Business Law II Question 1: Sam decided he was ready to sell his classic sports car.

On 1 May, and in the following order, he telephoned Bob, Carla, Dan and Edna. Each of whom had earlier express interest in buying the car. He was unable to make actual contact with any of them, so he left the following message on each ones telephone answer machine: I am ready to sell my car, which I know you had express interest in. The price is USD 10,000. My offer is good until the end of today, 1 May. If you are still interested, call me back by the end of today so I know for sure. Bob, Carla and Dan each call back at the time when Sam was out running errands. They each left a message on Sams telephone answering machine. Bobs message said: The price is pretty high, so I will have to think about it. Carlas message said: I think the price is too high, but I will pay u USD 9,000. Dans message said: Ok! I will pay your price but only if you let me take the car to my mechanic so he can check it out first. Edna, rather than call Sam back, mailed Sam a letter on 1May stating, I got your message, and I accept your offer and will pay USD 10,000. On 2 May, Sam died. Mark was appointed as executor for Sams estate and as such at all powers to deal with the estate property. Bob, Carla, Dan and Edna each said to Mark, I accepted Sams offer on 1 May and, in any event; I will buy the car as is and for Sams asking price. Mark tells them each that their so called acceptance will not valid and that their power of acceptance has already terminated. Is Mark correct? Explain fully. The rights and the remedies on the party depend on whether or not that is a valid contract. A contract is a promise or set of promises, the performance of which the law recognizes and for the breach the law provides a remedy. A valid contract is based on offer acceptance and legal consideration. Under contract law, the Uniform Commercial Code (UCC) governs contracts for moveable goods, identifiable to the contract, otherwise the common law prevails. Here, the contract is for a classic sport car, which is a moveable good, identified to the contract. Therefore, this contract is govern by Article 2 of UCC. Under the UCC, merchants are those in goods of that kind and hold themselves out by occupation, or knowledge and expertise regarding the goods in contract. Here, all the parties are not merchants because they are one time casual buyers and seller of one good. Therefore, the parties are not merchants. Article 2-104.

Business Law II Under contract law, the Statue of Fraud doctrine requires that certain goods be in writing, including those for the sales of good over USD 500. Here, the bargain is regarding the sale of good for USD 10,000, which would require writing. The issue that one has to address is whether there was an offer by Sam on 1 May. An offer is a manifestation of present intend and willingness to enter into a bargain so justified that a reasonable person knows that his assent is invited and would conclude it. In common law, the essential terms are the parties, subject matter, quantity, price and time of performance. Under the UCC, only the price is required and UCC Gap filters can determine the remaining terms. An advertisement or public offer made to more than one person is an invitation to bargain. Here, Sam showed a present intend and willingness to enter into a bargain because he called four different peoples that had showed previous interest in buying his car to sell it to them. A reasonable person would believe that this was a present intend and willingness to enter into a bargain. Although the parties will not specifically identified but all other term are present such as the subject, the classic car, the quantity, one car, the price USD 10,000 which is an essential term for the UCC contract and the time of performance is 1 May, a material term to the offer when it is expressly stated. This communication to the four peoples was an offer inviting performance until the end of the day. An offer may be revoking due to lapse of time or due to the operation of law. When the offeror die before the acceptance is made or the goods are no longer available then revocation is effective. Here, Sam died on 2 May and his offer for acceptance was due on 1 May, therefore, the offer was not revoke due to lapse of time from operation of law and his estate may be liable for a cause of action. Bob V Mark (Sam) Under contract law, acceptance is the essence enters into the bargain by any reasonable manner with varying terms. Here, Bob did not assent to enter into a bargain because he said, I have to think about it which a reasonable person would claim express uncertainly and interest but not an assent to enter a bargain at the present time. Therefore, this would not have been an acceptance to Sams offer. Carla V Mark (Sam) Under contract law, acceptance is the essence enters into the bargain by any reasonable manner with varying terms. Here, Carla assented to the bargain but offered varying terms. Since the parties are not merchants, the offer of varying additional and inconsistent terms would be a proposal or a counter offer to Sams offer, and would not have been acceptance. Further, the varying term was an additional inconsistent material term of the original offer and would require Sams approval before it was considered. A change in price is a material term because it

