CFL Contract Disputes & Commercial Litigation 1 — Questions and Answers
Question 1: Under the Uniform Commercial Code Article 2, the 'battle of the forms' under Section 2-207 addresses situations where:
- Acceptance contains different or additional terms from the offer in a commercial transaction (Correct answer)
- Two parties submit conflicting purchase orders for the same goods
- A seller ships non-conforming goods as an accommodation
- Multiple buyers submit offers for the same inventory
Correct answer: Acceptance contains different or additional terms from the offer in a commercial transaction
UCC 2-207 resolves the common commercial reality where purchase orders and acknowledgments contain different terms, establishing rules for which terms become part of the contract.
Question 2: The parol evidence rule generally prevents a party from introducing extrinsic evidence to:
- Contradict or vary the terms of a fully integrated written contract (Correct answer)
- Explain ambiguous terms in the written agreement
- Show that the contract was induced by fraud
- Prove that a condition precedent was never satisfied
Correct answer: Contradict or vary the terms of a fully integrated written contract
The parol evidence rule bars extrinsic evidence that contradicts the final written agreement, but permits evidence explaining ambiguity, proving fraud, or establishing conditions precedent.
Question 3: Under common law, the doctrine of 'anticipatory repudiation' allows the non-breaching party to treat the contract as breached and seek immediate damages when:
- The other party unequivocally communicates that it will not perform before performance is due (Correct answer)
- The other party misses an installment payment under a long-term contract
- The other party requests a modification that the non-breaching party rejects
- The other party becomes insolvent before the performance date
Correct answer: The other party unequivocally communicates that it will not perform before performance is due
Anticipatory repudiation requires a clear, unequivocal refusal to perform before the performance date, allowing the non-breaching party to treat the contract as immediately breached.
Question 4: In commercial litigation, 'consequential damages' for breach of contract are recoverable only if they were:
- Within the reasonable contemplation of both parties at the time of contracting (Correct answer)
- Specifically enumerated in the contract's damages provision
- Incurred within 6 months of the breach
- Supported by a third-party appraisal of their value
Correct answer: Within the reasonable contemplation of both parties at the time of contracting
The Hadley v. Baxendale foreseeability rule limits consequential damages to those that were within the contemplation of both parties when the contract was formed.
Question 5: A liquidated damages clause in a commercial contract is enforceable only if:
- The stipulated amount was a reasonable estimate of anticipated harm at the time of contracting and actual damages are difficult to prove (Correct answer)
- The clause was negotiated at arm's length between sophisticated parties
- The amount does not exceed the contract price
- The clause is included in the main body of the agreement, not an exhibit
Correct answer: The stipulated amount was a reasonable estimate of anticipated harm at the time of contracting and actual damages are difficult to prove
Courts enforce liquidated damages clauses when the amount reflects a genuine pre-estimate of harm and damages would otherwise be hard to determine; penalties designed to coerce performance are unenforceable.
Question 6: The Uniform Commercial Code's 'perfect tender rule' under Section 2-601 allows a buyer to reject goods that:
- Fail in any respect to conform to the contract (Correct answer)
- Are more than 10% defective by quantity or quality
- Arrive more than 3 days late under the delivery schedule
- Do not meet the industry standard for merchantability
Correct answer: Fail in any respect to conform to the contract
UCC 2-601 gives buyers the right to reject if goods or tender fail in any respect to conform to the contract, a stricter standard than the common law substantial performance rule.
CFL Contract Disputes & Commercial Litigation 1
Under the Uniform Commercial Code Article 2, the 'battle of the forms' under Section 2-207 addresses situations where: