CT exam (Assignments 9-16)

11-22-00

Explanations of Answers

1. d

Section 2-501(1) says that identification gives buyer an insurable interest. I have no good idea why so many people jumped directly to 2-401, rather 2-501, and then misapplied 2-401(3)(b). Although title can pass at the time of contracting if the goods are then identified and no docs are to be delivered, title doesn’t always pass upon identification. It otherwise passes upon seller’s completion of physical delivery. So item a. is not the best answer. On the other hand, the buyer always receives an insurable interest upon identification (unless the agreement can (1-102 question) and does change the result). Item e. is wrong because 2-501 doesn’t say that buyer must insure the goods. Item b. is wrong because buyer doesn’t have a duty to pay for the goods until seller tenders them (2-507(1)) and buyer accepts them (2-607(1)). Item c. is wrong because buyer needn’t accept the goods until they’re tendered (2-507(1).

2. b

The first “if” clause in this problem is worded to dodge the provisions of 2-613, which is the solution to question 3. The second and third “if” clauses tell you that this is a risk-of-loss problem without breach, so 2-509 applies, but it doesn’t give you the answer. Page 6 in our text says that buyer must pay for the goods if they are damaged on buyer’s clock. Item a. is wrong because title doesn’t fail to shift based on risk of loss or damage to the goods. Item c. might be wrong if risk of loss has shifted to the buyer because this is a shipment contract, because then seller would have tendered upon its delivery to the carrier. Item d. is the opposite of the correct answer and is wrong for those same reasons. Item e. is wrong because 2-613 doesn’t apply here; see next question for reasons why.

3. e

Section 2-613 applies only when (see your answers to Problem 16-6) the K requires goods that were identified upon K formation, those goods suffer casualty without the fault of either party (buyer or seller), and that casualty occurs before buyer gets the risk of loss. If all of those elements occur, then the K is avoided. Here, the goods were destroyed. (Some people wrote notes about whether they were completely destroyed. If they were partially destroyed, I would have said so. My dictionary defines “destroy” as “to ruin completely.” Don’t make the mistake of needing to add adverbs or adjectives in order for the word to have its full meaning. See also my comments on question 10.) And all of the other elements of 2-613 were met. Because the K is avoided, items b., c., and d. are wrong. And because the goods are gone, there’s no sense quibbling about title, which defeats item a.

4. b

See p. 15 of our text. A BOL is negotiable when made out to bearer or “to the order of”. So “seller” is the only choice that’s non-negotiable.

5. a

If you know that the goods are being sent, you know it’s not a warehouse K and that it could be a carrier K or it could be seller’s vehicle (but that’s not one of the choices), but you don’t know whether it’s a shipment or destination K. Somehow you need to narrow your choices from three to one. Section 2-503 cmt. 5 gives the default rule as shipment K, so item a. is the best choice. Item c. isn’t the best choice because 2-310(b) says that documents are an option but not required.

6. c

Reread the last paragraph on p. 29 of our text (the primer on void and voidable title). The only thing that the thief doesn’t have is voidable title.

7. d

A voidable title-holder has, under the derivative title rule in 2-403(1), power to transfer voidable title to a purchaser. It also has power to transfer good title to a gfPfV (2-403(1)). It has the same power if it acquired possession by impersonating someone (2-403(1)(a)). But there’s no mixing the rules in 2-403(1) with the rule in 2-403(2); a voidable title-holder has no power to transfer anything to a buyer in the ordinary course of business. So item d. is the only power not held by the voidable title-holder.

8. c

Items a. and b. do not meet the standards in 2-316(2), for lack of the magic word (“merchantability” or “merchantable”), nor do they meet anything in (3). Item c., on the other hand, meets the standards in (2) (conspicuous and uses the magic word) and so is a effective disclaimer. Item d. is probably not an effective disclaimer of the merchantability warranty, because it’s likely that a sign like this on the door of a store meets the standards in 2-316(3)(a): “calls buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty.” So item c. is the best answer, because it’s the only clearly effective disclaimer.

9. a

Items e. and h. (to bearer) are less secure ways to address a bill of lading. Items b. and d. are not negotiable, because they are not to bearer or “to the order of”. Items c. and f. deprive seller of control, because now the buyer or the carrier is the only party who can obtain or redirect the goods; the seller cannot. Items a. and g. are the only items to the order of the seller; between them, item a. gives seller greater control and flexibility because the “customary banking channels” (c.b.c.) are responsible for obeying seller’s instructions and the instructions in the documents (see p. 19 in our text) and because seller can have the c.b.c. folks endorse the BOL for seller to buyer when buyer is ready to pay or to another buyer if the first buyer repudiates. (Also, per Assignment 19, Seller also has the right of stoppage until that endorsement; 2-705(2)(d)).

10. e

Item a. is wrong because merger clauses have no effect on collateral agreements. Item b. is wrong because implied merger clauses are covered by 2-202 cmt. 3, which uses the standard of “certainly” rather than “naturally”. That one important word makes item b. incorrect. (See also pp. 128-129 of our text.) Item c. is wrong because a writing that embodies all of the parties’ agreed-upon terms is “complete and exclusive”. Finality has to do with the writing not being a draft of the agreement. Item d. is wrong because the parol evidence rule has no effect on subsequent evidence. Item e. is correct, because the meaning of “integrated” (which is a synonym for “merged”) is that the written agreement is complete and exclusive. (Some people wrote notes about whether “integrated” meant completely integrated, but this is the same semantic misstep as some argued in question 2 or 3 about whether “destroyed” meant completely destroyed; see my note there. “Integrated” means completely integrated, unless it says “partially integrated.”)

11. g

Item a. is a description per 2-313(1)(b). Item b. is an affirmation of fact or a promise per 2-313(1)(a). Item c. is a promise per 2-313(1)(a). So the correct answer is g., which includes a., b., and c.

12. b

In Problem 9-3(D) (p. 91), we used two solutions to get the after-furnished warranties within the basis of the bargain: 2-313 cmt. 7 (the modification idea) or the cases that extended the period of the basis of the bargain to include these later additions. In fact, we used the same solutions so many times in that Problems that I worried that we were being too redundant. In addition, it is permissible to add a warranty at the time of K formation that refers to the warranties-in-the-box and thereby brings them within the basis of the bargain. On the other hand, item b. is not enough to meet the basis-of-the-bargain test, because you didn’t know the content and therefore could not have relied on it. Nonreliance defeats the basis of bargain in all three jurisdictions.

13. a

See Problem 11-4 (p. 120). Magnuson-Moss does apply, because this is a “consumer product”, even if it is being used by a business; see p. 122, §101 parenthetical. Moreover, under § 108, the supplier cannot limit a limited warranty to a period shorter than the written warranty. Here, the written warranty is for one year; note that the definition of “written warranty” doesn’t impose any requirement of “basis of the bargain.” So the implied warranty can be limited to one year, but it can’t be completely disclaimed. Item a. correctly states this result. Item e. would be correct, except for this Magnuson-Moss rule. But then, that’s exactly what Congress had hoped to accomplish with Magnuson-Moss. Item b. is wrong because disclaimers don’t have to meet the test for basis of the bargain; see 2-316. Item c. is wrong because the magic language for 2-316(2) is there. Item d. is wrong because 2-316(1) applies only to conflicts between an express warranty and its would-be disclaimer; it doesn’t apply to implied warranties.

14. k

Look at your handy-dandy chart on p. 89. As we said in class numerous times, nonreliance defeats the basis of the bargain under all three tests. However Cipollone doesn’t apply here because the manual is not an advertisement. So items a., b., and d. are correct, which means that the right answer is item k.

15. c

You have to read each so-called merger clause for its particular content. There is no standard wording or content for a merger clause. This particular clause has three pieces of content: The “save for” clause says that this is a partial merger clause (see first full para. on p. 128) because it doesn’t apply to warranties of good title. The main clause (“all of the parties’ agreed terms are memorialized within the four corners of this document”) says that this writing is complete and exclusive. The final phrase (“as signed by the parties”) says that this writing is final, at least it will be when signed by the parties. Item a. addresses only the exclusion and the finality aspect. Item b. addresses only the exclusion and the completeness/exclusiveness aspect. Item c. addresses all three and is the correct response. Item d. is wrong because it bars c/d and u/t, in contravention of Columbia Nitrogen and your responses to Problem 12-1 (p. 132). Item e. is wrong because the PER has no explicit requirements about conspicuousness. Item f. is correct as far as it goes (see 2-312), but it is an incomplete answer and not as good as the answer in item c.

16. d or e

I had meant to word the question so that these were individual purchase orders that were being filled as they were received, so that there were no installment contracts or yet-unfilled orders. I neglected to make that clear, so I’m allowing either of two answers for this problem. Item d. is the best answer for the pending orders, and item e. is the best answer for the new orders. Item c. is not as good an answer as item d. because it raises impracticability without raising buyer’s allocation duties. Item a. is not a good response because financial stability is not pertinent to the problem of the shaky mineral supply, and it’s not clear that these are 2-609 demands. Item b. is wrong because 2-613 can’t apply because these aren’t goods identified at contract formation.