Business Law II significantly shifts the offerors economic advantage. Therefore, Carla would not have effectively accepted Sams offer. Dan V Mark (Sam) Under contract law, acceptance is the essence enters into the bargain by any reasonable manner with varying terms. Here, Dan assented by saying ok but it was based on a varying condition if you let me take the car to my mechanic so he can check it out first Since Sams offer limited acceptance to the terms of his offer, Dan would have to take the car to the mechanic before the end of 1 May with Sams approval. Varying terms that are consistent with the offer can be accepted if the offeror does not object within a reasonable time. Here, Sam did not object an offer could have been accepted, but this condition was not made before the deadline of the offer. Hence, there would not have been on valid acceptance. Edna V Mark (Sam) Under contract law, acceptance is the essence enters into the bargain by any reasonable manner with varying terms. Here, Edna accepted Sams offer by a written promise, a bilateral contract. Under the mailbox/postal rule, an acceptance to a bilateral contract is effective upon dispatch. Here, Edna mailed her acceptance on 1 May, the deadline for acceptance. However, Sams offer specified that acceptance was based on a call back by the end of the day, thus Sam would have to receive Ednas offer by end of 1 May, which was not died. Therefore, Edna acceptance would not be valid. UCC 2-206(1) In conclusion, in my opinion, Mark was correct and all of these parties power of acceptance would have terminated.

Business Law II Question 2: Buyer manufacturer mattress, which features an outer layer compose of a cotton material called batting. Unexpectedly, buyer supply of batting ran out, which brought the entire production line to a halt. At the time buyer was trying to fill a large, special order from Sleep Co., one of his customer. Buyers regular supplier of batting, refused to deliver any more batting because buyer was behind on his payment to the supplier. On 1 May, buyer telephoned Cotton Co. and told Cotton Co. that he urgently needed a large bale of batting and that he was willing to pay Top Dollar if Cotton Co. would deliver the bale of batting by the end of the day. On 1 May, Cotton Co delivered the bale of batting and told buyer it would sent him Cotton Co.s invoice for USD 5,000 later in the week. Buyer was upset because the price was about 30% higher than charge by his regular supplier but because of his urgent need, buyer open the bale and begun use the batting to use mattress. On 2 May, at the time when buyer use about 5% of the batting, Sleep Co. called and cancelled the order. This cancellation was such a major blow to buyers financial condition that he announced that he would immediately close his manufacturing plant. On 5 May, Cotton Co. learned that in fact, buyer had been insolvent for the past 60 days. On 6 May, Cotton Co. demanded that buyer either pay the invoice or return the unused part of the bale of batting immediately. Buyer refused, asserting that he and Cotton Co. had never enters into an enforceable contract, and informed Cotton Co. that he had sold the remaining batting to another mattress manufacturer. i) ii) Can Cotton Co. prevail in an action for breach of contract against buyer? Does Cotton Co. have the right to reclaim the unused batting? Explain fully.

i)The UCC will govern contracts for the sales of good. Goods are items which are identifiable and moveable at the time of sales. This contract is for the sale of a bale of cotton batting. Cotton batting is moveable and identifiable at the time of sale. Therefore, it is a good. This contract will be govern by UCC. One who regularly deal with the goods which are the subject matter of the transaction, or otherwise holds himself out as having knowledge or skill peculiar to the good, which are the subject matter of the transaction. Cotton Co. sells cotton batting as a business, therefore they regularly deal with the goods involve. Further, since the manufacturer the batting, they will have some special knowledge and skill regarding the batting. Therefore, Cotton Co. is a merchant. Buyer made mattress which use the batting and must order great quantities of batting. Therefore, buyer regularly deal with the subject matter involves. Further, he likely has special knowledge and skill of the batting. Thus buyer is a merchant too. 4

Business Law II Therefore, both parties are merchants under the UCC and will be held to a higher degree of good faith and fair dealing. A valid contract consists of an offer and an acceptance, collectively known as agreement plus consideration. An outward manifestation of present contractual intend which is definite in terms and is communicated in such a way as to create in the offeree the reasonable expectation that the offeror is willing to enter into a contract. Buyer called Cotton Co. and made Cotton Co. an offer with the following definite terms: Quantity : one bale Time of performance: before the end of the day Identity of parties: Cotton Co. and buyer Price: Top Dollar Subject matter: one bale of cotton batting

Buyer will agree that this is not sufficient definite to constitute an offer, since no price term is included. However, Cotton Co. will argue that under the UCC only a quantity term is needed to make an offer definite. As long as the buyer, unequivocally manifest intend to contract. Here, buyer stated a quantity of one bale; therefore the terms are sufficiently definite. Cotton Co. will argue that buyer may a sufficient manifestation of intend under the objective theory of contract because a reasonable person in Cotton Co.s shoes would believe that, by asking for delivery of a specific quantity of goods and promising to pay, the party promising to pay intends to enter into a contract. Further, Cotton Co. will show that buyer created the power of acceptance in Cotton Co. by providing that Cotton Co. could bind buyer to a contract simply by delivering the cotton bale before the end of the day. Cotton Co. will argue that the offer gives them the power to set the price term since buyer did not stated a price, but said he would pay Top Dollar for the bale. If the court find that Cotton Co. has the power to set the price term, Cotton Co. or the buyer must set them in good faith. If the courts found that the statement of Top Dollar: was the ambiguous term that did not give Cotton Co. the power to set the price, the court will set the price at the time of delivery. This is likely an offer. An acceptance is an outward manifestation of unequivocal assent to the terms at the offer. Cotton Co. delivered the batting before the day was over. This is an outward manifestation because Cotton Co. physically delivered the bale. Further, it showed unequivocal assent because Cotton Co. impliedly agree to all the terms of the contract. Buyer will argue that Cotton Co. did not properly accept because they set a price term which was 30% above what buyer usually paid. However, as discuss above, Cotton Co. may have had the 5

Business Law II power to set the price term. If buyer can show that the price was not set in good faith. However, if the reverse can be proven, Cotton Co. will likely be successful. Here the facts do not state if Cotton Co.s price was unreasonable disproportionate to the fair market value of the batting. However, if it was found to be unreasonable, buyer may set the price in good faith. Cotton Co.s failure to set the price does not affect the validity of the acceptance. Cotton Co. will show that because the offer did not specific whether acceptance could be made by promise of performance, delivery at the time stated was a reasonable means of accepting. This is a valid acceptance. A bargain for exchange of legal benefit and detriment is known as consideration. Each party incurred a legal detriment because Cotton Co. was giving up goods in exchange for buyer giving up money. Further, each party receives a legal benefit because Cotton Co. receives money and buyer receives goods. Therefore the exchange was bargain for. Buyer may argue that Cotton Co.s ability to set the price rendered the contract illusory. However, because Cotton Co. is obligated to set the price in good faith, Cotton Co. is under a legal obligation therefore it is not illusory that I sufficient consideration. Contract for the sale of good at USD 500 or more must be in writing in order to be enforceable Statue of Fraud. This contract is a sale of batting which is a good. Further, the price is USD 5000, which are over USD 500. Therefore the contract must be in writing in order to be enforceable. The fact states that the contract was made orally over the phone, with the only writing being an invoice sent by Cotton Co. Therefore, the contract was not in writing. This will be a valid defense absent and applicable way to remove the contract from the statue. Part performance of a sale of good will rendered the contract enforceable as to the portion which has been performed. Here, Cotton Co. sent all the batting to buyer; therefore the contract has been partly performed because the good had been delivered. Thus, the contract will be enforceable under the Statue of Fraud for all goods now delivered. Buyer will argue that the contract was not sufficiently definite because the price term was not set. However, the facts do not state how this appropriate the contract price is to the fair market value of the goods. Since quantity is the only term required under the UCC and in this case the term is define and definite. An express condition must be perfectly fulfilled. Cotton Co. delivered the batting on time therefore the condition has been fulfilled and buyers duty to perform has arisen. Therefore, buyer has the duty to pay the full contract price for the batting. ii)Buyer sold the batting to another manufacturer. The manufacturer who brought the batting did not know the batting in good faith. Because the batting was purchase in good faith, the purchase is a bonafide purchaser of the batting. The law generally holds that recouping goods from a bonafide purchaser would result in unjust hardship to the purchaser. Therefore, Cotton Co. may 6

Business Law II not receive the batting back and may also not recover the batting, though they may sue for the contract price as discuss above.