Commercial Law- Mtima Qustions And
Answers
A seller agrees to sell a television set to a buyer for $1,000. After the deal was
completed, the buyer discovers that other sellers in the area were selling the same
television set for $750. The buyer claims that he is entitled to rescind the contract
because under § 2-305 the price must be reasonable. Is the buyer correct?
A. Yes, because the purpose of the statute is to ensure that prices are reasonable.B.
Yes, because the market price is the reasonable price and this price was above market.
C. No, because the reasonable price rule only applies when nothing is said as to
price.D. No, because freedom of contract allows a buyer to agree to pay an
unreasonable price. - Correct Answer - Analysis. A careful reading of the statute
indicates that "the price is a reasonable price" only if "nothing is said as to price." Here,
there was an agreed-upon price, so the correct response is C. Although D is a true
statement, it is not responsive to the call of the question. The question asked whether
the buyer was correct in claiming that the price had to be reasonable under § 2-305.
In a jurisdiction that applies Article 2 to the sale of electricity, an electric co-op in a small
city agreed to buy "all the electricity it requires" from a supplier at a fixed price. When
the market price of electricity went up in a nearby state, the co-op ordered enough
electricity at the contract price so that it could satisfy its customers' needs and ship
surplus electricity to that state. Is a court likely to find that the co-op was in breach of its
agreement?
A. No, because freedom of contract is an important principle in the Code.
B. No, because no limit on requirements was stated in the contract.
C. Yes, because it could only order the same amount it had ordered in previous years.
D. Yes, because a reasonable measure of its requirements was the needs of its
customers. - Correct Answer - Analysis. The requirements of the buyer would probably
be objectively measured by the amount needed to satisfy its customers. This is not
exactly the same thing stated in response C. Although prior purchases can represent an
objective measure of requirements, in this case the needs of the customers is probably
a better measure. It appears here that the co-op's purchase of additional electricity was
not driven by the needs of customers but was an attempt to take advantage of the
market, which was not a good faith variation from its prior requirements. The best
response is D.
A department store runs an ad in a local newspaper that states, "Black lapin stoles.
$100. This sale price is effective for the next 10 days." The department store then
decides to stop this sale and the next day it runs an ad in the newspaper that states,
"Effective at the close of business today, black lapin stoles are no longer available at the
,sale price. We regret any inconvenience this may cause." Is the sale price for the stoles
still effective the next day?
A. Yes, because it was a merchant's firm offer that is not revocable during the time
stated.
B. Yes, because the method of revocation through the newspaper was not effective.
C. No, because the newspaper advertisement was not an offer.
D. No, because the offer was not a firm offer because it was made to the general public,
not to merchants. - Correct Answer - This is a bit tricky — you might even say it was a
trick question.
When we work through the elements of § 2-205 to see if they are satisfied, the
first element is that there is "an offer." You may recall from Contracts (and I
gave you a hint by using a hypothetical involving the sale of black lapin stoles,
the subject matter of the case of Lefkowitz v. Great Minneapolis Surplus Store,
86 N.W.2d 689 (Minn. 1957)) that an advertisement is generally not an offer,
and this one does not have the earmarks of an offer. Therefore, if it isn't an offer,
it cannot be a firm offer, so the correct response is C. Note that response B is not
correct because in general an offer can be effectively revoked in a medium
similar to the medium in which it was made. Response D is not correct because,
although a firm offer can only be made by a merchant, it does not have to be
made to a merchant.
A seller of electrical supplies wrote on stationery that had his letterhead at the top, "I am
offering 100-watt Luminex bulbs for 10 cents each while my supplies last." Without
signing the letter, he sent it to his best customers. Is this a § 2-205 firm offer?
A. Yes, but it will remain open for no more than three months.
B. Yes, and it will remain open until all the lightbulbs are sold.
C. No, because it is not made in a signed writing.
D. No, because it does not state that it will remain open for a time stated. - Correct
Answer - Analysis. This is clearly an offer by a merchant to sell goods. Is it made in a
signed writing? The definition of writing in § 1-201(b)(46) provides that "
'[w]riting' includes printing, typewriting, or any other intentional reduction to
tangible form." It would seem that the seller's printed stationery would
constitute a writing. And the definition of signed in § 1-201(b)(37) states that it
"includes any symbol executed or adopted with present intention to adopt or
"accept a writing." It would seem that the seller's letterhead was adopted with the
intention to indicate that the offer came from him. The Official Comment to that
section elaborates:
The symbol may be printed, stamped or written; it may be by initials or by
thumbprint. It may be on any part of the document and in appropriate cases
may be found in a billhead or letterhead. No catalog of possible situations can
be complete and the court must use common sense and commercial
experience in passing upon these matters. The question always is whether the
symbol was executed or adopted by the party with present intention to adopt
or accept the writing.
Do its terms give assurance that it will be held open? I think that can be implied
by the statement that the offer is open "while my supplies last." There is no time
,stated, but the Code would supply a reasonable time, and the Code also says that
the time cannot exceed three months. Therefore, the best response is A.
A coal-fired power station became short of fuel and sent a fax to a number of coal
companies that said, "We are offering to buy 100 tons of coal that contains at least 80%
carbon at market price." The Carbon County Coal Company replied by e-mail, "We
accept your offer. The coal will be shipped tomorrow." Carbon County only had coal that
contained 75% carbon, so when it shipped the coal it notified the buyer that it was
sending the coal as an accommodation. Is Carbon County in breach?
A. Yes, because a contract was formed when it accepted the offer and it then shipped
nonconforming goods.
B. Yes, because a contract was formed when it shipped nonconforming goods.
C. No, because its reply by e-mail did not constitute an acceptance.
D. No, because it offered the nonconforming goods as an accommodation. - Correct
Answer - When an offer is made by fax, e-mail seems to be a reasonable
medium of acceptance, so C is not a correct response. The solution to this
problem is to determine whether the acceptance was by promise or performance.
Although the offer invited either method of acceptance, when Carbon County
sent its e-mail, it appears that the language of the e-mail constituted an
acceptance by promise. Therefore, B is not a correct response because there was
acceptance by promise rather than by performance. Even though Carbon County
notified the buyer that it was shipping nonconforming goods as an
accommodation, this fact is irrelevant because it had already accepted by
promise. The best response is A. Had the acceptance been by performance, D
would have been the correct response.
A contractor sends a company its bid on a construction job. The bid consists of
specifications and prices, followed by a number of boilerplate provisions. The company
responds by writing up the price and specifications on its own form, which it sends to
the contractor. The contractor completes the project and the company inspects it after
25 days. The company finds some unfinished work and demands payment for it. The
contractor claims that he is not responsible for the unfinished work because the form he
sent says that inspection must be completed within 20 days after construction, and the
company did not timely inspect. However, the company's form indicates that it has 30
days after completion to inspect. Who is responsible for the unfinished work?
The owner, because the contractor's form governs.
The contractor, because the company's form governs.
Neither, because there is no agreement on this term.
Both terms are - Correct Answer - This problem involves construction services rather
than the sale of goods. Therefore, the common law rather than Article 2 applies. Under
the common law mirror-image rule, if the acceptance does not match the offer, then it is
a counteroffer. Here, the contractor's bid was an offer, and the company's response with
different terms was a counteroffer. The contractor accepted those terms by conduct
when it completed the project. Although I am not completely confident in this outcome, I
think most courts would conclude that the correct response is B.
, A buyer sent an order form to a seller, offering to buy 100 widgets for $10 each, with
delivery on April 1 and payment 30 days after delivery. The seller sent back an
acknowledgment form to the buyer, stating that it is selling ten widgets for $100 each,
with delivery on April 1 and payment 30 days after delivery. Shortly after that, the seller
shipped the 10 widgets to the buyer, who promptly put them to use. The buyer's
payment department then discovered the problem and asked for your advice about how
much it has to pay. How would you best analyze the problem?
The forms constitute an offer and an acceptance, and therefore there is a contract. The
different terms would be analyzed under the rules of the jurisdiction to determine which
terms are part of the contract.
The forms constitute an offer and an acceptance, and therefore there is a contract, and
the additional terms would be analyzed under § 2-207(2) to deter - Correct Answer -
Analysis. I don't think it makes any sense to analyze this problem as involving different
terms under § 2-207(1). Even though the forms contain different terms, they contain
different essential or "dickered" terms, and I think § 2-207 was designed to deal only
with conflicting terms in the boilerplate. There is support for this position in the language
of § 2-207(1) that says that "a definite . . . expression of acceptance . . . operates as an
acceptance." Because the seller did not give a definite expression of acceptance, I
would reject both responses A and B. While it is true that the exchange of forms did not
constitute a contract under the common law, we should not use the common law if there
is an applicable statute. Because § 2-207(3) speaks to this situation, I would look to it
rather than to the common law, so C is incorrect. This is a situation where the writings
do not establish a contract under § 2-207(1). However, conduct under § 2-207(3)
establishes a contract for ten widgets because the seller shipped those goods and the
buyer accepted them. The writings did not agree on price, but when the parties do not
agree on price, § 2-305 states that the price is a reasonable price. Therefore, while
there may be some debate, I think D is the best response.
A buyer of goods sends a purchase order to a seller on its form. The seller responds
with an acknowledgment form that has additional and different terms. In addition, the
seller's form states, "Acceptance is expressly made conditional on assent to the
additional or different terms in this acknowledgment." When it receives the form, the
buyer refuses to go through with the deal. Is the buyer in breach?
A. No, because under the common law there was a counteroffer that was not acted on.
B. No, because the Code says there was no acceptance, and therefore no contract.
C. Yes, because the Code says there is an acceptance and therefore a contract.
D. Yes, because there was acceptance by conduct. - Correct Answer - Under the Code,
the language employed by the seller satisfies the requirement of § 2-207(1) after the
comma ("unless acceptance is expressly made conditional on assent to the additional or
different terms"). That language prevents seller's form from being an acceptance.
Because there was no acceptance of buyer's offer, buyer cannot be in breach of
contract. The correct response is B.
A buyer of goods sends a purchase order to a seller on its form. The boilerplate on the
form states that the seller is liable for consequential damages. The seller responds with
an acknowledgment form that contains a boilerplate that states that the seller is not
Answers
A seller agrees to sell a television set to a buyer for $1,000. After the deal was
completed, the buyer discovers that other sellers in the area were selling the same
television set for $750. The buyer claims that he is entitled to rescind the contract
because under § 2-305 the price must be reasonable. Is the buyer correct?
A. Yes, because the purpose of the statute is to ensure that prices are reasonable.B.
Yes, because the market price is the reasonable price and this price was above market.
C. No, because the reasonable price rule only applies when nothing is said as to
price.D. No, because freedom of contract allows a buyer to agree to pay an
unreasonable price. - Correct Answer - Analysis. A careful reading of the statute
indicates that "the price is a reasonable price" only if "nothing is said as to price." Here,
there was an agreed-upon price, so the correct response is C. Although D is a true
statement, it is not responsive to the call of the question. The question asked whether
the buyer was correct in claiming that the price had to be reasonable under § 2-305.
In a jurisdiction that applies Article 2 to the sale of electricity, an electric co-op in a small
city agreed to buy "all the electricity it requires" from a supplier at a fixed price. When
the market price of electricity went up in a nearby state, the co-op ordered enough
electricity at the contract price so that it could satisfy its customers' needs and ship
surplus electricity to that state. Is a court likely to find that the co-op was in breach of its
agreement?
A. No, because freedom of contract is an important principle in the Code.
B. No, because no limit on requirements was stated in the contract.
C. Yes, because it could only order the same amount it had ordered in previous years.
D. Yes, because a reasonable measure of its requirements was the needs of its
customers. - Correct Answer - Analysis. The requirements of the buyer would probably
be objectively measured by the amount needed to satisfy its customers. This is not
exactly the same thing stated in response C. Although prior purchases can represent an
objective measure of requirements, in this case the needs of the customers is probably
a better measure. It appears here that the co-op's purchase of additional electricity was
not driven by the needs of customers but was an attempt to take advantage of the
market, which was not a good faith variation from its prior requirements. The best
response is D.
A department store runs an ad in a local newspaper that states, "Black lapin stoles.
$100. This sale price is effective for the next 10 days." The department store then
decides to stop this sale and the next day it runs an ad in the newspaper that states,
"Effective at the close of business today, black lapin stoles are no longer available at the
,sale price. We regret any inconvenience this may cause." Is the sale price for the stoles
still effective the next day?
A. Yes, because it was a merchant's firm offer that is not revocable during the time
stated.
B. Yes, because the method of revocation through the newspaper was not effective.
C. No, because the newspaper advertisement was not an offer.
D. No, because the offer was not a firm offer because it was made to the general public,
not to merchants. - Correct Answer - This is a bit tricky — you might even say it was a
trick question.
When we work through the elements of § 2-205 to see if they are satisfied, the
first element is that there is "an offer." You may recall from Contracts (and I
gave you a hint by using a hypothetical involving the sale of black lapin stoles,
the subject matter of the case of Lefkowitz v. Great Minneapolis Surplus Store,
86 N.W.2d 689 (Minn. 1957)) that an advertisement is generally not an offer,
and this one does not have the earmarks of an offer. Therefore, if it isn't an offer,
it cannot be a firm offer, so the correct response is C. Note that response B is not
correct because in general an offer can be effectively revoked in a medium
similar to the medium in which it was made. Response D is not correct because,
although a firm offer can only be made by a merchant, it does not have to be
made to a merchant.
A seller of electrical supplies wrote on stationery that had his letterhead at the top, "I am
offering 100-watt Luminex bulbs for 10 cents each while my supplies last." Without
signing the letter, he sent it to his best customers. Is this a § 2-205 firm offer?
A. Yes, but it will remain open for no more than three months.
B. Yes, and it will remain open until all the lightbulbs are sold.
C. No, because it is not made in a signed writing.
D. No, because it does not state that it will remain open for a time stated. - Correct
Answer - Analysis. This is clearly an offer by a merchant to sell goods. Is it made in a
signed writing? The definition of writing in § 1-201(b)(46) provides that "
'[w]riting' includes printing, typewriting, or any other intentional reduction to
tangible form." It would seem that the seller's printed stationery would
constitute a writing. And the definition of signed in § 1-201(b)(37) states that it
"includes any symbol executed or adopted with present intention to adopt or
"accept a writing." It would seem that the seller's letterhead was adopted with the
intention to indicate that the offer came from him. The Official Comment to that
section elaborates:
The symbol may be printed, stamped or written; it may be by initials or by
thumbprint. It may be on any part of the document and in appropriate cases
may be found in a billhead or letterhead. No catalog of possible situations can
be complete and the court must use common sense and commercial
experience in passing upon these matters. The question always is whether the
symbol was executed or adopted by the party with present intention to adopt
or accept the writing.
Do its terms give assurance that it will be held open? I think that can be implied
by the statement that the offer is open "while my supplies last." There is no time
,stated, but the Code would supply a reasonable time, and the Code also says that
the time cannot exceed three months. Therefore, the best response is A.
A coal-fired power station became short of fuel and sent a fax to a number of coal
companies that said, "We are offering to buy 100 tons of coal that contains at least 80%
carbon at market price." The Carbon County Coal Company replied by e-mail, "We
accept your offer. The coal will be shipped tomorrow." Carbon County only had coal that
contained 75% carbon, so when it shipped the coal it notified the buyer that it was
sending the coal as an accommodation. Is Carbon County in breach?
A. Yes, because a contract was formed when it accepted the offer and it then shipped
nonconforming goods.
B. Yes, because a contract was formed when it shipped nonconforming goods.
C. No, because its reply by e-mail did not constitute an acceptance.
D. No, because it offered the nonconforming goods as an accommodation. - Correct
Answer - When an offer is made by fax, e-mail seems to be a reasonable
medium of acceptance, so C is not a correct response. The solution to this
problem is to determine whether the acceptance was by promise or performance.
Although the offer invited either method of acceptance, when Carbon County
sent its e-mail, it appears that the language of the e-mail constituted an
acceptance by promise. Therefore, B is not a correct response because there was
acceptance by promise rather than by performance. Even though Carbon County
notified the buyer that it was shipping nonconforming goods as an
accommodation, this fact is irrelevant because it had already accepted by
promise. The best response is A. Had the acceptance been by performance, D
would have been the correct response.
