CP Contracts and Commercial Law 2 — Questions and Answers
Question 1: Under the UCC, what is the perfect tender rule?
- A rule requiring all contracts to be in writing
- A rule allowing a buyer to reject goods that fail to conform to the contract in any respect (Correct answer)
- A rule requiring payment before delivery
- A rule governing warranty disclaimers
Correct answer: A rule allowing a buyer to reject goods that fail to conform to the contract in any respect
Under UCC 2-601, the perfect tender rule allows a buyer to reject goods failing to conform in any respect.
The perfect tender rule under UCC 2-601 provides that if goods fail in any respect to conform, the buyer may reject the whole, accept the whole, or accept some commercial units and reject the rest. Exceptions include the seller's right to cure (2-508) and installment contracts (2-612).
Question 2: What is the difference between express and implied warranties?
- Express are verbal while implied are written
- Express are created by specific seller representations while implied arise automatically by law (Correct answer)
- Express apply only to new goods while implied apply to used
- No legal difference
Correct answer: Express are created by specific seller representations while implied arise automatically by law
Express warranties are affirmatively made by the seller, while implied warranties arise by operation of law.
Express warranties under UCC 2-313 are created by seller affirmations, promises, descriptions, or samples. Implied warranties arise by law: merchantability (2-314) requires goods fit for ordinary purpose, and fitness for particular purpose (2-315) applies when the seller knows the buyer's purpose and the buyer relies on seller expertise.
Question 3: What is anticipatory repudiation in contract law?
- Refusing to perform after the date has passed
- A clear indication before performance is due that a party will not fulfill obligations (Correct answer)
- Renegotiating terms before deadline
- Filing a breach lawsuit prematurely
Correct answer: A clear indication before performance is due that a party will not fulfill obligations
Anticipatory repudiation occurs when a party unequivocally indicates before performance is due that they will not perform.
Anticipatory repudiation occurs when a party demonstrates intention not to perform before the time for performance arrives. Under UCC 2-610, the non-breaching party may await performance for a commercially reasonable time, resort to any remedy for breach, or suspend their own performance.
Question 4: What does the parol evidence rule prohibit?
- Oral testimony in court
- The use of prior or contemporaneous oral agreements to contradict a final written contract (Correct answer)
- Hearsay about negotiations
- Evidence of subsequent modifications
Correct answer: The use of prior or contemporaneous oral agreements to contradict a final written contract
The parol evidence rule prevents introducing prior or contemporaneous statements to contradict an integrated written agreement.
The parol evidence rule bars evidence of prior or contemporaneous agreements to contradict an integrated agreement. Exceptions include showing fraud, duress, mistake, or illegality; explaining ambiguous terms; establishing conditions precedent; or supplementing partially integrated agreements.
Question 5: What is specific performance as a contract remedy?
- A monetary award based on contract price
- A court order requiring a breaching party to perform their contractual obligations (Correct answer)
- A penalty clause in the contract
- An agreement to renegotiate terms
Correct answer: A court order requiring a breaching party to perform their contractual obligations
Specific performance is an equitable remedy where the court orders the breaching party to fulfill obligations rather than pay damages.
Specific performance is granted when monetary damages are inadequate, most commonly for unique goods or real property. Courts consider adequacy of damages, feasibility of enforcement, mutuality, and clean hands. Under UCC 2-716, it may be granted for unique goods or other proper circumstances.
Question 6: What is a liquidated damages clause?
- A clause requiring immediate cash payment
- A pre-agreed damage amount specified in the contract for breach (Correct answer)
- A clause limiting liability to contract price
- A provision requiring arbitration of damages
Correct answer: A pre-agreed damage amount specified in the contract for breach
A liquidated damages clause specifies in advance the damages owed upon breach and must be a reasonable estimate of anticipated harm.
A liquidated damages clause fixes damage amounts in advance. To be enforceable, the amount must be reasonable in light of anticipated or actual loss, and actual damages must be difficult to calculate. If unreasonably large, courts will strike it as an unenforceable penalty. UCC 2-718 governs for goods.
CP Contracts and Commercial Law 2
Under the UCC, what is the perfect tender rule?