Prof Questions Flashcards
David is a builder-developer seeking more efficient energy sources for the buildings that his company, Source Development, owns and builds. Wayne is the owner and operator of Green Efficiency, a company that manufactures a new type of hydrogen generator able to quickly and cheaply utilize solar energy. David contracted with Wayne for the purchase of 75% of the hydrogen generators made by Green Efficiency for a designated two-year period at a price of $25,000 per generator. For the first several months, Green Efficiency produced on average four generators per month. Shortly thereafter the hydrogen market dropped, rendering hydrogen prices at an all-time low. On the open market, the contracted-for generators now sell for only $14,000 per unit. Green Efficiency, seeking to maximize the opportunity presented by its contract with Source Development, sped up its production lines so that it is now on schedule to produce eight generators per month.
What kind of contract did the parties enter into?
A. A requirements contract.
B. An output contract.
C. A contract for specially manufactured goods.
D. A destination contract.
B is correct. This is an output contract. David, on behalf of Source Development, agreed to purchase 75% of Green Efficiency’s output. It is not an exclusive dealing arrangement, as David did not agree to buy all of Green Efficiency’s output and Green Efficiency is not David’s sole provider of the product.
David is a builder-developer seeking more efficient energy sources for the buildings that his company, Source Development, owns and builds. Wayne is the owner and operator of Green Efficiency, a company that manufactures a new type of hydrogen generator able to quickly and cheaply utilize solar energy. David contracted with Wayne for the purchase of 75% of the hydrogen generators made by Green Efficiency for a designated two-year period at a price of $25,000 per generator. For the first several months, Green Efficiency produced on average four generators per month. Shortly thereafter the hydrogen market dropped, rendering hydrogen prices at an all-time low. On the open market, the contracted-for generators now sell for only $14,000 per unit. Green Efficiency, seeking to maximize the opportunity presented by its contract with Source Development, sped up its production lines so that it is now on schedule to produce eight generators per month.
As counsel for Source Development, what sorts of contract provisions would you have sought to include?
A. A provision setting forth a stated estimate of annual production.
B. A provision setting forth a floor and ceiling for total output during the two-year contract term.
C. Both A and B.
D. A only.
C is correct. Source Development would have been better served by a provision in the contract that set forth a stated estimate of annual production together with a floor and ceiling for total output for the two-year contract term, so that Green Efficiency would know that it could not exceed the prescribed ceiling.
David is a builder-developer seeking more efficient energy sources for the buildings that his company, Source Development, owns and builds. Wayne is the owner and operator of Green Efficiency, a company that manufactures a new type of hydrogen generator able to quickly and cheaply utilize solar energy. David contracted with Wayne for the purchase of 75% of the hydrogen generators made by Green Efficiency for a designated two-year period at a price of $25,000 per generator. For the first several months, Green Efficiency produced on average four generators per month. Shortly thereafter the hydrogen market dropped, rendering hydrogen prices at an all-time low. On the open market, the contracted-for generators now sell for only $14,000 per unit. Green Efficiency, seeking to maximize the opportunity presented by its contract with Source Development, sped up its production lines so that it is now on schedule to produce eight generators per month.
Is Source Development obliged to accept and pay for Green Efficiency’s higher yield? Choose the best answer.
A. Yes, if neither Source Development nor Green Efficiency caused the hydrogen market to drop.
B. Yes, because Source Development agreed to purchase 75% of Green Efficiency’s output.
C. No, because 8 generators per month is unreasonably disproportionate to any normal or comparable output.
D. No, because market shifts always excuse performance under a UCC contract.
C. is correct. No. Section 2-306(1) makes plain that no quantity that is unreasonably disproportionate to any normal or comparable output may be tendered. Further, Green Efficiency’s output must be made in good faith. Here, its “trumped up” production takes undue advantage of the market shift.
