Problem #1 A potential pet store owner deciding to open a new pet store in Lawrence

Problem #1

A potential pet store owner deciding to open a new pet store in Lawrence, Kansas sent letters by regular US mail to all known pet store suppliers on July 1, letting them know of his need for such items as aquariums, small animal cages, cat litter, and dog toys. The pet store owner received a letter dated July 8 from a fish and aquarium supply company, stating that the company had 100 5gallon aquariums left in stock and will sell them to the pet store owner for $4 each. The company added that it must receive the pet store owner’s answer by December 1 and will hold the aquariums for the pet store owner until then.

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On August 1, the company sold 50 of the 5-gallon aquariums to a competing potential pet store owner, which had recently opened a pet store in Dallas, Texas. On August 2, the company sent the initial pet store owner an email stating it had only 50 5-gallon aquariums left for sale. The pet store owner received the email that same day, but opened it and never read it. On August 10, the pet store owner notified the company that he was accepting the company’s offer to sell 100 5-gallon aquariums. The company, upon receiving the pet store owner’s acceptance, shipped the remaining (50) 5-gallon aquariums. The pet store owner sues the company for failing to deliver all 100 5gallon aquariums.
Will the pet store owner prevail?

A. No, because the pet store owner is not a pet store supply merchant.
B. No, because the company’s offer was to remain open for more than three months.
C. Yes, because the company promised in a signed writing to hold the offer open.
D. Yes, because the pet store owner never read the company’s August 2 email.

Issues to think about:
– Are the items at issue in this problem governed by UCC Article 2?
– What type of offer would characterize the company’s July 8 letter?
– Did company’s August 2 email serve as a valid recovation?
– Did the company’s express statement of a time-period to hold open the offer mean anything?

Answer
First, in order for any part of the UCC to apply, it must be demonstrated that the item being sold is considered a good. A pet store owner is looking for pet store items, and a supply company has offered to sell the pet store owner aquariums. Aquariums are physical, movable items, and are considered goods. Therefore, Article 2 of the UCC applies.

Article 2-205 of the UCC states that “An offer by a merchant to buy or sell goods in a signed writing … is not revocable … during the time stated … but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.” In short, an offer of a merchant to buy or sell goods cannot be revoked during the period of irrevocability stated in the offer. There are three key terms here that must be proved in order for this article to cover the situation: offer, merchant, and signed writing. First, was an offer made? The July 8 letter from the pet supply company lists a quantity, price, and that the goods would be held for the buyer. As far as we can tell, this letter invites acceptance (Article 2-206). Therefore, the July 8 letter constitutes an offer. Second, does the pet supply company fit the requirements in order to be considered a merchant? The pet supply company is considered a merchant here due to the fact that by the very nature of its business, it “deals in goods of the kind” (Article 2-104). Third, is there a signed writing stating the terms of the agreement? It is pretty clear that the July 8 letter was some form of official document stating the intentions of the pet supply company. Short of knowing more about the document, who wrote it, and the signature on it, it is safe to assume it is a signed writing. Therefore, the requirements of Article 2-205 have been met, so the offer was not revocable during the time stated.

The last paragraph explains why choice (c) is correct. Choice (a) is incorrect because the pet store owner’s classification as a merchant is irrelevant to the issue at hand. Only the seller must be proven to be a merchant for UCC Article 2-205 to apply. Choice (b) is incorrect because while Article 2-205 of the UCC does mention the 3-month (90 day) period of irrevocability, the 90-day limit is for situations in which no period of irrevocability is defined in the contract. The pet store supply company specifically offered (and therefore implied agreement to) the listed period of irrevocability, so the duration stands. Choice (d) seeks to invalidate the offer because the buyer never read the seller’s August 2 email. That email is irrelevant to the offer. The offer was made, and a period of irrevocability was set and agreed to by the seller. The buyer’s choice to read or not to read the email is immaterial.

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Problem #2

A manufacturer of hybrid electric lawn mowers telephoned a small-engine company and asked for a price quote on an order for 200 small lawn owner hybrid-electric motors built according to the specifications that the manufacturer had sent to the company the previous week. The company responded that it would sell the motors to the manufacturer at a cost of $30 a piece, with delivery in 30 days. The manufacturer agreed to the terms and instructed that its order be entered. The engine company immediately started work on the motors, and had made a substantial beginning on their manufacture (having completed 90 motors) when the manufacturer notified the company that it would not honor the contract. The engine company stopped work on the motors and sued the manufacturer, which raised the Statute of Frauds as a defense. The engine company responded that the specially manufactured goods exception takes the contract out of the Statute of Frauds.
If the engine company loses, what is the most likely reason?

A. It had not substantially completed work on the contract.
B. It had completed work on less than half of the motors.
C. It stopped work on the motors before the job was completed.
D. It could have sold the motors in the ordinary course of its business.

Issues to think about:
– What are the general requirements for the Statute of Frauds to be applicable?
– What, if any, exception to the Statute of Frauds is applicable in these facts and are all requirements to the exception met?

Answer

Article 2-201 (1) of the UCC states that a contract for the sale of goods greater than $500 is unenforceable unless there is sufficient writing to demonstrate an agreement and must be signed by the party against which the suit is filed. According to the problem statement, the contract is for $600 worth of goods (motors are considered a good here – touchable, movable items). However, the contract was entered into based on a phone call. There was no signed writing. Therefore, the contract fails subsection (1). Article 2-201 (3a) states that a contract that fails to fulfill the requirements of subsection (1) is still enforceable if the goods could not be sold in the normal course of the seller’s business. We don’t know how specific the lawn mower manufacturer’s specifications were. However, due to the speed at which the motor manufacturer was able to start the work, it is safe to assume this was some type of motor that the motor manufacturer regularly sells. Therefore, since it is a regular part of its business, the motors could be sold in the ordinary course of its business. Subsection (3a) of 2-205 does not apply and the contract is not enforceable.

The last paragraph explains why answer (d) is correct. Answers (a) and (b) are incorrect for the same reason that answer (d) is correct. The contract is only enforceable under Article 2-201 (3) if the goods cannot be sold in the normal course of the seller’s business and the seller has either made significant progress on the manufacturing of the goods or has procured significant amounts of the raw material. “Significant progress” is never defined in the UCC statue, so the current progress or 50% complete could be defined as significant progress. However, it’s immaterial since the seller can sell the goods in the normal course of its operations. Answer (c) seeks to discredit the seller since it stopped work on the goods before the contract was completed. The sellers work or lack thereof is immaterial here.
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Problem #3

On May 1, an electronics store offered to sell a vintage gaming console to a collector for $2,400. The following day, the collector wrote to the store owner: “I have decided to purchase the vintage gaming console. A check for $2,400 is enclosed. I am leaving for Malaysia to compete in an eSports competition for a month and will pick up the console when I return. I will pay you additionally to store the console in a climate-controlled lockbox.”
The letter that the collector wrote to the store owner is:

A. A counteroffer, because it changes the terms of the offer.
B. A rejection of the offer.
C. An acceptance, and the electronics store owner must store the gaming console but is entitled to the reasonable value of that service.
D. An acceptance, and the electronics store owner is not bound to store the gaming console.

Issues to think about:
– Think of the section of Chapter 3 on Offer and Acceptance here.
– Does Article 2 UCC apply here, generally speaking? What predominates (or the gravamen of the agreement) here – a good or a service? Discuss fully.
– What does the section of your text discussing the “Battle of the Forms” say about this matter?
– What is the significance if one party was a merchant and one was not?

Answer

In order for the UCC to apply, it must be determined that a sale of a good is taking place. The seller (an electronics store) is selling a gaming console to a buyer (a collector). The gaming console is a touchable, movable item. As far as we know, the seller is not including any services with the gaming console; he is just selling the thing. Therefore, this constitutes the sale of a good and is governed by the UCC. Article 2-201 of the UCC defines Article 2 as dealing with the sale of goods. As we just established that the gaming console is a good, Article 2 applies.

Article 2-207 (1) of the UCC states that an acceptance of an offer made within a reasonable amount of time still constitutes an acceptance even if it adds new terms to the contract being made unless the acceptance is conditional on the new terms being accepted. Article 2-207 (2) of the UCC defines how to handle the additional terms that the buyer wants to add to the contract. Specifically, these additional terms are to be looked upon as proposals for additions to the contract.

The first question that must be asked is, was an offer made? The initial offer on May 1 by the seller to sell the console for $2400, though not in writing, still constitutes an offer. Next, was the offer accepted within a reasonable amount of time? The day after the offer was made by the seller, the collect wrote a letter agreeing to the price. This constitutes an acceptance of the offer, and since it was written the next day it also satisfies the ‘reasonable period of time’ clause. And finally, the acceptance of the contract cannot be dependent on the new terms being accepted. The buyer never declares that his acceptance is conditional on the seller’s willingness to store the console. The buyer declared his intentions to purchase the console and paid for it. He did not pay for the additional services he requested. Therefore, his actions demonstrate that he outright accepted the original offer and asked for the new services to be added to the contract.

Subsection (2) goes on to defined additional requirements if the contract is ‘between merchants’. If it is ‘between merchants’, there are three ways the requested additions to the contract will not become part of the contract: the acceptance of the contract is dependent on the acceptance of the additional terms, the additional terms alter the original meaning of the contract, or if the other party refuses the additional terms within a reasonable amount of time. Article 2-201 of the UCC defines a deal ‘between merchants’ as one in which both parties can be charged with having the “knowledge or skill of being a merchant”. The antiques dealer is certainly a merchant – he deals with vintage items as a trade. We don’t know much about the collector, but it would seem like this is an area in which he has some sort of understanding. It is fair to assume that the transaction is ‘between merchants’, and Subsection (2) applies. Therefore, the seller has the right to refuse the additional terms before they become part of the contract.

The last few paragraphs describes why answer (d) is correct. Answer (a) is incorrect because the buyer did not make a counter-offer. Under UCC Article 2-207 (1), the buyer accepted the terms of the original offer and made a proposal for new terms to the contract. Answer (b) is incorrect because the buyer did not reject the offer. He specifically agreed to purchase the gaming console at the offered price. Answer (c) is incorrect because the seller has the right to refuse the additional terms proposed by the buyer.

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