CFL Contract Disputes & Commercial Litigation 2 — Questions and Answers
Question 1: In commercial real estate disputes, a 'time is of the essence' clause means that:
- Failure to meet deadlines constitutes a material breach justifying rescission (Correct answer)
- The parties must complete performance within a commercially reasonable time
- Late performance is excused only by force majeure events
- The non-breaching party must give notice and a cure period before terminating
Correct answer: Failure to meet deadlines constitutes a material breach justifying rescission
When time is of the essence, missing a performance deadline is a material breach that entitles the non-breaching party to terminate the contract and seek damages.
Question 2: Under the doctrine of commercial impracticability (UCC Section 2-615), a seller may be excused from performance if:
- Performance has become impracticable due to the occurrence of a contingency whose non-occurrence was a basic assumption of the contract (Correct answer)
- The cost of performance has increased by more than 50% since contracting
- A natural disaster destroyed the seller's primary manufacturing facility
- The market price of the goods has fallen below the seller's cost of production
Correct answer: Performance has become impracticable due to the occurrence of a contingency whose non-occurrence was a basic assumption of the contract
Section 2-615 requires that the supervening contingency was not foreseeable and was a basic assumption of the contract—mere price increases rarely suffice.
Question 3: A financial litigator analyzing a claim for tortious interference with contract must establish that the defendant's interference was:
- Intentional and improper, without justification or privilege (Correct answer)
- Negligent and foreseeable given the commercial relationship
- For the purpose of gaining a competitive advantage
- Known to the contracting parties before the breach occurred
Correct answer: Intentional and improper, without justification or privilege
Tortious interference requires intentional, improper interference—courts use the Restatement factors to determine impropriety, focusing on the defendant's purpose and means.
Question 4: Under the UCC, when a buyer's check for goods bounces and the seller seeks to reclaim goods already delivered, the reclamation right under Section 2-702(2) must be exercised within:
- 10 days after the buyer's receipt of the goods (Correct answer)
- 30 days after the buyer's receipt of the goods
- A reasonable time, which courts have typically defined as 3–5 business days
- The period specified in the contract
Correct answer: 10 days after the buyer's receipt of the goods
UCC 2-702(2) gives the seller a 10-day window to demand reclamation, extendable to a reasonable time if the buyer made a written misrepresentation of solvency within 3 months.
Question 5: In commercial arbitration under the Federal Arbitration Act (FAA), a court may vacate an arbitration award only on limited grounds, including:
- Corruption, fraud, or undue means in procuring the award (Correct answer)
- Manifest disregard of the law by the arbitrators
- Factual findings unsupported by substantial evidence
- An award that is contrary to public policy
Correct answer: Corruption, fraud, or undue means in procuring the award
FAA Section 10 provides narrow grounds for vacatur: corruption, evident partiality, arbitrator misconduct, or exceeding powers—courts have very limited review of arbitration awards.
Question 6: The 'economic loss rule' in commercial litigation generally bars recovery in tort for:
- Purely economic losses unaccompanied by physical injury or property damage (Correct answer)
- Losses caused by a defendant's negligent misrepresentation in a business context
- Lost profits resulting from a competitor's wrongful business practices
- All claims between commercial parties who have a contractual relationship
Correct answer: Purely economic losses unaccompanied by physical injury or property damage
The economic loss rule prevents plaintiffs from recovering purely financial losses through tort claims when those losses arise from a commercial transaction—the contract is the proper vehicle for such disputes.
CFL Contract Disputes & Commercial Litigation 2
In commercial real estate disputes, a 'time is of the essence' clause means that: