Business Law Exam 2 Answers

1. Typically, a court would not impose sanctions over minor issues.

To constitute a violation of the con-tract, the breach must be
material. A material breach is important enough to defeat an
essential pur-pose of the contract.
2. a) Title
b) Introductory Paragraph
c) Definitions
d) Covenants
e) Conditions
f) Representations and Warranties
g) Remedies
h) Boilerplate
3. Probably. Shrimp is a "good," and therefore this contract is
governed by Article 2 of the UCC. The statute of frauds requires
agreements for the sale of goods with a purchase price $500 or
more to be in writing with the defendant's signature.
4. Inez will lose under both implied warranties. The implied
warranty of merchantability was not breached because the
furnace was operating according the standards of the heating
industry. The implied warranty of fitness was likewise not
breached. This warranty requires the seller to know of the
buyer's particular purpose and that the buyer is relying on the
seller's skill or judgment in recommending a particular product.
Here Inez did not ask for or receive any suggestions from the
seller or the seller's expert
5. The UCC imposes a duty of good faith in the performance of all
contracts. The UCC frequently holds a merchant to a higher
standard of conduct than a non-merchant. A merchant is
someone who routinely deals in the particular goods involved, or
who appears to have special knowledge or skill in those goods, or
who uses agents with special knowledge or skill in those goods.
Morley Motors is a merchant when it comes to selling autos
because it routinely deals in cars. For a merchant, good faith
means honesty in fact plus the exercise of reasonable
commercial standards of fair dealing. Patsy is not a merchant in
cars and would behold to a lower standard of conduct. For nonmerchants, good faith means honesty in fact. Thus, when
performing the sales contract, neither Patsy nor Morley Motors
may lie or mislead the other party
6. (A) Under the UCC, the parties will have an agreement since they
intended to create a contract.(B) The payment term in the
acceptance is a different term. In the majority of states, different
terms cancel each other out. In deciding the payment term, the
court will look to enforce an oral agreement if one exists.

Otherwise, the court looks to the gap-filler provision concerning

payment. (C) The arbitration clause is an additional term. Under
the UCC, since the parties are merchants, the arbitration clause
will be part of the contract unless: (1) the offer insisted on its
own terms; (2) the additional terms materially alter the terms of
the offer; or (3) the offer or promptly rejects the additional terms
7. Identification means the parties have designated the specific goods to be
sold. Identification is important because goods must be identified to the
contract before title can pass. Identification must also occur before a buyer
obtains an insurable interest in the goods. The parties may agree in their
contract how and when the goods will be identified, and they may identify
them to the contract however they wish. If the parties do not specify,
however, identification will take place following the rules set forth in UCC
Section 2-501. These rules include: (a) If the contract describes specific
goods that already exist, identification occurs when the parties enter into
the contract. (b) For unborn animals, identification ordinarily takes place
when they are conceived. For crops, identification ordinarily occurs when
they are planted. (c) For other goods, identification occurs when the seller
marks, ships, or in another way designates the exact goods going to the
buyer.
8. If the supplier will not provide paint that matches the sample in
quality, Sonny can sue the supplier for breach of an express
warranty. The UCC establishes that the seller may create an
express warranty in three ways: with an affirmation of fact or a
promise, with a description of the goods, or with a sample or
model. A seller who uses a sample is generally warranting that
the merchandise sold will be just as good. Sonny must
demonstrate that the sample provided was the basis of the
bargain
9.

Any affirmation of fact, or any promise, can create an express warranty. An

affirmation of fact is a statement about the nature or the quality of the goods. A
statement indicating the sellers opinion or a statement of sales puffery does not
create a warranty. A statement is more likely to be an affirmation of fact if: (a) it is
specific and can be proven true or false; (b) it is written; (c) defects are not obvious;
and (d) the seller has greater expertise than the buyer

10. Agreements requiring a writing within the statute of frauds

include: (a) agreements for the sale of any interest in land,
subject to certain exceptions; (b) agreements that cannot be
performed within one year from the date of the agreement; (c) a
promise to pay the debt of another, subject to the leading object
rule exception; (d) a promise made by an executor of an estate
to use his personal funds to pay a debt of the decedent; (e) a

promise made in consideration of marriage; and (f) a contract for

the sale of goods worth $500 or more. If the agreement does not
have writing sufficient to satisfy the statute of frauds, it is
unenforceable, but not void or illegal. The parties may still
choose to perform the contract.
11. This type of clause is known as a liquidated damages clause. Generally this type of

clause will be enforced if, at the time of creating the contract, it was very difficult to
estimate actual damages, and the liquidated amount is reasonable. In this case, if the
total construction contract involved millions of dollars, the estimate of damages may
reasonably amount to a $1000 per day. If the construction project is a small one, the
court may see this amount as too much and not enforce the clause.

12. An injunction is a court order that requires someone to do something or to refrain

from doing something. Injunctions are equitable remedies, usually stated in the
negative. They are frequently granted to employers to block employees from leaving
to work somewhere else. Injunctions may be preliminary, which are issued early in a
lawsuit to prohibit a party from doing someething during the lawsuit. Such injunctions
are issued to protect the plaintiffs interests immediately. If, after the trial, it appears
that the plaintiff is entitled to an injunction, the court will make its order a permanent
injunction.