Contract Law — UBE practice questions

Under UCC § 2-207, between merchants an acceptance with new terms:

1. Automatically rejects the underlying original offer
2. May form a contract, with new terms in absent objection
3. Cannot form any contract on any set of terms
4. Is treated identically to the common-law mirror rule

Answer: B — May form a contract, with new terms in absent objection

A) That is the common-law rule; the UCC displaces it. B) Correct — § 2-207(1)-(2) allows a definite acceptance to form a contract, and between merchants new non-material terms become part of the contract absent objection or express limitation. C) Contracts can form under § 2-207. D) The mirror-image rule does not apply under Article 2.

The doctrine of mutual mistake permits rescission when the parties share a mistake about:

1. A prediction of future market prices for either party
2. The identity of an unrelated third-party in the market
3. A minor detail with no effect on either party's performance
4. A basic assumption having a material effect on the exchange

Answer: D — A basic assumption having a material effect on the exchange

A) Predictions about market movements are not 'facts' at contract formation. D) Correct — Restatement § 152 permits rescission for a mutual mistake about a basic assumption with material effect unless the party bore the risk. C) Immaterial mistakes are not grounds for rescission. B) Third-party identity is generally irrelevant.

A buyer ordered 100 chairs for delivery on June 1. On June 1 the seller delivered 98 chairs. The buyer rejected the entire shipment. The seller, with time remaining before the contract date having passed only hours earlier, offered to deliver the missing two the next morning. Which is MOST accurate?

1. The buyer's rejection was improper because a two percent shortfall is substantial performance
2. The rejection was proper, and the seller may cure only with the buyer's express consent
3. The rejection was proper, but the seller may cure if it had reasonable grounds to expect acceptance
4. The rejection was improper because a buyer must accept any commercial unit actually conforming

Answer: C — The rejection was proper, but the seller may cure if it had reasonable grounds to expect acceptance

C) Correct — the perfect tender rule permits rejection for any nonconformity, but where the time for performance has passed a seller who had reasonable grounds to believe the tender acceptable gets a further reasonable time to cure on notice. A) imports the common-law substantial performance standard that does not govern goods. B) makes cure depend on consent, which the statute does not. D) misstates the buyer's option to accept part of a shipment as a duty.

A contractor bid on a job after its estimator transposed digits, producing a bid far below every other bid and below the contractor's known costs. The owner, who saw the bid spread, accepted immediately. The contractor seeks to avoid the contract. The BEST ground is:

1. Mutual mistake, because neither party intended the transposed figure to control
2. Unconscionability, because enforcing a below-cost price would be oppressive
3. Unilateral mistake, where the other party had reason to know of the clerical error
4. Impracticability, because performing at that price would cause severe hardship

Answer: C — Unilateral mistake, where the other party had reason to know of the clerical error

C) Correct — a unilateral computational mistake is a ground for avoidance when the other party knew or had reason to know of it, as the bid spread suggests here. A) mislabels the defect; only one side was mistaken. B) reaches for a doctrine aimed at unfair bargaining process and shocking terms, not clerical slips. D) confuses increased cost with impracticability, which requires an unforeseen supervening event.

A firm offer under UCC § 2-205 requires:

1. A written and notarized agreement from both parties involved
2. A ten-percent good-faith deposit by the offeree upfront
3. A promise of exclusivity backed by adequate consideration
4. A merchant's signed written assurance to hold the offer open

Answer: D — A merchant's signed written assurance to hold the offer open

D) Correct — § 2-205 makes a merchant's signed written promise irrevocable for the stated time (max 3 months without consideration). B) A deposit is not required. C) Consideration is not required for a firm offer. A) Notarization is not required.

Promissory estoppel may substitute for consideration when there is:

1. A written contract signed by both parties
2. Any casual social promise between friends
3. An ordinary bargained-for exchange of value
4. A definite promise inducing detrimental reliance

Answer: D — A definite promise inducing detrimental reliance

A) A signed contract has its own consideration analysis. B) Social promises do not typically support estoppel. C) Bargained-for exchange is itself consideration. D) Correct — Restatement (Second) § 90 requires a definite promise, reasonably foreseeable and actual detrimental reliance, and enforcement to avoid injustice.

Assignment of contract rights is generally permissible unless the assignment would:

1. Materially change the obligor's duty or increase the risk
2. Involve a change in the assignor's business address only
3. Be for less than the original invoice price of the goods
4. Occur before the underlying performance is fully complete

Answer: A — Materially change the obligor's duty or increase the risk

A) Correct — Restatement § 317 permits assignment unless it materially changes the obligor's duty, materially increases risk, or is barred by law or the contract. B) Address changes do not affect assignability. C) Consideration for assignment is not a bar. D) Timing alone is not restrictive.

A supplier breached a contract to deliver a custom part, and the buyer's factory sat idle for two weeks. The supplier knew the part was for the buyer's assembly line but knew nothing of an unusual resale contract that the buyer lost. The buyer sues for both idle-plant losses and the lost resale profit. The court will MOST likely award:

1. Both items, because all losses flowing in fact from a breach are recoverable
2. The idle-plant losses only, because the resale loss was not within the supplier's contemplation
3. Neither item, because consequential damages require an express contractual provision
4. The resale profit only, because lost profits are the standard measure of expectation

Answer: B — The idle-plant losses only, because the resale loss was not within the supplier's contemplation

B) Correct — consequential damages are limited to losses the breaching party had reason to foresee at contracting, and the special resale arrangement was unknown. A) applies pure factual causation and drops the foreseeability filter. C) requires an express clause that the law does not demand. D) inverts the analysis, awarding the unforeseeable item and denying the foreseeable one.

Under UCC § 2-201, a contract for the sale of goods for $500 or more is generally enforceable only if:

1. It has been notarized by a licensed notary
2. It is witnessed by at least two disinterested parties
3. It is recorded with a state commercial-code office
4. It is in a writing signed by the party to be charged

Answer: D — It is in a writing signed by the party to be charged

A) Notarization is not required by § 2-201. B) Witnesses are not a UCC requirement for sales contracts. C) UCC contracts are not recorded with a state office. D) Correct — § 2-201 requires a signed writing sufficient to indicate a contract, absent exceptions like merchant's confirmation, specially manufactured goods, admission, or part performance.

Under UCC § 2-207, a proposed term is a 'material alteration' when it would:

1. Only be discussed in the boilerplate of a form
2. Cause surprise or hardship without express awareness
3. Merely address the mode of packaging the goods
4. Restate an obligation already imposed by the Code

Answer: B — Cause surprise or hardship without express awareness

A) Boilerplate placement is not the test. B) Correct — comment 4 to § 2-207 identifies material alterations as those causing surprise or hardship if incorporated without express awareness (e.g., disclaiming implied warranties). C) Packaging terms are usually non-material. D) Restating UCC defaults is non-material.

Mailbox rule?

Acceptance effective on dispatch. Rejection effective on receipt.

Implied warranty of fitness for particular purpose?

Seller knows buyer's purpose AND buyer relies on seller's expertise.

List the Statute of Frauds categories (MY LEGS).

Marriage, contracts not performable within one Year, Land interests, Executor promises to pay estate debts personally, Goods of 500 dollars or more under the UCC, and Suretyship.

Anticipatory repudiation?

Clear, unequivocal indication won't perform. Other party can sue immediately, treat as breach.