Quiz 21: Introduction to Sales


The contract is dependent contract. As per UCC the agreement should be reached upon good faith i.e. honesty in fact and as per prevailing commercial practice. In this case the contract between P Corp and AT T Co. is dependent upon the contract between P Corp and MBTA. As the contract between P Corp and MBTA has terminated, contract between P Corp. and AT T Co. stands automatically terminated but now the unique UCC comes to play, As the P Corp has only supplied 15% of total salvageable material, it is not allowed to take extra profit by not supplying material to AT T Co which is still lying with it. It should supply the salvageable material up to the part of contract it has completed at least. Here output and requirements contracts are also applicable. In the output and requirements contracts, under § 2 -306, an output contract obligates the seller to sell all of his output to the buyer, who agrees to accept it. Here AT T Co. is the buyer and P Corp is the seller, the UCC requires that the parties in an output or requirements contract make their demands in good faith. For instance, in a requirements contract, a buyer may not suddenly increase her demand far beyond what the parties expected merely because there has been a market change, wherefrom profits can be made. Can the seller reduce his supply far below what the parties anticipated? Yes, as long as the reduction is made in good faith. Here the seller P Corp has reduced its supply far below what AT T Co. expected rather eventually there was termination of the contract. But the same was done in good faith since the supply was dependent on the undercutting of the existing track. Now when the contract between P Corp and MBTA is terminated, the supply will cease suo moto.

In England, there were many laws about land, but few for contracts. English judges were only beginning to acknowledge that an exchange of mere promises, with no money or property changing hands, might lead to an enforceable agreement. But merchants dealt in the sale of goods not real estate. Their livelihood depended upon promises, on the rapid movement of their wares and on their ability to enforce bargains. The merchants were dissatisfied with few remedies that the courts offered businessmen throughout England and the Continent began to treat their own customs as law and to settle disputes in trade organizations rather than civil courts. The body of rules they relied on became known as law merchant. This new doctrine focused on promises, the sale and exchange of goods, and payment. Here the willingness and voluntary consent are inherent in making promises. On sensing the interest from customers, he aggressively badgers them until they verbally commit to buy. In the US, J is intending to buy a used Chevy Tahoe. The price is reasonable, amounting to $7000. Though he is willing to go online and look for a better deal. While being with the car owner, he could assess the other buyer's interest in the car. J wants an assurance that he only buys the car. Thus he promises to buyer and is aware that such oral promises cannot be enforced. Here the Statute of Frauds. UCC §2-201 requires a writing for any sale of goods worth $500 or more. J perpetrates to take advantage of this clause. Conclusion : Both J and N acted wrongfully, aware of the loopholes or the provisions of the law but J has acted more wrongfully as he used UCC in negatively and in case of N the contract is bound by the common law of Britain. Good faith is the base of UCC but J used it to deceive the seller which is not intended by the statue.

UCC § 2 -102 : Article 2 applies to the sale of goods. Goods are things that are moveable, other than money and investment securities. Hats are goods and so are railroad cars, lumber, books and bottles of wine. Land is not a good nor is a house. But the article shall not be applicable to the sake of an office building. A skyscraper is not moveable. The correct Answer is (c), The obligation of the parties to the contract must be performed in good faith. Under UCC merchants and non merchants not treated alike and contract involving sale of goods less than $ 500 still governed by UCC but it can be oral.

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