Commercial Transactions

Final Exam

Prof. Kunz

1998

 

 

 

To my students:

 

There are 9 pages in this exam (plus cover sheet).  Please look over your pages to make sure you have all of them.

 

Questions 1-15 are worth one point apiece, and you must get a question completely right in order to earn each point.

 

Question 16 is worth four points, and you can earn anywhere from zero to four points on that question.

 

If you have a dispositive question about the exam while you’re taking it, write me a brief note next to the item in question.  Tell me what you think is an ambiguity or missing fact or instruction.  Then tell me how your answer would come out, depending on each scenario.

 

 

-- Prof. Kunz

1.   Which items are “goods”?  (Check all that apply.)

x       a pint of blood for a transfusion

x       a pet cat

x       an acre of white pine trees, to be cut down by buyer in a year or two

x          walleye for a fish market

x          software, shrink-wrapped and sold at an electronics store

 

2.   Which actions (explicitly or implicitly) apply ONLY to goods identified before this action, and not to unidentified goods?  (Check all that apply.)

___    acceptance

x          seller’s reclamation in cash sale

x          seller’s stoppage of delivery

x          buyer’s security interest

___   specific performance

___    cover

___    market damages

x          buyer’s reclamation for seller’s insolvency

x       avoid contract after casualty loss

x          replevin

x          seller’s reclamation in credit sale

 

3.   Buyer is in St. Paul, and seller is in St. Louis.  If their contract calls for C.I.F. St. Louis, what kind of contract is it?  (Check all that apply.)

x          shipment contract

x       full-fledged documentary

___    quasi-documentary

___    warehouse bailee

x          carrier bailee

___    seller’s truck

___    destination contract

___    non-documentary

___    buyer’s truck

 

4.   In a sale of goods with a negotiable bill of lading, how can seller best preserve its right to stop the goods during shipment?  (Check the single best answer.)

x             instruct buyer’s bank to endorse the bill of lading to the buyer upon payment

___    instruct carrier not to let buyer inspect the goods before payment

___    instruct the buyer’s bank not to relinquish the bill of lading before the goods arrive

___    instruct seller’s bank to sign over the bill of lading when it receives payment from buyer’s bank

___    instruct carrier to call seller for instructions upon reaching the destination

___    attach a sight draft and insist that the bill of lading not be given to buyer until payment is made against the sight draft

The following facts apply to Questions 5 through 15:

 

Bev and Jim Seller are Minnesota truck farmers who raise fruits, vegetables, and flowers for four farmers’ market sites in the Twin Cities.  They also sell produce directly to caterers and restaurants in the same city.

 

(For all of these questions, disregard any non-UCC statutes and regulations dealing with agricultural commodities, if you happen to know about such things.)

 

 

The following facts apply to Question 5 through 10:

 

The Sellers made a contract over the phone with Peter’s Restaurant (a new customer) in December.  Sellers agreed to sell all of their premium sweet corn, however much that might be, to the restaurant during the following summer.  Payment was agreed to be due within ten days of each delivery.  By the end of the summer, the Sellers had made forty deliveries (mostly daily) of fresh sweet corn, totaling 160 dozen ears of corn.

 

During the last two weeks of deliveries, Peter’s Restaurant rejected four of the deliveries, because they weren’t “premium” quality.  The parties agreed that the four deliveries weren’t premium quality but that they were the standard quality sold at the farmer’s market.  Sellers declined to cure because they had delivered everything that was ripe.  Sellers say that buyer wrongfully rejected.  Buyer has refused to pay for those four deliveries.

 

 

5.   What is the pivotal argument between Peter’s Restaurant and Sellers?  (Check the single best argument.)

___    whether the Sellers made a perfect tender

___    whether the risk of loss passed to buyer before the corn deteriorated to non-premium quality

___    whether this is a casualty loss

___    whether buyer gave sufficient notice of rejection

x          whether the lesser quality is a substantial impairment

 

6.   If buyer rightfully rejected the corn, what were its duties as to the unsuitable corn?  (Check all that could apply.)

___    resell to satisfy its security interest

___    resell perishable goods for Sellers’ account

___    follow Sellers’ reasonable instructions

x       hold goods with reasonable care

___    store the goods

___    ship the goods back to Sellers

___    resell for Sellers’ account

7.   If buyer wrongfully rejected the goods and if Sellers sold the rejected corn at the farmers’ market, what remedies could Sellers choose among, on or after the day of rejection?  (Check all that apply.)