Jacob Morton (a law professor) agrees to sell his pen to you (a student) for $10. This agreement:
A. is a UCC transaction
B. is not a UCC transaction because the parties are not merchants
C. is not a UCC transaction because the sale is for less than $500
D. both (B) and (C)
A. is a UCC transaction
Southern Pine harvests pine trees and manufactures lumber. Suncoast Home Builders (“Suncoast”) builds luxury homes. On June 1, 2024, a Southern Pine agent drafted, printed, and signed the following writing: “Southern Pine agrees to sell up to 10,000 board feet of 4x4 Eastern Pine to Suncoast at a price of $2.25 per board foot. You have eight weeks to consider this exclusive offer, during which period Southern Pine will not withdraw its offer.” Southern Pine’s agent scanned and emailed the signed writing to Suncoast. As of June 15, Suncoast had not responded to the email. On June 16, Southern Pine emailed Suncoast: “Since we have not heard from you, we regretfully withdraw our $2.25 offer.” Immediately after receiving the withdrawal email, a Suncoast agent calls Southern Pine and stated: “We accept the $2.25 offer.” What result?
A. Southern Pine and Suncoast are parties to a contract because Southern Pine made an irrevocable offer that Suncoast accepted.
B. Southern Pine and Suncoast are parties to a contract because Suncoast is a merchant.
C. Southern Pine and Suncoast are not parties to a contract because Suncoast’s acceptance was not in writing.
D. Southern Pine and Suncoast are not parties to a contract because Southern Pine revoked its offer before Suncoast accepted it.
A. Southern Pine and Suncoast are parties to a contract because Southern Pine made an irrevocable offer that Suncoast accepted.
Mae adopted a tabby cat from Orange County Animal Rescue and paid an “adoption fee” of $200. The fee included i) neutering, ii) vaccinations and iii) grooming. Which of the following provides the strongest support for a finding that this transaction does not fall within Article 2’s scope?
A. The adoption of a pet does not effectuate a transfer of title.
B. A cat is not a good.
C. The predominant purpose of this transaction concerns neutering, vaccination, and grooming.
D. The predominant purpose of the transaction is the adoption of a cat.
C. The predominant purpose of this transaction concerns neutering, vaccination, and grooming.
GreenBeef raises regeneratively-farmed, grass-fed cattle. Wholesome Foods operates organic supermarkets across the United States. Over the past fifteen years, GreenBeef and Wholesome Foods have entered into numerous supply agreements for, among other things, beef ribeye with a Beef Marbling Score (“BMS”) of at least 6. And for the past fifteen years, GreenBeef would often deliver ribeye with a BMS of 5, which Wholesome Foods always accepted. However, on August 1, 2024, the parties executed a new supply agreement providing that “GreenBeef warrants that its American Wagyu ribeye shall have a Beef Marbling Score of not less than 8.” On August 20, WholeFoods accepted a delivery of GreenBeef American Wagyu ribeye with a BMS of 8. On September 10, Wholesome Foods rejected a shipment of GreenBeef American Wagyu ribeye with a BMS of 5. GreenBeef believes the rejection was improper and contends that “American Wagyu ribeye” is widely understood in the cattle industry to mean ribeye with a BMS of 5 or more. Who will likely prevail?
A. GreenBeef because Wholesome Foods, for fifteen years and with knowledge of GreenBeef’s imperfect performance, accepted nonconforming beef without objection.
B. GreenBeef if it is true that “American Wagyu ribeye” is understood in the cattle industry to mean ribeye with a BMS of 5 or more
C. GreenBeef because Wholesome Foods accepted the August 20 delivery.
D. Wholesome Foods.
D. Wholesome Foods.
Syrus manages a touring music group, the Marigolds. On the eve of a North American Tour, Syrus bought five wireless “A-Band” in-ear monitor units from Sure Sound for $5,000 per unit. The purchase agreement contained a clause stating: “The parties to this Agreement hereby agree that, in the event of a breach of this Agreement or of any express or implied warranty, the parties shall be entitled only to direct damages not to exceed the contract price.” Unbeknownst to Syrus, one of Sure Sound’s executives served as an advisor to the United States Federal Communication Commission (the “FCC”). In his capacity as FCC advisor, the Sure Sound executive learned that the FCC was about to restrict the A-Band of UHF frequencies to use by military personnel and first responders. The executive shared the FCC’s plans with Sure Sound prior to the sale of A-band units to Syrus, and it was well known among Sure Sound’s sales force that the A-Band would soon become unavailable for commercial use. During the first week of the Marigolds’ tour, the FCC banned the A-band of UHF frequencies. Syrus could not continue to operate the A-band units lawfully. With nightly performances scheduled, Syrus had no choice but to purchase lawful B-band wireless monitor units at a cost of $9,000 per unit. The Marigolds also had to cancel a performance and refund tickets to concertgoers, which cost Syrus and the Marigolds $96,000. Is the limitation of remedy clause enforceable?
A. Yes because the parties are both merchants.
B. No, if the court finds the limitation unconscionable, but Syrus bears the burden of alleging and proving unconscionability.
C. No, if the court finds the limitation unconscionable, and the court may raise the issue on its own; however, once raise, unconscionability must be decided as a triable matter of fact.
D. No, if the court finds the limitation unconscionable, and the court may raise the issue on its own and decide the issue as a matter of law.
D. No, if the court finds the limitation unconscionable, and the court may raise the issue on its own and decide the issue as a matter of law..
DJ, a professional disc jockey, sends an email to a sales associate at Midwest Sound stating: “Hey, a friend of mine just backed out of the Rocky Mountain Electric Carnival in two days. They asked me to cover his set. Can you please overnight two Technik MegaMax turntables to Mile High Stadium? Thanks.” The Midwest Sound agent overnighted two Audio-Technica AGZ-1000 turntables, which are significantly more expensive than the turntables DJ requested. Has a contract been formed?
A. No because DJ is not a merchant.
B. No if the turntables are worth more than $500 and the parties agreement was never memorialized in a signed writing.
C. Yes and the Audio-Technica turntables will be deemed “conforming goods” under the UCC.
D. Yes, but Midwest Sound’s delivery of Audio-Technica turntables constitutes a breach.
D. Yes, but Midwest Sound’s delivery of Audio-Technica turntables constitutes a breach.
Sasha, a dentist, ordered custom tablecloths from Daisy Party Supply (“Daisy”) for a dental hygienist’s baby shower. The order form stated that the tablecloths must be delivered by November 1, price $30 per tablecloth, free two-day shipping. Daisy responded with an email acknowledgment stating that Daisy will provide the tablecloths by November 1, price $30 per tablecloth, free two-day shipping. The email also stated, “Seller disclaims all warranties. Further, as a new customer, buyer must pay a one-time $100 design and typesetting fee.” Has a valid contract been made?
A. Yes, and all of Daisy’s additional terms are included.
B. Yes, but Daisy’s additional terms are not included.
C. Yes, but only those additional terms that do not materially alter the agreement are included.
D. No.
B. Yes, but Daisy’s additional terms are not included.
Patricia owns and operates a men’s clothing boutique. On August 1, she text Darryl, a sales manager for Alex Edmonds Shoes, to order fifty black “Madison Avenue” balmoral dress shoes at a purchase price of $700 per pair. Darryl text back, “No problem.” Patricia then called Darryl and said, “I need them ASAP. We’re heading into wedding season.” Darryl promised to ship the shoes the following day via overnight parcel service. That same afternoon, Darryl emailed Patricia an order form stating, “Thank you for your continued support. The twenty black Madison Avenues will ship tomorrow.” Patricia read the email, but did not respond. When the shipment arrived two days later, Patricia refused to accept the shoes. Patricia then text Darryl, “I never signed a purchase order and am not accepting these shoes. Next time I text you, follow up with a formal purchase order.” What result?
A. There is no enforceable contract because Patricia never signed a writing sufficient to satisfy UCC section 2-201.
B. There is no enforceable contract because Darryl never signed a writing sufficient to satisfy UCC section 2-201.
C. The statute of frauds does not apply to this transaction.
D. Since Patricia did not object to Darryl’s email, there is an enforceable agreement and Patricia must pay for the shipment (assuming the shoes are conforming goods).
D. Since Patricia did not object to Darryl’s email, there is an enforceable agreement and Patricia must pay for the shipment (assuming the shoes are conforming goods).
