrect because merchants are held to a higher standard in some cases. Answer (c) is incorrect because goods may be sold for less than $500. Answer (d) is incorrect because provisions of the UCC may be disclaimed. For example, implied warranties may be disclaimed if the disclaimer is conspicuous.
14. (d) An anticipatory repudiation occurs when one side states they will not perform before the time of performance. The injured party can sue immediately or wait until the time of performance and then sue.
Wax told Noll prior to the time of performance that Wax would not perform. Thus, Noll can sue immediately and need not wait until June 3, making (d) correct and (b) and (c) incorrect. Answer (a) is incorrect because Wax may retract its repudiation as long as Noll hasn’t canceled the contract or materially changed position.
15. (d) A buyer is released from liability if the seller refuses to give written assurance of performance when reasonably demanded. Answer (a) is incorrect because if risk of loss is with the buyer, the buyer is liable for all damage and would not be released. Answer (b) is incorrect because the seller may substitute a different means of delivery if the specified means becomes impractical. Answer (c) is incorrect because an anticipatory breach can be retracted as long as the injured party has not canceled the contract or materially changed position.
16. (c) The Statute of Frauds generally requires that the writing contain a quantity. It does not require the designation of buyer and seller, the delivery terms or the warranties to be made. Thus (a), (b) and (d) are incorrect.
17. (d) A writing is not required to enforce a contract for more than $500 if the party to be charged admits in court that they made the contract. Answers (a) and (b) are incorrect because part receipt and part payment only allow the contract to be enforced for the amount received or the amount paid for and the question required the contract to be enforced in its entirety. Answer (c) is incorrect because this contract was for more than $500 and the Statute of Frauds applies.
18. (a) A writing is not required to enforce a contract of more than $500 if a merchant fails to object within ten days to a confirming letter sent by another merchant. Since Webstar and Northco are both merchants and Webstar failed to object to the purchase order sent by Northco, a writing signed by Webstar was not required under the Statute of Frauds. Answer (b) is incorrect because UCC Sales does not require that only the buyer sign. Usually only one party need sign (whether buyer or seller), but it can only be enforced against the one who signed. The failure of a merchant to object to a written confirmation is an exception to the rule that it can only be enforced against the one who signed and is the reason (c) and (d) are also incorrect.
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19. (d) The warranty of merchantability is implied by law if the seller is a merchant. One who ordinarily sells the product purchased would be a merchant. Since merchantability is an implied warranty, no written or oral words are needed for it to arise making (a) incorrect. Answer (b) is incorrect because the implied warranty of fitness for a particular purpose arises when the buyer relies on seller to select goods, not the warranty of merchantability.
Answer (c) is incorrect because merchantability, like all implied warranties, can be disclaimed.
20. (a) The implied warranty of merchantability arises if the seller is a merchant. Answers (b), (c) and (d) are incorrect because merchantability does not require a showing of negligence, privity or strict liability.
21. (a) Under UCC Sales a seller’s prompt shipment of goods is a valid acceptance, even if the goods are nonconforming. Ram’s nonconforming shipment was both a valid acceptance and a breach. Answer (b) is incorrect because it was a valid acceptance and not a counteroffer. Answer (c) is incorrect because the acceptance does not have to be in writing. Answer (d) is incorrect because a prompt shipment of nonconforming goods is both a valid acceptance and a breach.
22. (c) Since Ram is a merchant, the implied warranty of merchantability arises in this sale. Since all sellers impliedly promise good title, the warranty of title arises. For the implied warranty of fitness for a particular purpose to arise, the buyer must rely on the seller to select suitable goods and Handy did not rely on Ram to select suitable goods. Thus, the only correct answer is (c).
23. (d) Under UCC Sales only two implied warranties require the seller to be a merchant: the warranty of merchantability and the warranty against infringements. Fitness for a particular purpose does not require that the seller be a merchant. Thus, only answer (d) is correct.
