Teal Set
of Sales Problems
>without answers<
Note that this problem
set is also available
with answers.
by Professor Eric E. Johnson, University of North Dakota
School of Law
Note
to students:
This problem set is finalized for 2017.
Topic 2.
Fraud and Misrepresentation
Problem
201: You are an
investor who has made a great deal of money buying undervalued consumer products
companies. In evaluating the purchase of Krystal Kazoo Company, you hired
attorney Carl Cantwell to review products liability lawsuits pending against
the company and opine on the possible legal liability for the company
represented by those lawsuits. After a week, Cantwell sent you an opinion
letter concluding that there was no significant liability exposure posed by the
pending suits.
It turns out that after you
asked Cantwell to do this for you, Cantwell assigned a first-year associate to
work up the analysis. That associate, who completely misunderstood the law of
products liability, did a terrible job. And Cantwell never double-checked the
first-year associateÕs work. Competent analysis would have concluded that the
lawsuits pointed to a substantial chance of large monetary judgments against
the company that could erase all or nearly all of the companyÕs value.
In the end, you lost almost your
entire investment in the purchase of Krystal Kazoo because of the crushing
liability burden of the products-liability lawsuits.
Do you have a good fraud claim
against Carl CantwellÕs firm? Is there some other cause of action that might
work?
ANSWER:
________________________________________________.
Topic 3.
History, Purposes, and Basic Structure of the UCC
Problem
301: You are a
law clerk for the Supreme Court of Minnesconsin. Your judge has asked you to
draft an opinion in Ramirez v. Lampey, which will need to interpret the word
ÒconspicuousÓ as it is used in Article 2, section 2-909 of the Minnesconsin
Commercial Code. (The Minnesconsin Commercial Code is that stateÕs adoption of
the Uniform Commercial Code.)
There are cases from various
states, including Arkassippi, Nevizona, Connectachusetts, Floribama, and
Wyorado, that say that in various contexts of interpreting contracts, statutes,
and administrative regulations, ÒconspicuousÓ should be interpreted to mean
that something Òstands out from its context.Ó
A provision of Article 1 of the
Minnesconsin Commercial Code, however, says that ÒconspicuousÓ means Òso
written, displayed, or presented that a reasonable person against which it is
to operate ought to have noticed it.Ó
Which definition should the
court use to interpret ÒconspicuousÓ in ¤2-909? Why?
ANSWER:
________________________________________________.
Topic 4.
Hierarchy of Construction, Gap-Filling, and Supplementation by Other Law
NOTE THE FOLLOWING FACTS:
CutÕnÕRun v. Abbingdale
Acres
Retailer Cut ÔnÕ Run Convenience Stores and Abbingdale Acres, a supplier of food and dairy products, are both Texlahoma-based businesses that have done many deals in the past. Now, CutÕnÕRun is suing Abbingdale Acres over a multi-million-dollar contract that had Abbingdale supply milk to all of CutÕnÕRunÕs Texlahoma stores over a five-year term, which began two years ago. The parties dispute whether Abbingdale or CutÕnÕRun is supposed to pay for increased shipping costs caused by rising fuel prices. There is a written agreement for the deal, but nothing is said in the document about the issue of increased shipping costs one way or the other.
mc 3. Consider the following facts that might be established at trial:
I. In all other dealings between the two companies – from ice cream to packaged snacks – Abbingdale has always absorbed increased shipping costs as a matter of course.
II. Over the past two years of this milk deal, CutÕnÕRun has twice paid for increased shipping costs out of its own budget.
III. In the retail-convenience industry, retailers virtually always absorb increased shipping costs.
Which of the following correctly orders the above facts from most important to least important in establishing the terms of the deal about which Abbingdale and CutÕnÕRun are now litigating?
(A) I, II, III
(B) II, I, III
(C) II, III, I
(D) III, I, II
(E) III, II, I
Problem
401: Today, A.A. Abernathy Construction LLC signed a contract with Lolo
Lumber Company that says only the following:
AA Abernathy agrees to purchase from Lolo
and Lolo agrees to supply 1,000 8-foot pine 2x4s for framing for a total of
$2,000.
The agreement says nothing about
when the lumber will be supplied, whether it will be delivered to a job site or
held for pick up, or what the payment terms are. These parties have never
contracted before. Assume there is no usage of trade applicable here. Is this
deal enforceable, and if so how will the terms regarding delivery and payment
be determined?
Hint:
See Hull p. 22.
ANSWER:
________________________________________________.
Problem
402: Hexetron
Scrapbooking Supplies Company has a provision in its regular sales agreement
that states:
The
allowable time period for bringing any legal actions to enforce any right or
obligation in this agreement, including for breach, shall be five years from
the date the cause of action has accrued.
What is the effect of this
provision? Can a party to an agreement containing this provision successfully
bring an action for breach four years and six months after a breach occurred?
See
¤¤ 1-302, 2-725(1).
ANSWER: ________________________________________________.
Problem
403: Hexetron
Dental Amalgams Corp has a provision in its regular purchasing agreement with
suppliers that states:
¤67.8.
If Hexetron rightfully rejects any shipment of goods, Hexetron shall not be
obligated to exercise any greater care over the goods than is specified in the
2007 Guidelines of the Joint Commission of Dental Industry Suppliers and
Purchasers.
The 2007 Guidelines of the Joint
Commission of Dental Industry Suppliers and Purchasers holds that goods need
not be held in a temperature controlled environment, even though temperature
fluctuations can sometimes lead to spoliation of goods covered by the
guidelines.
