BUSA311 - Exam 1 Study Guide Questions and Answers Additional terms become part of the agreement unless the original offeror insisted on its own terms, the new term materially alters the offer, or the offeror promptly rejects the new term. Martin's offer insisted on its own terms and Serge's arbitration clause does not become part of the agreement. Martin may litigate his dispute. - Correct Answer Martin, a diamond wholesaler, writes Serge, a jewelry retailer, offering to sell 75 specified diamonds for $2 million. Martin's offer sheet specifies the price, quantity, date of delivery, and other key terms. The sheet also states, "Offer is made on these terms and no other." Serge sends Martin his own purchase order, naming the diamonds, price, and so forth, but adding a clause requiring any disputes to be settled by a diamond- industry arbitrator. In the diamond industry, arbitration by such a person is standard.Martin does not object to the arbitration clause. Martin delivers the gems but Serge refuses to pay the full price, claiming that many of the stones are of inferior quality.Martin sues for the balance due, but Serge insists that any dispute must be settled by arbitration. May Martin litigate, or must he arbitrate the case?This contract neither stated a price nor allowed one party to determine it. That means that the price is a reasonable one at the time of delivery. A court will use market value, and any comparable sales, to determine the price. - Correct Answer Coffee Retailer sends a form to Cupper, ordering 100 cartons of specified coffee cups to be delivered the first of each month for six months. The order form says nothing about price. For three months, Cupper delivers on time and sends an invoice, which Retailer pays. On the fourth month, Cupper's invoice is 8 percent higher than before. Retailer refuses to pay the increase and informs Cupper that it will accept no more deliveries. Cupper sues.Retailer claims there was no enforceable contract. Cupper says there was a bargain and that it has the right to determine the price. Who is right?The UCC governs this contract because the speakers are much more expensive than the labor. The contract does not have to be in writing because it is for less than $500.The agreement to use JBL speakers rather than Rockford Fosgates is enforceable, even without consideration for the change. Jacob will have to live with the deal, including the JBL speakers. - Correct Answer Jacob turns 18. For his birthday, he gets $500 cash and his grandmother's ancient minivan. And yes, it is the kind with wood paneling on the side. Jacob cannot do much about how the car looks, but he decides that he can at least make it sound awesome. So, he immediately takes the car to Big Mike's Custom Stereo.At Big Mike's, Jacob makes a verbal agreement to buy an amplifier and two Rockford Fosgate speakers and to have them installed at a cost of $499. The amp and speakers come to $420, and the installation charge is $79. He decides to have them installed while he waits.After an hour, a clerk finds him and says, "Hey, man, we're out of stock on those speakers. But I can get you some JBLs right now—same size, same price, just as loud." Jacob is eager to drive out with a new system and agrees to the speaker substitution. 1 / 2
Moments later, Jacob finds the clerk and says, "Wait, I'm not sure about all of this. I don't think I want to buy any of it after all." Can Jacob get his money back, or is he stuck with his purchases?The purchases of the iPad and the barbecue grill are covered by Article 2 of the UCC.Both agreements involve goods. The figure of $500 is relevant to whether the Statute of Frauds applies to the agreements, but it is not material to the threshold question of whether Article 2 applies in the first place. All sales of goods, from ferrets to Ferraris, fall under Article 2. The teeth whitening is a service and not a sale of goods. It is not governed by Article 2. - Correct Answer While shopping at his local mall, Milan buys an iPad for $399, a barbecue grill for $509, and then pays $25 to have his teeth whitened.Which of Milan's transactions are governed by Article 2 of the UCC?This is a bargain between two businesses, and courts rarely find clauses in such agreements unconscionable. The assumption is that sophisticated businesspeople understand what they are getting into and are able to protect themselves. If Jim Dan could run a golf course, the company was sophisticated enough to understand the simple disclaimer in this contract. Scotts wins. - Correct Answer Jim Dan, Inc., owned a golf course that had trouble with crabgrass. Jim Dan bought 20 bags of Scotts Pro Turf Goosegrass/Crabgrass Control for $835 and applied it to the greens. The Pro Turf caused over $36,000 in damage to the greens. Jim Dan sued Scotts. Scotts defended by claiming that it sold the Pro Turf with a clearly written, easy-to-read disclaimer that stated that in the event of damage, the buyer's only remedy would be a refund of the purchase price. Jim Dan, Inc., argued that the clause was unconscionable. Please rule.(a). The "valid city certificate" phrase raises a new issue; it does not contradict anything in Cookie's offer. That means it is an additional term and becomes part of the deal unless Cookie insisted on its own terms, the additional term materially alters the offer, or Cookie promptly rejects it. Cookie did not insist on its terms, this is a minor addition, and Cookie never rejected it. The new term is part of a valid contract. - Correct Answer Cookie Co. offered to sell Distrib Markets 20,000 pounds of cookies at $1.00 per pound, subject to certain specified terms for delivery. Distrib replied in writing as follows: "We accept your offer for 20,000 pounds of cookies at $1.00 per pound, weighing scale to
have valid city certificate." Under the UCC:
A contract was formed between the parties.A contract will be formed only if Cookie agrees to the weighing scale requirement.No contract was formed because Distrib included the weighing scale requirement in its reply.No contract was formed because Distrib's reply was a counteroffer.c - Correct Answer For a contract governed by the UCC sales article, which one of the following statements is correct?
- Merchants and non-merchants are treated alike.
- The contract may involve the sale of any type of personal property.
- The obligations of the parties to the contract must be performed in good faith.
- The contract must involve the sale of goods for a price of $500 or more.
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