24. (b) For the implied warranty of fitness for a particular purpose to arise, the buyer must rely on the seller to select suitable goods and the seller must be aware of this. The warranty is implied by law and requires no special words, either written or oral. Thus, only answer (b) can be correct.
25. (c) For the implied warranty of fitness for a particular purpose to arise, the buyer must rely on the seller to select suitable goods. Rita relied on Wally’s assurance that this saw was capable of cutting the trees she described. Answers (a) and (b) are incorrect because merchantability requires goods to be of fair average quality and fit for ordinary uses. This warranty requires the seller be a merchant and Wally is not a merchant. Answer (d) is incorrect because fitness for a particular purpose is a warranty implied by law and no oral or written words are needed to create it.
26. (a) All sellers impliedly warrant good title. To disclaim this warranty the seller must specifically make the buyer aware that there is no guarantee of title. The warranty cannot be disclaimed by general language such as a disclaimer of “any and all warranties” or an “as is” sale. Ocean breached the warranty because Ocean did not have good title. Answers (b) is incorrect because any seller (including a merchant) can disclaim title. Answer (c) is incorrect because a disclaimer of “any and all warranties” is too general to effectively disclaim the warranty of title.
Answer (d) is incorrect because Vick was required to return the boat to the true owner. This does not negate the breach of the warranty of title.
27. (b) One of the three implied warranties of title is the warranty against encumbrances. This warranty impliedly promises no unstated liens, attachments or encumbrances. Of the three tile warranties, only the warranty against infringements is made solely by merchants. Answer (a) is incorrect because title can be disclaimed if specific language is used. Answer (c) is incorrect because the warranties of title are implied by law and require no oral or written words. Answer (d) is incorrect because two of the warranties of title are made by all sellers, not just merchants.
28. (a) The warranty of merchantability may be disclaimed by either an “as is” sale or by specifically stating that there is no merchantability. The disclaimer may be oral. Answer (b) is incorrect because only the seller (not the buyer) need be a merchant. Answer (c) is incorrect because merchantability warrants that the goods are fit for normal uses, not for all uses. Answer (d) is incorrect because no implied warranty need be part of the basis of the bargain. Only an express warranty must be part of the basis of the bargain.
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29. (c) To disclaim title the seller must use specific language to make the buyer aware that there is no guarantee of title. A statement that the seller is only selling what right or title it has would be specific enough.
Answer (a) is incorrect because title can be disclaimed without a writing. Answer (b) is incorrect because both merchants and non-merchants can disclaim title if they use the right language. Answer (d) is incorrect because title cannot be disclaimed by general language as in an “as is” disclaimer.
30. (d) Liability for personal injury cannot be disclaimed. Answer (a) is incorrect because under UCC Sales privity is not a bar to recovery if the injured party was one reasonably affected by the product, such as Oak’s spouse. Answer (b) is incorrect because notification within one week was certainly proper notice. Answer (c) is incorrect because the disclaimer had no effect on Larch’s liability for personal injuries.
31. (a) A seller may be sued for breach of an express warranty for any material misrepresentation of fact. The misrepresentation must be part of the basis of the bargain. The warranty of fitness for a particular purpose requires that the buyer rely on the seller to select suitable goods and is an implied warranty, not an express warranty. Thus, the only correct answer is (a).
32. (a) A seller may be sued for breach of an express warranty for any material misrepresentation of fact.
The misrepresentation must be part of the basis of the bargain. Answer (b) is incorrect because neither the seller nor the buyer needs to be a merchant for an express warranty to arise. Answer (c) is incorrect because an express warranty can be oral. Answer (d) is incorrect because an express warranty can be created by a seller’s material misrepresentation of fact even if the seller did not intend to create the warranty.
33. (d) An express warranty is created by a seller’s material misrepresentation of fact. Sale of goods by a description, sample or model also creates an express warranty that the goods will conform to the description sample or model.
34. (b) Neither title nor risk of loss can pass until existing goods have been identified to the contract (marked, tagged or in some manner identified as goods for a specific buyer). Answers (a), (c) and (d) are incorrect because title and risk of loss can pass prior to tender of delivery, acceptance or payment. For example, in a shipment contract where the buyer has 30 days to pay after delivery, title and risk of loss would pass when the goods were delivered to the carrier (even though no tender of delivery has been made and the goods have been neither accepted nor paid for).
35. (b) Once goods have been identified, the most important factor in determining when risk of loss will pass is the agreement of the parties. Answer (a) is incorrect because the type of carrier has no effect on when risk of loss passes. Answer (c) is incorrect because title may pass at a different time than risk of loss (e.g. with no transportation and no documents of title involved, title and risk of loss pass at different times). Answer (d) is incorrect because how the goods were lost will not usually affect when risk of loss passes.
36. (a) There are two types of contracts involving transportation by carrier: shipment contracts and destination contracts. In a shipment contract risk of loss and title pass when the seller delivers goods to the carrier to go to buyer. Thus answer (a) is correct. Answers (b), (c) and (d) are incorrect because risk of loss does not pass when the goods are tendered to the buyer, when the contract is made or when the goods are identified.
37. (d) With nonconforming goods risk of loss is always on the seller, even in a shipment contract. Thus (d) is correct and (a) is incorrect. Answer (b) is incorrect because risk of loss for nonconforming goods is always on the seller. Risk of loss would not remain with the buyer, Deck, for any time. Answer (c) is incorrect because with conforming goods risk of loss in a shipment contract passes when the seller delivers the goods to a carrier, not when they are delivered to the buyer.
38. (a) When no transportation by carrier or documents of title are involved, risk of loss with nonmerchants passes on tender of delivery. Wool is not a merchant and Wool tendered delivery. Answer (b) is incorrect because title will pass at the time the contract is made, but risk of loss will only pass with tender of delivery. Answers (c) and (d) are incorrect because they state risk of loss remained with Wool.
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39. (d) When no transportation by a carrier or documents of title are involved, risk of loss with merchant sellers only passes when the buyer takes possession of the goods. Risk of loss does not pass on tender of delivery (as it does with nonmerchants) and use of the seller’s truck will not cause risk of loss to pass. Thus, only answer (d) is correct.
40. (c) With a shipment contract, title and risk of loss pass when goods are delivered to the carrier to go to buyer. With destination contracts, title and risk of loss only pass when the goods reach the destination and are tendered to buyer. Although it is unclear whether a shipment or destination contract is present, the goods were destroyed in the seller’s warehouse before they ever got to the carrier. Thus, whether a shipment or destination contract, title and risk of loss are on the seller. Answers (b) and (d) are incorrect because Star, the buyer, does not have title. A seller has an insurable interest while the seller has a risk of economic loss. A buyer has an insurable interest when goods are identified. Since the seller had risk of economic loss and the goods were identified, both seller and buyer have an insurable interest. Answer (c) is correct and (a) is incorrect because the seller has both title and an insurable interest.
41. (d) With a shipment contract, title and risk of loss pass when the goods are delivered to a carrier to go to the buyer. The term F.O.B. seller’s loading dock would make this a shipment contract and risk of loss passed when the goods were delivered to the carrier. Answers (a) and (b) are incorrect because the risk of loss is not on Union, the seller. Answer (c) is incorrect because title does not determine who has risk of loss.
42. (c) With a shipment contract, title and risk of loss pass when goods are delivered to the carrier to go to buyer. Identifying the goods or placing them on the loading dock are not enough to pass title and risk of loss. They must be delivered to the carrier. Answer (d) is incorrect because requiring the goods to reach the buyer’s loading dock would make the contract a destination contract, not a shipment contract.
43. (a) With a shipment contract, title and risk of loss pass when the goods are delivered to a carrier to go to the buyer. The term F.O.B. seller’s loading dock would make this a shipment contract and risk of loss passed when the goods were delivered to the carrier. Answers (b) and (c) are incorrect because the risk of loss is not on Wizard, the seller. Answer (d) is incorrect because title does not determine who has risk of loss.
