Sales and Contracts

Question 1

Contracts under the Statute of Frauds must be in what form to be valid?

Answer 1

They must be in writing.

Question 2

What must a contract contain?

Answer 2

Offer, Acceptance, Consideration, Proper form (oral or written), Legal subject matter, 2 Competent parties

Question 3

What is promissory estoppel?

Answer 3

Promises to donate are legally enforceable Basically; you can’t tell a charity; Hey; if you buy this $100;000 piece of land; I’ll pay for the building that will go on it; and then renege on your promise

Question 4

What is a Requirements Contract? How are they limited?

Answer 4

These are contracts where someone becomes the exclusive provider of something in exchange for consideration Companies can’t get locked in to one and then have market conditions force them to sell something at what has become an unreasonable price

Question 5

What makes a contract subject to the Statute of Frauds?

Answer 5

o Cannot be completed within one year o Involves the purchase of real estate o $500+ Sale of Goods o Co-signing and guaranteeing the debt of another

Question 6

What is an Option?

Answer 6

Some amount of consideration (like money) is put forth by offeror to keep the offer open for a stated period of time

Question 7

What is Warranty of Merchantability?

Answer 7

This good will do its intended purpose Can be disclaimed

Question 8

What is Warranty of Fitness?

Answer 8

This good is the right choice for you based on the seller’s expert opinion Can be disclaimed

Question 9

What actions or circumstances will revoke a contract?

Answer 9

Offeror revokes and offeree receives revocation Offeree finds out prior to acceptance that offeror has sold the item In the case of an Option; offeror cannot revoke until the time of the option has elapsed Initial rejection by offeree doesn’t void the option.

Question 10

What will void an offer?

Answer 10

If offeror dies or becomes insane before acceptance; offer is void. Contract is binding if acceptance occurs before death/insanity.

Question 11

What are the elements of a Firm Offer?

Answer 11

You offer to sell something at a price and keep that offer open for a set period of time 3 months max Only merchants can make firm offers Must be in writing and signed

Question 12

What happens if an offeree accepts a contract but puts added stipulations?

Answer 12

It is not acceptance; but instead becomes a counter-offer and the original offeror is now the offeree

Question 13

When can contracts be discharged by law?

Answer 13

Party under contract is bankrupt Party under contract dies or is incapacitated Party cannot physically complete the contract (i.e. They are in prison so can’t finish building your house)

Question 14

What elements are needed for a sale covered under the Uniform Commercial Code (UCC)?

Answer 14

Offer - You offer to sell something at a price Acceptance - the other party accepts Consideration - Something of value has been exchanged for the goods Note: The UCC only covers sales of goods.

Question 15

When does title and risk of loss transfer on a sale of goods?

Answer 15

If terms are: FOB shipping point: Title transfers at point of shipment (i.e. when loaded on truck) FOB destination: Title and risk transfers once item is delivered

Question 16

What forms may acceptance of a contract take?

Answer 16

Can be written or oral Must be in the form/method required by offeror Must be mirror image - i.e. no changes in terms

Question 17

When is an offeror bound by a contract?

Answer 17

When they RECEIVE the acceptance. If the offeree rejects; then accepts - whatever gets to the offeror first is what is binding.

Question 18

Under what situations are sales of goods covered by the Statute of Frauds? What are the exceptions?

Answer 18

If value of goods sold is > $500; sales contract must be in writing Exceptions: Merchants can enter into oral contracts for > $500 items. Oral contracts are binding for special or uniquely-made items (i.e. custom cabinets or custom furniture that could not be sold if buyer reneged)

Question 19

What is the statute of limitations with respect to buyer protection?

Answer 19

Buyer must sue to recover damages within 4 years.

Question 20

What are the requirements for the assignment of a contract?

Answer 20

Contracts are assignable to a third party beneficiary; but must be done so in good faith Obligations may be assignable- Assignor is still liable Assignor may be released from liability if other party grants a novation

Question 21

What is the result of a clerical error in a contract?

Answer 21

The contract is unenforceable. Example: Person signs a contract to pay $500.00 to have their lawn re-seeded but due to clerical error; it actually reads $5000.00

Question 22

What is strict liability with respect to buyer protection?

Answer 22

Manufacturers of goods cannot disclaim that their products will be safe Can be liable if negligent

Question 23

What is the parol evidence rule?

Answer 23

Prevents one party to a written contract from coming in after the fact and claiming that a certain conversation took place that conflicts with what is agreed upon in the written contract It also prevents using an oral argument to read into the meaning of what is written on paper If it’s on paper; it trumps what was agreed-upon orally prior to the written contract Note: does not negate oral agreements made AFTER the contract or disallow oral words from clarifying ambiguous contract language.

Question 24

What can make a contract VOIDABLE?

Answer 24

Fraud in the inducement Party not competent to contract Formed under SIMPLE duress Undue influence

Question 25

What are non-conforming goods with respect to buyer protection?

Answer 25

Buyer can reject some or all of the shipment if the seller didn’t perform as agreed and ship what was expected Must give notice Must give seller a chance to remedy the situation

Question 26

What is a Warranty of Title?

Answer 26

The seller has the right to sell the good and no one else can stake claim to that good

Question 27

Who can accept an offer?

Answer 27

Must be accepted by intended party (offeree) Acceptance can only be made by a party who knows an offer has been made and has all of the facts - AKA a meeting of the minds They must intend to accept

Question 28

What sales are covered under the Uniform Commercial Code (UCC)?

Answer 28

Only sales of goods are covered under the UCC.

Question 29

What can make a contract VOID?

Answer 29

Fraud in the execution Formed under extreme duress - extreme Illegal