Terms of Contract

Question 1

Agreement

Answer 1

Means the bargain of the parties in fact found in their language or inferred from other circumstances, including course of performance, course of dealing, or usage of trade.

Question 2

Whether the buyer was correct in claiming that the price had to be reasonable under 2-305?

Answer 2

The price is a reasonable price only if “nothing is said to price.”

Question 3

Good Faith

Answer 3

requires honesty in fact.

Question 4

Outrageous term

Answer 4

If a term is so outrageous that it does not belong in a contract, then it should not matter that a party was actually aware of it because they read it, or objectively aware of it because it was in bold print.

Question 5

What is an “unconscionable contract”?

Answer 5

A contract is unconscionable if the clauses involved are so one sided as to be unconscionable under the circumstances existing at the time of the making of the contract.
- When the court finds that terms are unconscionable, it is free to void the entire contract apply all but the offending clause, or limit application of the clause to eliminate the unconscionable effect.

Question 6

Is unconscionability found more often in consumer transactions or in commercial transactions?

Answer 6

Consumer transactions. Unconscionability is not generally found in commercial transactions, because businesspeople are presumed to know what they’re doing, and there isn’t generally the element of gross unfairness or absence of meaningful choice when both parties are businesspeople.

Question 7

Freedom of contract rule

Answer 7

the provisions of this section are subject to the contrary agreement of the parties.

Question 8

Identification

Answer 8

occurs when the goods are shipped, marked or otherwise designated by the seller as goods to which the contract refers.

Question 9

Voidable title

Answer 9

a person with voidable title has power to transfer a good title to a good faith purchaser for value

Question 10

Once goods are identified to a contract, does title pass to the buyer?

Answer 10

No. Identification doesn’t determine passage of title.
- Identification does give buyer an insurable interest in the goods and, in some cases, the right to demands the goods from the seller and the right to recover from third parties for damages to the goods.

Question 11

May the parties decide for themselves who is to bear the risk of loss?

Answer 11

Sure. the parties may allocate loss any way they want. 2-509(4)

Question 12

Under a “sale on approval contract, when does the risk of loss pass to the buyer?

Answer 12

Only when he accepts the goods. Until then, the risk remains with the seller; if the buyer decides not to accept the goods, he must notify the seller, and the seller bears the risk and expense of the return of the goods.
Approval = acceptance

Question 13

Does a breach of contract by buyer or seller affect who bears the risk of loss?

Answer 13

Yes; the effect of breach on the risk of loss is covered by UCC 2-510

Question 14

Where goods are so defective buyer can rightfully reject:

Answer 14

Risk stays with seller until cure or acceptance.

Question 15

Where buyer rightfully revokes acceptance

Answer 15

Seller is responsible only for loss to extent not covered by the buyer’s insurance coverage

Question 16

Where buyer wrongfully repudiates before risk passes to him

Answer 16

Buyer is responsible for loss to extent not covered by seller’s insurance coverage, and only for losses occurring within a commercially reasonable time after seller learns of the breach.

Question 17

Under a “sale on approval” contract, if a buyer doesn’t accept the goods, is return of the goods at the seller’s risk?

Answer 17

yes, under 2-327

Question 18

What is a shipment contract ?

Answer 18

A contract that authorizes shipment of goods by a third - party carrier in which the risk of loss passes when the seller delivers the goods to the carrier at the point of shipment.

Question 19

What is a destination contract

Answer 19

A contract authorizing the shipment of goods by a third party carrier in which the risk of loss passes to the buyer when the goods are tendered at the point of destination.

Question 20

In a contract authorizing the shipment of goods by a third party carrier and in the absence of contrary agreement, does the risk of loss to the buyer at the point of shipment or at the point of destination?

Answer 20

In the absence of agreement to the contrary, the risk of loss passes at the point of shipment. The shipment contract is viewed as the normal agreement.

Question 21

What do “C.I.F.” and “C & F” stand for in sales contract and what is the seller required to do to pass risk of loss to the buyer?

Answer 21

“C.I.F” means hat the price includes the cost of goods, insurance covering the goods, and the cost of freight to the named destination.
“C&F” means that the price includes the cost of the goods and the cost of freight to the named destination, but no insurance.

Question 22

C.I.F Contract

Answer 22

the seller must put the goods into possession of the carrier, load the goods, obtain a policy of insurance covering the goods, and forward the shipping documents to the buyer for the risk of loss to pass.

Question 23

C& F

Answer 23

requires the seller to do the same things, except purchase insurance

Question 24

What does F.A.S. stand for in a sale of goods contract and what is the seller required to do to pass risk of loss to the buyer

Answer 24

Means free alongside a vessel at a named port designated by the buyer. The seller is required to deliver the goods alongside the vessel or at the dock designated by the buyer and obtain and tender a receipt for the goods, in exchange for which the carrier is under the duty to issue a bill of lading. At this point the risk of loss passes to the buyer.

Question 25

Exception to Shipment contract

Answer 25

” Where a tender or delivery of goods so fails to conform to the contract as to give a right of rejection the risk of their loss remains on the seller until cure or acceptance.