44. (a) With a shipment contract, title and risk of loss pass when the goods are delivered to a carrier to go to the buyer. The term F.O.B. seller’s loading dock would make this a shipment contract and title passed when the goods were delivered to the carrier. With nonconforming goods title passes to the buyer when seller completes the delivery requirements, in this case delivers the goods to the carrier. Answer (b) is incorrect because a buyer can revoke an acceptance for hidden defects a reasonable inspection would not show. Answer (c) is incorrect because F.O.B. fixes the seller’s place of last responsibility and this was F.O.B. seller’s loading dock. In a shipment contract, the buyer must pay the cost of freight. Answer (d) is incorrect because the buyer can reject for failure to notify in a shipment contract only if a material delay or loss resulted from the failure to notify.
45. (c) Under UCC Sales a firm offer is irrevocable without consideration if made by a merchant, in writing and guaranteed it would be held open. Lace was a merchant, the offer was in writing and it did guarantee that it would be held open until June 1. Thus, the offer could not be revoked prior to June 1, making (c) correct and (b) incorrect. Answer (a) is incorrect because there was no acceptance on May 2 and a contract requires acceptance.
Answer (d) is incorrect because of the mailbox rule. When the offeree uses a reasonable means of communication, the acceptance is valid when sent.
46. (c) Risk of loss in a destination contract passes when the goods reach the destination and are tendered to the buyer. F.O.B. buyer’s warehouse is a destination contract. Answers (a), (b) and (d) state that risk of loss will pass at some other time and are incorrect.
47. (d) With nonconforming goods, title passes to the buyer when the seller completes his delivery requirements. Upon rejection, title reverts back to the seller. Since the goods were rejected by Parco, title reverted to Lace at that time. All other answers indicate title passing at some other time and are therefore incorrect.
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48. (c) In a sale on approval, title and risk of loss only pass when the buyer approves or accepts. Answer (a) is incorrect because title and risk of loss pass upon approval whether the parties are merchants or not. Answer (b) is incorrect because the buyer’s purpose in purchasing the goods will not change when title and risk of loss pass in a sale on approval. If it was unclear whether a sale on approval or sale or return were involved, it would be considered a sale or return if purchased primarily for resale and not a sale on approval Answer (d) is incorrect because title does not pass on delivery.
49. (c) Shipment of nonconforming goods is a breach by the seller, giving the buyer the right to reject.
Answers (a), (b) and (d) are incorrect because shipment of nonconforming goods does not cancel the contract. Even if Ajax had not accepted the order in writing, their prompt shipment of nonconforming goods would be both a valid acceptance and a breach. It would create a contract and would not be a counteroffer.
50. (b) Neither the buyer nor the seller may usually collect punitive damages. Answer (a) is incorrect because specific performance may be used if the goods are unique or the buyer cannot reasonably cover. Answer (c) is incorrect because a buyer may cover, purchase suitable goods elsewhere and charge seller for any loss, when a seller breaches. Answer (d) is incorrect because a buyer may recover goods from a seller as long as the goods have been identified.
51. (b) Neither sellers nor buyers may usually collect punitive damages. Answers (a), (c) and (d) state that a buyer may collect punitive damages and are therefore incorrect. A buyer may rescind the contract and may also demand assurance of performance.
52. (d) The buyer can use specific performance or replevin when the seller breaches if the goods are unique or the buyer is unable to cover. Eagle was unable to cover within a reasonable time and may use specific performance.
Answers (a) and (c) are incorrect because money damages and replevin are not the only remedy available. Specific performance is available. Answer (b) is incorrect because Eagle was not required to pay due to seller’s breach. This breach gave Eagle the right of specific performance and replevin.