What is the effect of ¤67.8? Can
Hexetron fulfill its obligations with regard to rightfully rejected goods by
holding them in a non-temperature-controlled environment?
See
¤¤ 1-302, 2-602(2)(b).
ANSWER: ________________________________________________.
Problem
404: The
Hexetron Tool-of-the-Month Club sells five-year memberships whereby a customer
agrees to buy 60 different tools, one delivered each month, for an aggregate
price of $2,345. Hexetron does all its sales over the telephone, getting each
customer to agree to the deal orally. The following is read over the phone and
a customer must agree to it orally for the deal to be concluded:
Customer
and Hexetron agree that this contract is binding and enforceable without being
presented in writing and without being signed, and Customer and Hexetron
specifically agree that the statute of frauds provision of section 2-201(1) of
the Uniform Commercial Code shall not apply to this transaction.
Hexetron then follows up with a written
confirmation that includes the above provision. What is the effect of this
provision? Is the deal enforceable?
See
¤¤ 1-302, 2-201(1), and Official Comment 1 to ¤1-302.
Topic 5.
Choice of Law and CISG Applicability
Problem
501: A contract
between Blastodyne Safety Wholesale and Hrenka-HŸbner Robotic Systems concerns the sale of
emergency stop switches. It specifies that Virginia law governs the contract
and selects Kentucky as the forum. Blastodyne Safety
Wholesale is a Delaware corporation with its headquarters in North Carolina.
The contract was negotiated on Blastodyne Safety
WholesaleÕs behalf out of its Kentucky office. Hrenka-HŸbner
Robotic Systems is a Kentucky corporation with its headquarters in Kentucky,
and this contract was negotiated and agreed to by employees in its headquarters
office. The goods being purchased are to be shipped to and used by Hrenka-HŸbner Robotic SystemsÕ operations in Kentucky,
North Carolina, South Carolina, and Virginia.
In the event there is litigation
about this contract, what substantive law will be applied to determine the
parties rights and obligations under the contract?
See
¤ 1-301.
ANSWER: ________________________________________________.
Problem
502: A contract
between True North Industrial and Hrenka-HŸbner Robotic
Systems concerns the sale of plexiglass shielding. It
specifies as follows:
The parties agree that that
Kentucky law governs the contract and that in the event of any dispute, the
forum shall be Kentucky.
True North Industrial has its
headquarters in Winnipeg, Manitoba, Canada. It also has a research and
development office in Kentucky. This contract was negotiated on True North
IndustrialÕs behalf out of its Winnipeg office. Hrenka-HŸbner
Robotic Systems is a Kentucky corporation with its headquarters in Kentucky,
and this contract was negotiated and agreed to by people in the Kentucky
headquarters office. The goods being purchased are to be shipped to and used by
Hrenka-HŸbner Robotic SystemsÕ operations in Kentucky
and Virginia.
In the event there is litigation
about this contract, what substantive law will be applied to determine the
partiesÕ rights and obligations under the contract?
See
¤ 1-301 and CISG Articles 1, 2, and 10.
ANSWER: ________________________________________________.
Problem
503: A contract
between True North Industrial and Jennifer Jardelsmohr
concerns the sale of safety goggles. It specifies as follows:
The parties agree that that
Kentucky law governs the contract and that in the event of any dispute, the
forum shall be Kentucky.
True North Industrial has its
headquarters in Winnipeg, Manitoba, Canada. It also has a research and
development office in Kentucky. Jennifer Jardelsmohr
contacted True North Industrial through their toll-free number and said she was
ordering the safety goggles for her and her family to use while operating a
chain saw to cut down overgrown trees in their backyard. The call was received
at True North IndustrialÕs Winnipeg office. True North Industrial shipped the
goggles from its Winnipeg warehouse to JenniferÕs home in Kentucky.
In the event there is litigation
about this contract, what substantive law will be applied to determine the
partiesÕ rights and obligations under the contract?
See
¤ 1-301 and CISG Articles 1, 2, and 10.
ANSWER: ________________________________________________.
Topic 6.
Scope and Applicability of Article 2
mc 1. In the case of Swift v. MWC Water Supply Corp., a residential consumer, Swift, is suing a corporation, MWC, under a contract by which MWC agreed to sell water to be delivered by underground pipe to Swift. According to SwiftÕs complaint, MWC breached the contract by failing to supply water for a week, leaving Swift unable to cook, clean, or bathe at home.
Note that UCC ¤ 2-105 provides, in part:
(1) ÒGoodsÓ
means all things (including specially manufactured goods) which are movable at
the time of identification to the contract for sale other than the money in
which the price is to be paid, investment securities (Article 8) and things in
action. ÒGoodsÓ also includes the unborn young of animals and growing crops and
other identified things attached to realty as described in the section on goods
to be severed from realty (Section 2-107).
Note that the New Oxford American Dictionary states the definition of ÒgoodsÓ as follows:
merchandise
or possessions: imports of luxury goods
Note also that uncontradicted expert testimony establishes that within the water industry, when the term ÒgoodsÓ is used in a contract, it is understood to not include water flowing through a pipe.
An
initial issue facing the court is whether UCC Article 2 governs this
transaction. Which of the following would represent the best analysis for the
court to include in its opinion?
(A) ÒThis court determines that flowing water is a ÔgoodÕ under UCC Article 2. We must adhere to the definition in ¤ 2-105, which defines ÔgoodsÕ as things that are moveable at the time of identification. The water that is the subject of this contract for sale was moveable at the time of its identification to the contract, and therefore it must be included within the scope of ÔgoodsÕ under the UCC; thus UCC Article 2 governs this transaction.Ó
(B) ÒThis court determines that water is a ÔgoodÕ under this contract because we must interpret the word ÔgoodÕ according to the UCCÕs policy of protecting consumers from abuse by merchant sellers. In this case, by construing the water to be a good, Swift benefits from various of the UCCÕs provisions. Therefore, as to this contract, water is a Ôgood,Õ and UCC Article 2 governs this transaction.Ó
(C) ÒWater is embraced within ÔgoodsÕ under the UCC because the courtÕs job in interpreting the UCC is to use the commonly understood sense of its language, for which resort to a dictionary definition is appropriate. The New Oxford American Dictionary defines goods as Ômerchandise or possessions.Õ This court determines that water fits within this definition. Therefore, the subject of the contract is goods, and UCC Article 2 governs the transaction.Ó
(D) ÒThis court determines that water is not ÔgoodsÕ under the UCC. Upon the evidence submitted to it, this court finds that the common-sense definition of goods does not include water. And this court is bound to construe the provisions of the UCC first according to common-sense before resulting to the default definitions provided by the UCC. Therefore, the common law, and not the UCC, governs this transaction.Ó
(E) ÒUncontradicted expert testimony has established that flowing water is understood not to be embraced within the term ÔgoodsÕ as it is used by the relevant industry in written contracts. Based on this, the court finds that the relevant usage of trade is to exclude water from goods, and therefore, with regard to the transaction before the court, water is not goods and the common law and not the UCC governs this transaction.Ó
Problem
601:
My Bear Lair is a store
where children can watch as a custom-made teddy bear is manufactured for them
by the Bear-ma-tron. The Bear-ma-tron
is made to look like one giant machine, but it actually is a series of robotic
manufacturing modules bolted together with fancifully shaped fiberglass panels
painted in bright colors.
My Bear Lair entered
into a contract with Hexetron Automated Plush Systems LLC to purchase $487,000
worth of robotic manufacturing modules and to install them the new My Bear Lair
store in The District, a new upscale shopping mall in a tourist-heavy part of
San Frangeles. For My Bear Lair, the installation was highly important, since
the modules must be set-up exactly the right way for the fiberfill,
accessories, and various teddy-bear components to move from one machine to the
other in a synchronized way. Calibrating the software to make the machines work
together is very complicated and requires a highly competent process engineer.
Testing is also key, so that manufacturing-process problems can be found and
overcome through further calibration.
When the modules were
delivered to the My Bear Lair store in The District, Hexetron workers merely
arranged the machines according to the blueprints and plugged them in so that
they would power up. Then the Hexetron people left. When the My Bear Lair
employees stocked the system with parts and materials so the Bear-ma-tron could make bears, they could not get a single teddy
bear to emerge. Fiberfill spewed from gaps between modules, materials jammed,
and components got stuck as they travelled through the system. Children cried.
In a dispute between My Bear
Lair and Hexetron Automated Plush Systems over this deal, does the UCC or the
common-law govern? What arguments are plausible?
ANSWER: ________________________________________________.
Topic 7.
Basic Formational Rules, Offer and Acceptance, Firm Offers
For Problems 701-703
á Look at: 2-104(a), 2‑205
á Background: Mitsutatchi Motors,
U.S.A. of Toledo, Ohio is a major motorized equipment manufacturer and a
leading seller of forklifts. Vayatom U.S.A. of
Lexington, Kentucky uses forklifts constantly in its business and has a
dedicated executive in charge of purchasing them and making sure they are
properly operated and maintained.
Problem
701:
Mitsutatchi Motors, U.S.A. sent Vayatom a firm offer for between 10 and 100 forklifts (model
no. FGFL-800XL) at $28,000 each. The offer was signed, and it said on its face
it was irrevocable and would expire in 60 days. Mitsutatchi
then said they revoked the offer. Can Vayatom accept
the offer and enforce it as a contract?
ANSWER: ________________________________________________.
Problem 702:
Mitsutatchi Motors, U.S.A. sent Vayatom
a firm offer for between 10 and 100 forklifts (model no. FGFL-800XL) at $28,000
each. The offer was signed, and it said on its face it was irrevocable and would
not expire for three years. Mitsutatchi then said
they revoked the offer. Can Vayatom accept the offer
and enforce it as a contract?
ANSWER: ________________________________________________.
Problem 703:
Mitsutatchi Motors, U.S.A. and Vayatom
did a deal, evidenced by a signed writing, where, for a $3,000 fee, Mitsutatchi would hold open an irrevocable offer for three
years for between 10 and 100 forklifts (model no. FGFL-800XL) at $28,000 each.
Can Vayatom accept the offer after one year
and enforce it as a contract?
ANSWER: ________________________________________________.
mc 6A. There
was no writing evidencing Wendy's agreement to sell a $1,200 chair to Lilla. Which of the following would not be a good
argument that the contract should be enforced despite the statute of frauds?
(A) The chair was
specially manufactured for Lilla and no one else
would want to buy it.
(B) Lilla relied to her detriment on Wendy's promise to sell
the chair.
(C) Wendy
admitted in writing, in a letter to Wendy's friend, that she had agreed to sell
the chair to Lilla.
(D) Lilla already paid $1,200 to Wendy.
(E) Lilla already accepted delivery of the chair.
ANSWER: ________________________________________________.
Topic 8.
Battle of the Forms
For Problems 801-A thru 801-C
á Look at: 2-206, 2-207
á Background: Blastodyne is a major
demolition firm. Octan Chemicals is a leading manufacturer of explosives and
other industrial chemical compounds. Both companies are headquartered in and
operate almost entirely within the United States.
Problem 801-A:
Blastodyne sent a purchase order for 200 kg of TNT to
Octan Chemicals. The purchase order provided that any dispute under the contract
was to be litigated in the courts of New Jersey under the provisions of New
Jersey law, and the purchase order specified that the TNT be warranted as
defect-free for two years. Octan sent an order acknowledgment to Blastodyne for 200 kg of TNT with language specifying that
the material would be supplied with no warranties of any kind. The order
acknowledgement said nothing about dispute resolution.
Is
there a contract? If so, what are its terms with regard to warranties and
dispute resolution?
ANSWER: ________________________________________________.
Problem 801-B:
Blastodyne sent a purchase order for 200 kg of TNT to
Octan Chemicals. The purchase order provided that any dispute under the
contract was to be litigated in the courts of New Jersey under the provisions
of New Jersey law and specifying that the TNT be warranted as defect-free for
two years. Octan sent an order acknowledgment to Blastodyne
for 400 kg of inert clay with language specifying that the material
would be supplied with no warranties of any kind. The order acknowledgement
said nothing about dispute resolution.
Is
there a contract? If so, what are its terms with regard to warranties and
dispute resolution?
ANSWER: ________________________________________________.
BONUS: Assuming that the
parties perform – Octan sends the clay and Blastodyne
accepts, is there a contract? If so, what are its terms with regard to
warranties and dispute resolution?
ANSWER: ________________________________________________.
Problem 801-C:
Blastodyne sent a purchase order for 200 kg of TNT to
Octan Chemicals. The purchase order provided that any dispute under the
contract was to be litigated in the courts of New Jersey under the provisions
of New Jersey law and specifying that the TNT be warranted as defect-free for
two years. Octan shipped 200 kg of TNT without sending an order
acknowledgment. After discovering they had neglected to send an order
acknowledgment, Octan sent Blastodyne an order
acknowledgment stating that the material was supplied with no warranties of
any kind.
Is
there a contract? If so, what are its terms with regard to warranties and
dispute resolution?
ANSWER: ________________________________________________.
For Problems 802-A and 802-B
á Look at: 2-206, 2-207
á Background: Hrenka-HŸbner USA is
small-arms manufacturer in the United States. It uses steel as a principal
component in the products that it makes and sells. Monongahela Steel is a steel
manufacturer in the United States.
Problem 802-A:
Hrenka-HŸbner sent a purchase order
for 1 metric ton of domestically sourced steel to Monongahela Steel. The
purchase order included standard terms and conditions providing that
consequential damages would be available for sellerÕs breach. Monongahela Steel
sent back an order acknowledgement with standard terms and conditions providing
that the steel would be domestically sourced, that consequential damages were
excluded, that Hrenka-HŸbner would pay by wire
transfer within 30 days, and that all disputes would be settled by binding
arbitration conducted by the World Federation of Arbitration. The steel is
shipped and paid for.
Is
there a contract? If so, what are its terms with regard to available damages,
payment, and dispute resolution?
ANSWER: ________________________________________________.
Problem 802-B:
Hrenka-HŸbner sent a purchase order
for 1 metric ton of domestically sourced steel to Monongahela Steel. The
purchase order included standard terms and conditions providing that
consequential damages would be available for sellerÕs breach. Monongahela Steel
sent back an order acknowledgement with standard terms and conditions providing
that the steel would be domestically sourced, that consequential damages were
excluded, that Hrenka-HŸbner would pay by wire
transfer within 30 days, and that all disputes would be settled by binding
arbitration conducted by the World Federation of Arbitration. The steel is
shipped and paid for. Both the purchase order and the order acknowledgement
contain language saying they are expressly made conditional on the assent of
the other party to all terms.
Is
there a contract? If so, what are its terms with regard to available damages,
payment, and dispute resolution?
ANSWER: ________________________________________________.
Topics 9-12.
Statute of Frauds with Sales of Goods, Basic Contract Interpretation, Gap
Filling, and Parol Evidence Rule
NOTE THE FOLLOWING FACTS:
CutÕnÕRun v. Abbingdale
Acres
Retailer Cut ÔnÕ Run Convenience Stores and Abbingdale Acres, a supplier of food and dairy products, are both Texlahoma-based businesses that have done many deals in the past. Now, CutÕnÕRun is suing Abbingdale Acres over a multi-million-dollar contract that had Abbingdale supply milk to all of CutÕnÕRunÕs Texlahoma stores over a five-year term, which began two years ago. The parties dispute whether Abbingdale or CutÕnÕRun is supposed to pay for increased shipping costs caused by rising fuel prices. There is a written agreement for the deal, but nothing is said in the document about the issue of increased shipping costs one way or the other.
mc 4. Cassandra, an executive of CutÕnÕRun, wants to testify that the CEO of Abbingdale Acres told her orally, right before the companies signed the five-year milk deal, ÒYou know Cassandra, we will of course absorb any increased shipping costs caused by increased fuel prices – thatÕs what I understand this deal to mean.Ó Can Cassandra testify about this at trial?
(A) Yes, because it is relevant evidence that, on these facts, is admissible notwithstanding the UCCÕs parol evidence rule.
(B) Yes, because there is no parol evidence rule under the UCC.
(C) No, because the UCCÕs parol evidence rule bars the introduction of oral testimony in cases involving written contracts.
(D) No, because the UCCÕs statute of frauds bars the introduction of oral testimony in cases involving written contracts.
(E) No, because the oral evidence purports to vary the terms of the written agreement.
ANSWER: ________________________________________________.
Problem 1001-A:
Hrenka-HŸbner in Texas, a small arms manufacturer, did a deal
with Vayatom Industries, in Kentucky, for the
purchase of several semi-automatic rifles for VayatomÕs
security force. The deal was written up as a Òterm sheet,Ó which both parties
signed, with a description of items, prices, and some other things. This is
what the term sheet says – in handwriting – about delivery:
Delivery:
at the loading dock, in cases
Hrenka-HŸbner contends Òthe loading dockÓ means Hrenka-HŸbnerÕs loading dock in Texas. Vayatom
contends it means VayatomÕs loading dock in Kentucky.
Both parties want to testify about what was said during negotiations because
they say that this will explain what was meant by Òloading dock.Ó How should a
court resolve this? What evidence can be considered?
ANSWER: ________________________________________________.
Problem 1001-B:
Hrenka-HŸbner in Texas, a small arms manufacturer, did
a deal with Vayatom Industries, in Kentucky, for the
purchase of several semi-automatic rifles for VayatomÕs
security force. The deal was written up as a Òterm sheet,Ó which both parties
signed, with a description of items, prices, and some other things. This is
what the term sheet says
– in handwriting – about
delivery:
Delivery:
at the loading dock, in cases
Additionally,
the bottom of the term sheet has this, in printing:
Deliveries
are at buyerÕs place of business.
Hrenka-HŸbner contends Òthe loading dockÓ means Hrenka-HŸbnerÕs loading dock in Texas. Vayatom contends it means VayatomÕs loading dock in Kentucky. Both parties want to testify about what was said during negotiations because they say that explains what was meant by Òloading dock.Ó How should a court resolve this? What evidence can be considered?
ANSWER: ________________________________________________.
Problem 1001-C:
Hrenka-HŸbner in Texas, a small arms manufacturer, did a deal
with Vayatom Industries, in Kentucky, for the
purchase of several semi-automatic rifles for VayatomÕs
security force. The deal was written up as a Òterm sheet,Ó which both parties
signed, with a description of items, prices, and some other things. This is what the term sheet says – in handwriting
– about delivery:
Delivery:
at the sellerÕs loading dock, in cases
The
bottom of the term sheet has this:
Deliveries
are at buyerÕs place of business, at the loading dock.
Hrenka-HŸbner contends Òthe loading dockÓ means Hrenka-HŸbnerÕs loading dock in Texas. Vayatom
contends it means VayatomÕs loading dock in Kentucky.
How should a court resolve this? What evidence can be considered?
ANSWER:
________________________________________________.
Problem 1001-D:
Hrenka-HŸbner in Texas, a small arms manufacturer, did a deal
with Vayatom Industries, in Kentucky, for the
purchase of several semi-automatic rifles for VayatomÕs
security force. The deal was written up as a Òterm sheet,Ó which both parties
signed, with a description of items, prices, and some other things. This is what the term sheet says – in handwriting
– about delivery:
Delivery:
at the loading dock, in cases
The
bottom of the term sheet has this:
This
contract document contains the full and complete expression of the parties with
respect to this deal and is a fully integrated contract.
Hrenka-HŸbner contends Òthe loading dockÓ means Hrenka-HŸbnerÕs loading dock in Texas. Vayatom
contends it means VayatomÕs loading dock in Kentucky.
Both parties want to testify about what was said during negotiations because
they say that explains what was meant by Òloading dock.Ó How should a court
resolve this? What evidence can be considered?
ANSWER:
________________________________________________.
Problem 1002-A:
Bethany
Banks is purchasing a 1961 Ferrari GT California from Stevie Stockwell. They do a deal for the sale of the car for
$400,000. The two of them working together type up the following on an
otherwise blank piece of paper:
September
10, 2017
Ô61
Ferrari GT California
in
Parksville, Texlahoma
$400,000
Is
the contract for sale enforceable?
ANSWER:
________________________________________________.
Problem 1002-B:
Bethany
Banks is purchasing a 1961 Ferrari GT California from Stevie Stockwell. They do a deal for the sale of the car for
$400,000. They sign the following typed-up paper, otherwise blank, to
memorialize their deal:
September
10, 2017
Sale
of:
Ô65
Ferrari GT California
in
Parksville, Texlahoma
at
agreed-upon price
Bethany
Banks
Stevie
Stockwell
Is
the contract for sale enforceable?
ANSWER:
________________________________________________.
Topics
14-22. Warranties
Background: Hexetron Aerospace, a U.S. business, is a
leading aerospace manufacturer. WZX FM is a radio station
that plays hit music. UKEA is a large retailer of Norwegian-styled furniture.
Problem 1401-A:
Hexetron AerospaceÕs
Hot-Air Balloon Systems Division sells UKEA a Fresh Aire
V hot-air balloon. UKEA tries to operate the balloon for promotional purposes
at the city balloon festival, but the fabric is too heavy for the balloon to
stay aloft in most ordinary weather conditions, and the stitching is too weak
to keep the balloon safely structurally intact. Does UKEA have a good warranty
claim?
ANSWER: ________________________________________________.
Problem 1401-B:
Hexetron AerospaceÕs
Hot-Air Balloon Systems Division sells UKEA a Fresh Aire
V hot-air balloon. UKEA never unpacks the balloon, deciding not to attend
the city balloon festival. Instead, they sell it to radio station WZX for them to use for promotional purposes and to give
rides to call-in contest winners. But the radio station discovers that the
fabric is too heavy for the balloon to stay aloft in most ordinary weather
conditions, and the stitching is too weak to keep the balloon safely
structurally intact. Does WZX have a warranty
claim?
ANSWER: ________________________________________________.
Problem 1401-C:
Hexetron AerospaceÕs
Hot-Air Balloon Systems Division sells WZX a Fresh Aire V hot-air balloon after WZX
asks for a balloon that will work well for the city balloon festival. The
fabric is too heavy for the balloon to stay aloft given the atmospheric
conditions prevailing at the city balloon festival. Does WZX have a warranty claim?
ANSWER: ________________________________________________.
Problem 1401-D:
[Continued from previous]: Unable to use the balloon at the city
balloon festival, WZX takes it to a place with a different
elevation and colder air. Then they take the balloon aloft. The weak stitching
causes the balloon to come apart in the air, causing personal injury to radio
station employees. Does WZX have a warranty claim? Do
the employees?
ANSWER: ________________________________________________.
NOTE
THE FOLLOWING FACTS FOR QUESTIONS 5 AND 6:
VovolTrac is a manufacturer of vehicle trailers based in Elkhart, Indiana, selling about 2000 trailers per year. They do many different kinds of sales. Just last month, VovolTrac sold a VVB‑60 boat trailer it manufactured to George Yinkan for $4000, with delivery taken at VovolTracÕs manufacturing facility in Elkhart. VovolTrac also sold 10 VVB‑60 boat trailers it manufactured to the Canada Border Services Agency (CBSA), a Canadian government agency responsible for border enforcement. Those trailers were transported by a third party to a CBSA facility in Ontario, Canada. And also last month, VovolTrac sold a metal-bending machine – which it had used for years to bend metal as part of its manufacturing operations – to Ridgefield College of Technology (Ridgefield Tech), a private university with a very strong mechanical engineering program. In making the sale to Ridgefield Tech, the VovolTracÕs chief operations officer Linda Rezerna explained that VovolTrac had a great amount of knowledge and expertise in metal bending and metal bending machines. Linda even suggested – without making an explicit promise – that if Ridgefield Tech bought the machine, VovolTrac employees would be able to come to Ridgefield Tech to explain how to use it.
mc 5. Based on the facts given, and assuming no other facts, which sales would include a warranty of title?
(A) the sales to George Yinkan, CBSA, and Ridgefield Tech
(B) the sales to George Yinkan and CBSA, but not Ridgefield Tech
(C) the sales to George Yinkan and Ridgefield Tech, but not CBSA
(D) the sales to Ridgefield Tech and CBSA, but not George Yinkan
(E) not any of the sales to George Yinkan, CBSA, or Ridgefield Tech
ANSWER: ________________________________________________.
mc 6. Based on the facts given, and assuming no other facts, which sales would include an implied warranty of merchantability?
(A) the sales to George Yinkan, CBSA, and Ridgefield Tech
(B) the sales to George Yinkan and CBSA, but not Ridgefield Tech
(C) the sales to George Yinkan and Ridgefield Tech, but not CBSA
(D) the sales to Ridgefield Tech and CBSA, but not George Yinkan
(E) not any of the sales to George Yinkan, CBSA, or Ridgefield Tech
ANSWER: ________________________________________________.
± ± ±
Topics
23-25. Unconscionability, Commercial Impracticability, Frustration of Purpose
mc 7. In which situation will complete destruction of the good or goods before delivery (and before risk of loss has passed to the buyer) completely excuse performance?
(A) The contract is
for Ò10 metric tons of industrial grade aluminum.Ó
(B) The
contract is for Ò2,000 units of Team USA Luge t-shirts in sizes and design as
specified on the attached list.Ó
(C) The
contract is for Òa 2008 white Ford F-150 XL pickup truck.Ó
(D) The contract is
for Òthe Pontiac Trans Am used to portray KITT in the
final scene of Season 1, Episode 5 of the original Knight Rider TV series.Ó
(E) The contract is for Òluxury office furnishings suitable for three offices and one conference room, such rooms being as shown on the attached blueprint.Ó
ANSWER: ________________________________________________.
Problem 2301:
Hexetron Home Laundry Systems
Corp contracted with leading social media companies and a big-data consulting
firm to create a marketing strategy to drive at-home sales. First, Hexetron
compiled a list of relatively uneducated parents who had adolescent children
and who would were likely to be particularly vulnerable to overpaying for a
washing machine following exposure to guilt-inducing social-media posts. Then,
Hexetron paid to get targeted parents to see social-media posts about
neglectful parents who donÕt adequately wash their childrenÕs clothes, thereby
exposing their children to being socially ostracized for bad odors. Next, using
sophisticated data algorithms, Hexetron used social media to spur social
acquaintances of the adolescent children of targeted parents to tease those
adolescent children about bad odors. Then, Hexetron used relationships with
providers of in-home electronics such as Òsmart speakersÓ to analyze in-home
spoken communications between family members. When this analysis confirmed that
an adolescent child had communicated in an emotionally fraught way with a
targeted parent, Hexetron had a sales associate knock on the door to offer to
sell a Hexetron Ultra 5000 washing machine. In exactly this way, Hexetron was
able to get a signed contract to sell an Ultra 5000 to Bill Borvensdorn
for $10,000, despite the fact that the Ultra 5000Õs actual retail value is
about $350. The deal also obligates Bill to purchase a yearÕs worth of
detergent for $200, the actual retail value of which is about $180. A few days
later, once Bill got some emotional distance from his childÕs social crisis, he
realized what a terrible deal he had made. Can Bill avoid the contract on the
basis of unconscionability? Why or why not? What potential remedies could a
court consider ordering?