David is a builder-developer seeking more efficient energy sources for the buildings that his company, Source Development, owns and builds. Wayne is the owner and operator of Green Efficiency, a company that manufactures a new type of hydrogen generator able to quickly and cheaply utilize solar energy. David contracted with Wayne for the purchase of 75% of the hydrogen generators made by Green Efficiency for a designated two-year period at a price of $25,000 per generator. For the first several months, Green Efficiency produced on average four generators per month. Shortly thereafter the hydrogen market dropped, rendering hydrogen prices at an all-time low. On the open market, the contracted-for generators now sell for only $14,000 per unit. Green Efficiency, seeking to maximize the opportunity presented by its contract with Source Development, sped up its production lines so that it is now on schedule to produce eight generators per month. What kind of contract did the parties enter into?
A. An output contract.
B. An exclusive dealing contract.
C. A requirements contract.
D. A personal services contract.
A. An output contract.
Buyer, Paula American Bakeries, Inc., began negotiations with seller, David Commercial Ovens, Inc. for the purchase of a commercial grade oven. Early on, they agreed in writing that the price would be $110,000. Later, they orally agreed that Paula American Bakeries, Inc.’s duty to pay was conditioned on its getting financing from a bank. At the end of negotiations, the parties signed a writing that was complete on its face and did not contain a merger clause. The contract price was stated to be $120,000 and the financing condition did not appear in the writing. Paula American Bakeries, Inc. now seeks to introduce evidence of the lower price and the agreed upon financing condition. What result?
A. The $110,000 price term contradicts the terms of the final contract. Hence, it is inadmissible.
B. The condition regarding financing was an oral condition precedent to Paula’s obligation under the contract from even taking effect or becoming valid, and thus the parol evidence rule would not apply to prohibit evidence of the condition.
C. Both A and B.
D. The $110,000 price term condition and the condition regarding financing are admissible.
C. Both A and B.
Chanel, a Florida manufacturer of pre-batched cocktails, contracted with Derrick, a Tennessee manufacturer of distilled spirits and liqueurs, to purchase Derrick’s entire stock of Kudzu Bitter, a liqueur made from Kudzu leaves that only Derrick manufactures. The contract stated that it is “F.O.B. Florida.” The carrier suffered a train derailment, destroying Derrick’s stock of Kudzu Bitter. Will Derrick be excused from his performance obligation?
A. No, because this is a destination contract, and the risk of loss has not yet passed from Derrick to Chanel.
B. No, because Derrick failed to deliver conforming goods.
C. Yes, because this is a shipment contract, and the risk of loss has passed from Derrick to Chanel.
D. Yes, because, although this is a destination contract and the goods have not yet been delivered to Chanel, the goods here are identified to the contract and, under the circumstances, the contract is avoided.
D. Yes, because, although this is a destination contract and the goods have not yet been delivered to Chanel, the goods here are identified to the contract and, under the circumstances, the contract is avoided.
Krystal Glass, a glass rod manufacturer, agreed to sell Chic Glass Bead Supply its current stock of clear transparent glass rods for September 1 delivery at $0.35 per rod. When Krystal executed the contract, it cost Krystal $0.10 to manufacture each glass rod. However, in the months preceding the delivery date, the market price of glass rods increased significantly. As a result, it would cost Krystal $0.30 per unit to manufacture the glass rods required under Krystal’s contract with Chic. Krystal failed to deliver and claimed excuse. Krystal prevails. Which of the following, if true, provides the strongest basis for such a result?
A. The market price of glass increased significantly in the month’s preceding the delivery date.
B. The market for glass is notoriously volatile, and Chic, a merchant, should have anticipated that Krystal might refuse to deliver the glass rods in the event of a significant price increase.
C. The United States banned glass imports from China, the world’s leading exporter of glass, causing the price of glass to skyrocket.
D. Both parties are merchants, and merchants may refuse to deliver or accept goods when doing so would significantly impair one of the merchant’s ability to realize a profit from the transaction.
C. The United States banned glass imports from China, the world’s leading exporter of glass, causing the price of glass to skyrocket.