53. (d) If the buyer breaches, the seller may resell, rescind and sue the buyer for any losses to specifically include lost profits, reasonable expenses and storage fees. A seller may collect the full contract price when cannot be resold for any price. Taso can recover the purchase price ($120,000) because the compressor cannot be resold for any price. Taso can also recover the storage fees ($2,000). Thus, only (d) is correct.
54. (a) If the buyer breaches, a seller may resell, rescind and sue the buyer for any loss to specifically include storage fees. Thus a seller may cancel the agreement (rescind) and also sue to recover damages. Only answer (a) is correct.
55. (a) If a buyer breaches, a seller may use any or all of the following remedies: sue to recover damages, resell the goods, rescind the contract, and stop delivery of the goods. Only answer (a) reflects that the seller may resell and stop a carrier from delivering goods upon a buyer’s breach
56. (a) If a seller in a credit sale discovers that the buyer is insolvent, the seller may stop delivery and demand cash. If the goods have already been delivered, the seller may reclaim them within ten days. If the buyer misrepresented solvency, the seller may reclaim them at any time while still in the buyer’s possession. Bold may reclaim the computers, even though more than ten days have passed, because of the buyer’s misrepresentation of solvency. Thus, (a) is correct and (c) and (d) are incorrect. Answer (b) is incorrect because if Anker had passed the goods on to a good faith purchaser for value, Bold could not reclaim them from the purchaser. Although Anker committed fraud, one who gets title by fraud can pass good title to an innocent purchaser.
57. (b) If a seller in a credit sale discovers that the buyer is insolvent, the seller may stop delivery and demand cash. Anker’s insolvency gives Bold the right to stop delivery and demand cash. Answer (a) is incorrect because the contract between Bold and Anker is not void. Anker’s insolvency merely gives the seller the right to turn a credit sale into a cash sale. Answers (c) and (d) are incorrect because Bold does not have to deliver the goods.
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58. (d) To establish strict liability one must show a defective product, that caused injury, that was unreasonably dangerous, that seller was engaged in that business and that it reached the user without substantial change in condition. Privity and negligence are irrelevant. Answer (a) is incorrect because lack of due care is negligence and negligence is irrelevant. Answer (b) is incorrect because privity is irrelevant. Answer (c) is incorrect because although the product must be defective, the defect may involve something other than a design defect (i.e. defectively manufactured).
59. (d) To establish strict liability one must show a defective product, that caused injury, that was unreasonably dangerous, that seller was engaged in that business and that it reached the user without substantial change in condition. Privity and negligence are irrelevant. Since negligence is irrelevant, (d) is correct and (a) is incorrect. Answer (b) is incorrect because sellers of defective products are liable without regard to their fault (strict liability) and following the custom of the industry would be no defense. Answer (c) is incorrect because privity is irrelevant.
60. (b) To establish strict liability one must show a defective product, that caused injury, that was unreasonably dangerous, that seller was engaged in that business and that it reached the user without substantial change in condition. Privity and negligence are irrelevant, thus (b) is correct and (a) is incorrect.
Answer (c) is incorrect because most jurisdictions have adopted strict liability. Answer (d) is incorrect because strict liability is liability without regard to fault.
61. (d) To establish strict liability one must show a defective product, that caused injury, that was unreasonably dangerous, that seller was engaged in that business and that it reached the user without substantial change in condition. Thus, the seller must have sold the product in a defective condition. There is no requirement that the seller be aware of the defect, thus (a) is incorrect. Answer (b) is incorrect because any seller involved in the sale of the product will be liable, not just the seller who sold to the injured party. Answer (c) is incorrect because failure to use due care is negligence and negligence is irrelevant in a strict liability suit.
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Chapter Two: Sales
Other Objective Format Answers
ANSWER 1
1. (A) The contract stated goods were to be shipped F.O.B. sellers loading dock which is a shipment contract. The contract is not a destination or consignment contract.
2. (C) With nonconforming goods, risk of loss is always on the seller. The goods were nonconforming because Grand shipped 15 standard cabinets. Answers (a) and (b) are incorrect because they state risk of loss passed to Axle.