___    withhold the next delivery

x       resale damages

x          market damages

___    the price

___    salvage

 

8.   If buyer rightfully rejected and then paid twice the contract price for sweet corn from another farmer on the days of the defective deliveries, what kind of damages encompass that extra cost?  (Check the single best answer.)

x       cover damages

___    incidental damages

___    consequential damages

___    market damages

___    lost-profit damages

 

9.   When did the risk of loss for the corn pass from the Sellers to buyer?  (Check the two best alternative answers.)

___    upon tender by Sellers

x       upon receipt by buyer

upon acceptance by buyer

x       it never did

___    upon tender by carrier

___    upon tender to carrier

 

10.  Where do you look to find the terms of the agreement, at the time of the dispute?  (Check all that apply.)

___    default terms

___    mandatory rules of law

___    Sellers’ notes, taken during the phone conversation

___    buyer’s notes, taken during the phone conversation

x          course of performance

x          course of dealing

___    all additional and different terms except those expressly conditional on the other party’s assent

___    all additional terms except those that materially alter or were objected to in advance or within a reasonable time

___    all different terms except those removed by first-shot, last-shot, or knock-out rule

x      the oral phone conversation

x      usage of trade

The following facts apply to Question 11 through 15:

 

The Sellers made a written agreement with a grocery store to furnish 100 heads of organic Boston bibb lettuce on June 15.  (No other terms were written out.)  At the four farmers’ markets, Sellers had distributed a brochure listing its types of produce and the seasonal availability of each.  The lettuce listed was described as “Boston bibb lettuce, tender from the core through each outer leaf.”

 

The lettuce that Sellers delivered to the grocery store had to be cleaned up; the store three away an average of 3-6 leaves per lettuce head, before putting the lettuce out for sale.  The grocery store did not see the brochure until after delivery.  At that point, the store argued that it was entitled to a price reduction.

 

11.  The Sellers argued that their contract with the store didn’t include the brochure contents.  In a range of jurisdictions, would the brochure be part of the basis of the bargain?  (Place one check in each vertical column below.)

 

 

12.  If buyer is correct and can legitimately claim a price reduction, what UCC section(s) will it use to calculate who owes whom how much?  (Check all that apply.)

2-711(3)

2-712

2-713

x      2-714

2-715 arguable

2-716

x      2-717

13.  Does buyer have any claim based on breach of warranty of fitness for a particular purpose?  (Check the single best answer.)

x      no, because buyer’s purpose was ordinary

___    no, because buyer didn’t actually rely on Sellers’ skill or judgment to select suitable goods

___    no, because Sellers had no actual knowledge of buyer’s particular purpose at the time of contract formation

___    no, because Sellers had no constructive knowledge of buyer’s particular purpose at the time of the contract formation

___    no, because Sellers had no constructive knowledge of buyer’s reliance at the time of the contract formation

___    no, because the warranty was formed but not breached

___    yes, because the warranty was formed and breached

 

14.  Where does the UCC mention the warranty of resalability?

 

2-314 comment 8 (?? 1? -optional                                          

 

15.  Assume that, at the time of executing the written agreement, Bev Seller said to the grocer, “This will be our best bibb, ready to go directly into your displays.”  Will that statement be barred by the parol evidence rule?  (Check the single best answer.)

___    yes, because the written agreement is a final expression

___    yes, based on the implied merger doctrine

___    yes, because the written agreement is a final and complete expression

x      no, because the written agreement is not a complete expression

___    no, because the written agreement is not a final expression

16.  Attached are §§ 2-401 and 2-403 from the December 1998 draft of Article 2.  Depict the rule(s) in § 2-403 in a flowchart, a diagram, and if/then textual format, or other format, so long as it shows the content and interrelationships of the section correctly, clearly, succinctly, and coherently.  Use any of the definitions from § 2-401 that apply.  You are limited to one page.  I suggest that you prepare a scrap coy first.  If you try more than one version, clearly mark which one you want me to read.

       PART 4.

  WARRANTIES

SECTION 2-401.  DEFINITIONS.  In this part:

(1) “Damage” means all loss resulting from a breach of warranty, including incidental and consequential damages.

(2) “Goods” includes a component incorporated in substantially the same condition into other goods.

(3) “Immediate buyer” means a buyer in a contractual relationship with the seller.

(4) “Remote buyer” means a buyer from a person other than the seller against which a claim for breach of warranty is asserted.

(5) “Representation” means a description of the goods, an affirmation of fact or a promise about the quality or performance of the goods to be delivered, or a sample or model of the goods.

(6) “Seller” includes an auctioneer or liquidator that fails to disclose that it is acting on behalf of a principal.

  SECTION 2-403.  EXPRESS WARRANTY TO IMMEDIATE BUYER.

(a) Any representation made by the seller to the immediate buyer, including a representation made in any medium of communication to the public, including advertising, which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods will conform to the representation or, with respect to a sample, that the whole of the goods will conform to the sample.

(b) It is not necessary to create an express warranty that the seller use formal words such as “warranty” or “guarantee” or have a specific intention to make a warranty.  However, a representation merely of the value of the goos or an affirmation purporting to be merely the seller’s opinion or commendation of the goods does not create an express warranty under subsection (a).

(c) A representation, including a representation made in any medium of communication to the public, including advertising, made to the immediate buyer and which relates to the goods becomes part of the basis of the bargain unless:

(1) the immediate buyer know that the representation was not true;

(2) a reasonable person in the position of the immediate buyer would not believe that the representation was part of the agreement; or

(3) in the case of a representation made in any medium of communication to the public, including advertising, the immediate buyer did not know of the representation at the time of the sale.

(d) A right of action for breach of warranty under this Section accrues as provided under Section 2-814.