ANSWER: ________________________________________________.
Problem 2401
Hurricane Roscoe, Part 1:
The weather says
Hurricane Roscoe will make landfall in two days. Bob contracts to purchase 30
sheets of plywood from Sally to board up the windows on BobÕs building,
delivery set for the next day.
When Sally goes to
procure the plywood from the wholesaler, the price has gone up, because of the
hurricane, by 2000%. Sally wants to avoid the contract. Can she?
ANSWER: ________________________________________________.
Problem 2402
Hurricane Roscoe, Part 2:
Hurricane Roscoe
causes massive damage to a custom-restored 1946 Studebaker automobile that car
collector Brenda had contracted to purchase from classic-car broker Selena for $860,000.
Brenda was willing to pay so much for the car because it had been prominently
featured in the blockbuster movie Fatal Death (tagline: ÒMurderÕs never been so
deadly.Ó) The car was completely flooded and a collapsing roof caused by the
winds smashed the back half of the car. Selena wants to avoid the contract. Can
she?
ANSWER: ________________________________________________.
Problem 2501-1
Hurricane Sharona, Version 1:
At 2:03 p.m., the
National Hurricane Center issues a hurricane warning saying Hurricane Sharona will veer west and make landfall tomorrow
afternoon. Claire contracts to purchase 100 sheets of plywood from Sally to
board up the windows on ClaireÕs building, delivery set for the next morning at
10 a.m. Then, at 2:05 p.m. the National Hurricane Center retracts its warning.
(An intern had made the wrong selection from a pulldown
menu.) Sally procures the plywood from the wholesaler, puts it on a truck, and
sends it out. At 9:30 a.m., Claire calls to cancel the order. Can she avoid the
contract?
ANSWER: ________________________________________________.
Problem 2501-2
Hurricane Sharona, Version 2:
At 2:03 p.m., the
National Hurricane Center issues a hurricane warning saying Hurricane Sharona will veer west and make landfall tomorrow afternoon.
Claire contracts to purchase 100 sheets of plywood from Sally to board up the
windows on ClaireÕs building, delivery set for the next morning at 10 a.m.
Then, at 2:05 p.m. the National Hurricane Center retracts its warning. (An
intern had made the wrong selection from a pulldown
menu.) At 2:07 p.m., Claire calls to cancel the order. Sally hadn't yet done
anything to procure the plywood. Can Claire avoid the contract?
ANSWER: ________________________________________________.
Topics
26-34. Identification and Delivery, Risk of Loss, Title, Remedies
Sam, Ben, and the DeLorean Time Machine
Background: A ÒDeLorean Time
MachineÓ is a DeLorean automobile customized to look
like a time machine from a famous movie. DeLorean
automobiles are quite rare, and the customization involved is elaborate.
Problem 2701-A:
Sam Sandsen of Miami made a contract to sell his DeLorean Time Machine to Ben Boyden of Seattle for $88,000. As part of the deal, Sam had to transport the vehicle to Seattle for Ben to take delivery. Sam decided to transport the DeLorean to Seattle by driving it himself by towing it behind his truck in a covered vehicle trailer. Unfortunately, because Sam was negligent in not correctly hitching the trailer to his truck, the trailer became unhitched in the Rockies in Colorado and the trailer plunged over a cliff, destroying the DeLorean. Who will bear the loss?
ANSWER: ________________________________________________.
Problem 2701-B:
Sam Sandsen of Miami made a contract to sell his DeLorean Time Machine to Ben Boyden of Seattle for $88,000. As part of the deal, Sam had to transport the vehicle to Seattle for Ben to take delivery. The contract specifically provided that title transferred to Ben at the moment the DeLorean first left the state of Florida. Sam decided to transport the DeLorean to Seattle by driving it himself by towing it behind his truck in a covered vehicle trailer. Unfortunately, because Sam was negligent in not correctly hitching the trailer to his truck, the trailer became unhitched in the Rockies in Colorado and the trailer plunged over a cliff, destroying the DeLorean. Who bears the risk of loss?
ANSWER: ________________________________________________.
Problem 2801:
Orrin dropped off his Nikon D3 SLR camera at Camera City to get it cleaned and repaired. Allandra, the Camera City associate who took OrrinÕs camera and filled out the repair slip told Orrin to come back for it next week, and she set it on the back counter, at which point AllandraÕs attention was distracted by some children that were roughhousing and were about to topple a display. Bryce, another Camera City associate, saw OrrinÕs camera on the back counter and figured, erroneously, that it was part of Camera CityÕs pre-owned inventory, and he put a price tag on it and put it in a display case. The next day, the camera was sold by Camera City to Nino. What is Orrin entitled to legally? Can he succeed in a legal action to have Nino return the camera to him? If not, can he prevail in a claim against Camera City?
ANSWER: ________________________________________________.