3. (B) Grand’s shipment of only 85 custom cabinets and 15 standard cabinets instead of the 100 custom cabinets required by the contract constituted a breach of contract. Axle may rescind the contract and sue for money damages for this breach, thus making the contract voidable. Answer (a) is incorrect because lack of a delivery date does not make a contract invalid. If no time of delivery is specified, the goods must be delivered within a reasonable time.
Answer (c) is incorrect because destruction of goods does not render a sales contract void. Destruction of the goods will cause one of the parties (in this case, Grand) to bear the risk of loss.
4. (A) Grand’s shipment of only 85 custom cabinets and 15 standard cabinets instead of the 100 custom cabinets required by the contract constituted a breach of contract. Answer (b) is incorrect because the time of the seller’s breach does not depend on the buyer’s rejection. The seller’s breach occurred when the seller shipped goods that did not conform to the contract. Answer (c) is incorrect because shipment of nonconforming goods is a valid acceptance and a breach, not a counteroffer.
5. (A) Specific performance is available as a remedy to a buyer when goods are unique or if the buyer cannot reasonably cover. These were unique, custom designed cabinets. Answer (b) is incorrect because a buyer is not required to cover. Although cover is a remedy available to a buyer when a seller breaches, it is not mandatory.
Answer (c) is incorrect because punitive damages are rarely awarded in contracts or sales.
ANSWER 2
a. Mason's claim, that the risk of loss for the tuna belonged to Angler, is correct. Because Angler shipped the wrong grade of tuna, risk of loss remained with Angler until either it cured by shipping conforming goods to Mason or Mason elected to accept the tuna despite the fact that it was nonconforming.
b. Classic's claim, that it was not obligated to return the peaches to Angler, is incorrect. Classic is a merchant because it deals with the type of goods that is the subject of its contract with Angler. Therefore, Classic has an obligation, on rejecting goods, to follow any reasonable instructions from Angler. Angler's request that Classic ship the peaches back to Angler at Angler's expense is a reasonable instruction.
c. Regal's claim, that it is not obligated to purchase the hamburger meat, is incorrect. Because the price of the hamburger meat exceeds $500, the Uniform Commercial Code (UCC) Statute of Frauds applies and the contract between Angler and Regal must be evidenced by a writing and:
• Indicate that a contract for sale has been made;
• Be signed by the party against whom enforcement is sought; and
• Specify the quantity of goods sold.
Regal's correspondence to Angler, dated October 29, satisfies the UCC Statute of Frauds, so the contract will be enforceable against Regal.
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ANSWER 3
a. 1. Vesta Electronics would bear the risk of loss for the 18" speakers destroyed by the fire on its loading dock.
Even though Vesta identified and segregated the goods on its loading dock, the risk of loss remained with the seller because the contract's shipping terms "F.O.B. seller's loading dock" made it a shipping contract. Thus, risk of loss does not pass to Zap until the goods are delivered to the carrier.
2. The risk of loss for the 16" speakers also remained with Vesta. Even though the goods were delivered to the common carrier, risk of loss did not pass because Vesta shipped nonconforming goods.
b. 1. Zap may validly reject the 16" speakers because any buyer may reject nonconforming goods. To avoid potential liability, the rejection must be made within a reasonable time of receipt and must be communicated to the seller.
2. Zap may also validly accept some of the 18" speakers. A buyer may accept none, all, or any commercial unit of a shipment when nonconforming goods are shipped.
c. To be entitled to damages, Zap must comply with the UCC by notifying Vesta of the rejection of the goods within a reasonable time; acting in good faith with respect to the rejected goods by following any reasonable instructions of the seller; and giving Vesta the opportunity to cure until the contract time of performance expires.
ANSWER 4
a. Rapid's claim is incorrect. Both Debco and Rapid are merchants under the UCC because they both deal in the type of goods involved in the transaction (computers).