A contractor sends a company its bid on a construction job. The bid consists of
specifications and prices, followed by a number of boilerplate provisions. The company
responds by writing up the price and specifications on its own form, which it sends to
the contractor. The contractor completes the project and the company inspects it after
25 days. The company finds some unfinished work and demands payment for it. The
contractor claims that he is not responsible for the unfinished work because the form he
sent says that inspection must be completed within 20 days after construction, and the
company did not timely inspect. However, the company's form indicates that it has 30
days after completion to inspect. Who is responsible for the unfinished work?
The owner, because the contractor's form governs.
The contractor, because the company's form governs.
Neither, because there is no agreement on this term.
Both terms are - Correct Answer - This problem involves construction services rather
than the sale of goods. Therefore, the common law rather than Article 2 applies. Under
the common law mirror-image rule, if the acceptance does not match the offer, then it is
a counteroffer. Here, the contractor's bid was an offer, and the company's response with
different terms was a counteroffer. The contractor accepted those terms by conduct
when it completed the project. Although I am not completely confident in this outcome, I
think most courts would conclude that the correct response is B.
, A buyer sent an order form to a seller, offering to buy 100 widgets for $10 each, with
delivery on April 1 and payment 30 days after delivery. The seller sent back an
acknowledgment form to the buyer, stating that it is selling ten widgets for $100 each,
with delivery on April 1 and payment 30 days after delivery. Shortly after that, the seller
shipped the 10 widgets to the buyer, who promptly put them to use. The buyer's
payment department then discovered the problem and asked for your advice about how
much it has to pay. How would you best analyze the problem?
The forms constitute an offer and an acceptance, and therefore there is a contract. The
different terms would be analyzed under the rules of the jurisdiction to determine which
terms are part of the contract.
The forms constitute an offer and an acceptance, and therefore there is a contract, and
the additional terms would be analyzed under § 2-207(2) to deter - Correct Answer -
Analysis. I don't think it makes any sense to analyze this problem as involving different
terms under § 2-207(1). Even though the forms contain different terms, they contain
different essential or "dickered" terms, and I think § 2-207 was designed to deal only
with conflicting terms in the boilerplate. There is support for this position in the language
of § 2-207(1) that says that "a definite . . . expression of acceptance . . . operates as an
acceptance." Because the seller did not give a definite expression of acceptance, I
would reject both responses A and B. While it is true that the exchange of forms did not
constitute a contract under the common law, we should not use the common law if there
is an applicable statute. Because § 2-207(3) speaks to this situation, I would look to it
rather than to the common law, so C is incorrect. This is a situation where the writings
do not establish a contract under § 2-207(1). However, conduct under § 2-207(3)
establishes a contract for ten widgets because the seller shipped those goods and the
buyer accepted them. The writings did not agree on price, but when the parties do not
agree on price, § 2-305 states that the price is a reasonable price. Therefore, while
there may be some debate, I think D is the best response.
A buyer of goods sends a purchase order to a seller on its form. The seller responds
with an acknowledgment form that has additional and different terms. In addition, the
seller's form states, "Acceptance is expressly made conditional on assent to the
additional or different terms in this acknowledgment." When it receives the form, the
buyer refuses to go through with the deal. Is the buyer in breach?
A. No, because under the common law there was a counteroffer that was not acted on.
B. No, because the Code says there was no acceptance, and therefore no contract.
C. Yes, because the Code says there is an acceptance and therefore a contract.
D. Yes, because there was acceptance by conduct. - Correct Answer - Under the Code,
the language employed by the seller satisfies the requirement of § 2-207(1) after the
comma ("unless acceptance is expressly made conditional on assent to the additional or
different terms"). That language prevents seller's form from being an acceptance.
Because there was no acceptance of buyer's offer, buyer cannot be in breach of
contract. The correct response is B.
A buyer of goods sends a purchase order to a seller on its form. The boilerplate on the
form states that the seller is liable for consequential damages. The seller responds with
an acknowledgment form that contains a boilerplate that states that the seller is not