Topic
35. Key Differences Under the CISG
For Problems 3501:
á Background: Mitsutatchi Motores Industriales is a major motorized equipment manufacturer and a leading seller
of forklifts. Vayatom Industries uses forklifts
constantly in its business and has a dedicated executive in charge of
purchasing them and making sure they are properly operated and maintained.
Problem 3501-A:
Mitsutatchi Motores Industriales in Zapopan,
Mexico sent Vayatom
Industries in Lexington, Kentucky a firm offer for between 10 and 100 forklifts
(model no. FGFL-800XL) at ´2,800,000 each. The offer was signed, said on its
face it was irrevocable, and that it would not expire for 60 days. Mitsutatchi then said they were revoking the offer. Can Vayatom accept the offer and enforce it as a contract?
ANSWER: ________________________________________________.
Problem 3501-B:
Mitsutatchi Motores Industriales in Zapopan, Mexico sent Vayatom Industries in Lexington, Kentucky a firm offer for
between 10 and 100 forklifts (model no. FGFL-800XL) at ´2,800,000
each. The offer was signed, said on its face it was irrevocable, and that it
would not expire for three years. Can Vayatom accept
the offer and enforce it as a contract?
ANSWER: ________________________________________________.
Problem 3501-C:
Mitsutatchi Motores Industriales in Zapopan, Mexico sent Vayatom Industries in Lexington, Kentucky a firm offer for
between 10 and 100 forklifts (model no. FGFL-800XL) at ´2,800,000
each. The offer was signed, said on its face it was irrevocable, and that it
would not expire for three years. Can Vayatom
accept the offer after two years and enforce it as a contract?
ANSWER: ________________________________________________.
Background: Hexetron Aerospace, a U.S. business, is an
aerospace manufacturer and a leading seller of jet engines. AeroAtlantique
is a European airline based in Toulouse, France. France is a CISG signatory.
Canada World Airways is a Canadian airline.
Problem 3502:
Representatives of Hexetron Aerospace attend the Paris Air Show at Le Bourget Airport in France. They do a deal in-person – with a handshake and no signed document – with representatives of AeroAtlantique for the sale of 40 new J-801 turbojet engines for $11 million each. Is this an enforceable contract for sale?
ANSWER: ________________________________________________.
Problem 3503-A:
Representatives of Hexetron Aerospace attend the Paris Air Show at Le Bourget Airport in France and do a deal with Canada World Airways. The deal is in the form of a 56-page written agreement signed by representatives of both companies. The agreement contains the following:
MERGER
CLAUSE: This agreement constitutes the entire agreement between the parties. No
waiver, consent, modification or change of terms of this agreement shall bind
either party unless in writing and signed by both parties. Such waiver,
consent, modification or change, if made, shall be effective only in the
specific instance and for the specific purpose given.
The agreement says nothing about warranties. Later, in a dispute, Hexetron claims Canada World Airways agreed orally at the time the deal was made that the warranty on the engines would be limited to replacement of parts with no allowance for the labor cost in making repairs. Can Hexetron introduce evidence of this alleged oral agreement in the litigation?
ANSWER:
________________________________________________.
Problem 3503-B:
Representatives of Hexetron Aerospace attend the Paris Air Show at Le Bourget Airport in France do a deal with Canada World Airways. They do a deal in the form of a 56-page written agreement signed by representatives of both companies. The agreement contains the following:
MERGER
CLAUSE: This agreement constitutes the entire agreement between the parties. No
waiver, consent, modification or change of terms of this agreement shall bind
either party unless in writing and signed by both parties. Such waiver,
consent, modification or change, if made, shall be effective only in the
specific instance and for the specific purpose given. There are no
understandings, agreements, or representations, oral or written, not specified
herein regarding this agreement.
CHOICE
OF LAW: This agreement shall be governed exclusively by the law of Texas, USA.
The agreement says nothing about warranties. Later, in a dispute, Hexetron claims Canada World Airways agreed orally at the time the deal was made that the warranty on the engines would be limited to replacement of parts with no allowance for the labor cost in making repairs. Can Hexetron introduce evidence of this alleged oral agreement in the litigation?
ANSWER: ________________________________________________.
Topics
36-37. Leases
Background: Hexetron Aerospace is a major aerospace
manufacturer and a leading seller of jet engines. Oceanic Airlines is a major
international airline. Both are U.S. companies doing business in the U.S.
Problem 3601-A:
Hexetron Aerospace does a deal over the phone with Oceanic Airlines for the lease of 10 new J-906 turbojet engines. The lease term is one year, renewable each year for a total of 10 years. The initial lease payment, due now, before delivery, is $10 million. For each renewal year, an additional $10,000 is due. At the end of the lease, Oceanic may exercise an option to purchase for $10,000. The day after making this deal, Oceanic receives an offer from a rival manufacturer for much less money. Is this an enforceable lease?
ANSWER: ________________________________________________.
Problem 3601-B:
Hexetron Aerospace does a deal over the phone with Oceanic Airlines for the lease of 10 new J-906 turbojet engines. The lease term is one year, renewable each year for a total of 10 years. The initial lease payment, due now, before delivery, is $2 million. For each renewal year, an additional $1.2 million is due. At the end of the lease, Oceanic may exercise an option to purchase for $1 million. At that time, the jet engines are expected to be worth between $1 million and $2 million. The day after making this deal, Oceanic receives an offer from a rival manufacturer for much less money. Is this an enforceable lease?
ANSWER: ________________________________________________.
© 2015-2017 Eric E.
Johnson. Konomark
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