The UCC provides that a confirmation satisfies the Statute of Frauds, if an oral contract between merchants is:
• Confirmed in writing within a reasonable period of time, and
• The confirmation is signed by the party sending it and received by the other party.
Both parties are bound even though the party receiving the confirmation fails to sign it. This is correct unless the party receiving the confirmation submits a written objection within 10 days of receipt. Rapid will be bound even though it did not sign the confirmation because no written objection was made.
b. Debco's first claim, that its October 25 correspondence prevented the formation of a contract, is incorrect.
Debco's October 12 purchase order will be regarded as a firm offer under the UCC because:
• Debco is a merchant.
• The purchase order is in writing and signed.
• The purchase order states that it will not be withdrawn for the time specified.
Because Debco's October 12 purchase order is considered a firm offer, Debco cannot revoke it, and its October 25 attempt to do so in ineffective.
Debco's second claim, that TMI's October 31 correspondence is not an effective acceptance because it was not received until November 3, is incorrect. An acceptance of an offer is effective when dispatched (in this case, when mailed), provided that an appropriate mode of communication is used. The UCC provides that an offer shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances.
In this case, Debco made its offer by mail, which, if adequately addressed with proper postage affixed, would be considered a reasonable manner and medium for acceptance. As a result, TMI's acceptance was effective when mailed on October 31.
Debco's third claim, that TMI's acceptance is not effective because it added payment terms to Debco's offer, is also incorrect. The UCC provides that a definite and timely expression of acceptance of an offer will form a contract, even if the terms of the acceptance are different from those in the offer, unless acceptance is expressly made conditional on accepting the different terms. Therefore, TMI's October 31 correspondence, which expressly stated that TMI would ship the computers ordered by Debco, was an effective acceptance, and a contract was formed despite the fact that TMI added payment terms.
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ANSWER 5
a. Under the UCC Sales Article, the contract between Pharo and Secure creates the following implied warranties:
x Implied warranty of merchantability;
x Implied warranty of fitness for a particular purpose;
x Implied warranty of title.
The implied warranty of merchantability requires the tug to be merchantable; that is, fit for the ordinary purpose intended. It is probable that the tug was fit for such ordinary purposes and, therefore, the implied warranty of merchantability was not breached.
The implied warranty of fitness for a particular purpose requires that the tug be fit for the particular purpose for which it was purchased. To show that the implied warranty of fitness for a particular purpose is present as a result of the contract, Pharo must show that:
x Secure knew of the particular needs of Pharo;
x Pharo relied on Secure to select a suitable tug;
x Secure knew that Pharo was relying on Secure to select a tug suitable for Pharo's needs.
The implied warranty of fitness for a particular purpose has been breached because the tug was not suitable for Pharo's particular needs (i.e., to move airplanes weighing up to 10,000 pounds).
The implied warranty of title requires that:
x Secure have good title;
x The transfer to Pharo would be rightful;
x The tug would be delivered free from any security interest or other lien.
The implied warranty of title has been breached because Maco was the rightful owner.
b. Maco will not be entitled to recover the tug from Pharo because:
x Maco had entrusted the tug to Secure, which deals in similar goods;
x That, as a result of such entrustment, Secure had the power to transfer Maco's rights to the tug to a buyer in the ordinary course of business;
x Pharo was a buyer in the ordinary course of business because Pharo purchased the tug in good faith and without knowledge of Maco's ownership interest.
ANSWER 6
a. Negligence. In order to establish a cause of action based on negligence Barr must establish the following elements:
x That the defendant owed a legal duty to the plaintiff.
x That the defendant breached that duty.
x That the plaintiff sustained an actual loss or damages.
x That the breach of duty was the proximate cause of the plaintiff's actual loss or damages.
In determining if negligence is present the court will consider whether the defendant acted as a reasonably prudent person under the circumstances. Included in the reasonably prudent person test is whether the risk of harm was foreseeable.
Breach of Warranty. Since the sale of goods (the fork-lift) is involved in the contract, the UCC Sales Article applies. Because the seller would be regarded as a merchant, an implied warranty of merchantability is created. In order to establish a breach of this warranty, the plaintiff (Barr) must show:
x That the fork-lift was not fit for the ordinary purposes intended and x That as a result of the breach of warranty, the plaintiff sustained a loss.
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Strict Liability in Tort. Generally, the elements necessary to establish a cause of action based on strict liability in tort are as follows:
x That the product was in defective condition when it left the possession or control of the seller.
x That the product was unreasonably dangerous to the consumer or user.
x That the cause of the consumer's or user's injury was the defect.
x That the seller engaged in the business of selling such a product.
x That the product was one which the seller expected to and did reach the consumer or user without substantial changes in the condition in which it was sold.
Proof of fault is not a requirement to establish a cause of action in strict liability.
b. A proper disclaimer will permit the seller to exclude the implied warranty of merchantability. Under the facts, the disclaimer would appear to be invalid since a written disclaimer of the implied warranty of merchantability must be conspicuous and, arguably, the language in the contract is not acceptable under the UCC. In this case the disclaimer was in fine print and therefore not conspicuous. In addition, the disclaimer may be considered unconscionable since the contract was standardized and no bargaining of the terms of the contract was permitted. It should be pointed out that although consequential damages may be limited or excluded, in the case of consumer goods limitation of consequential damages for personal injuries is prima facie unconscionable. However, since the facts do not relate to consumer goods, such limitation of damages is not prima facie unconscionable but may be proved to be unconscionable.
ANSWER 7
Magic's first assertion, that the original contract between Starr and itself is not enforceable because of the statute of frauds, is incorrect. The sale of computer equipment is a transaction in goods and thus is governed by the UCC Sales Article. This Article provides that a contract for the sale of goods for the price of $500 or more is not enforceable unless there is some writing sufficient to indicate that a contract for sale has been made between the parties which is signed by the party against whom enforcement is sought. Since the sales price is $18,000, the statute of frauds applies. Magic's execution of the written contract will satisfy the statute of frauds since Magic is the party against whom enforcement of the contract is being sought.
Magic's second assertion, that the oral agreement to change the price of the equipment is not enforceable because the agreement lacked consideration and failed to satisfy the statute of frauds, is incorrect. Under the UCC Sales Article, an agreement to modify a contract for the sale of goods needs no consideration to be binding. However, the modification must meet the test of good faith, which is defined under the UCC as "honesty in fact in the conduct or transaction concerned and the observance of reasonable commercial standards of fair dealing in the trade." Based upon the facts, it appears that a shift in the market that will result in Starr bearing a loss on the sale to Magic will satisfy the requirement of good faith. In addition, the agreement modifying the sales price must meet the requirements of the statute of frauds if the contract, as modified, is within its provisions. Under the facts, the contract as modified by Magic and Starr, falls within the provisions of the statute of frauds and thus the statute of frauds must be satisfied. Magic's oral agreement to the modification is not sufficient to satisfy the statute of frauds.
However, the statute of frauds will be satisfied if: both parties are merchants; a writing in confirmation of the agreement which is sufficient against the sender is received; the recipient receives the writing within a reasonable time; the recipient has reason to know the contents of the writing; and, the recipient fails to give written notice of objection to the contents of the writing within ten days after it is received. As the facts clearly indicate, the mailing of the signed letter by Starr to Magic on May 17 satisfied the aforementioned requirements and thus the modification agreement is enforceable.
Magic's third assertion that Starr is not entitled to recover the full sales price for the equipment is incorrect. The UCC provides that a seller may recover the price of goods identified to a contract and in the possession of the seller if the seller is unable after reasonable effort to resell them at a reasonable price or the circumstances reasonably indicate that such effort will be unavailing. Under the facts of the case at hand, Starr is entitled to recover the full sales price of $20,000 because the equipment could not be resold for any price.