Contracts and Sales Flashcards

A seller of a business promises not to compete within an unreasonably large territory. How will most courts treat the covenant?

Answer: Enforce it only to a reasonable scope or strike it, depending on the jurisdiction's approach

Courts either blue-pencil or reasonably modify overbroad non-competes, enforcing them only to the extent reasonable in scope, time, and territory.

A buyer pays for goods to be delivered to a third party as a gift. The seller fails to deliver. May the third party sue the seller?

Answer: Yes, as an intended donee beneficiary once her rights vested

An intended donee beneficiary may enforce the contract directly against the promisor despite giving no consideration.

A contract requires a painter to paint a portrait to the buyer's personal satisfaction. The buyer honestly dislikes the finished portrait. What is the result?

Answer: The condition fails and the buyer need not pay, if the dissatisfaction is in good faith

For contracts involving personal taste, honest good-faith dissatisfaction defeats the condition of satisfaction, excusing payment.

A seller delivers defective goods with time remaining before the contractual delivery deadline. The buyer rejects. What right does the seller have?

Answer: A right to cure by making a conforming delivery within the contract time after seasonable notice

UCC 2-508 gives a seller the right to cure a rejected non-conforming tender by delivering conforming goods within the original contract time upon seasonable notice.

A party assigns his right to receive payment under a contract, then assigns the same right to a second assignee for value. In most states, who prevails between successive assignees of the same right?

Answer: The first assignee, under the majority rule that first in time is first in right

The majority American rule protects the first assignee of the same contractual right, subject to limited exceptions for later good-faith assignees who obtain payment or judgment.

A liquidated damages clause sets damages at an amount grossly disproportionate to any anticipated or actual harm. How will a court treat the clause?

Answer: Strike it as an unenforceable penalty and award actual damages

Liquidated damages must be a reasonable forecast of harm that is difficult to estimate; a grossly disproportionate sum is a void penalty.

Goods are shipped under a contract with the term F.O.B. seller's city (a shipment contract). The goods are destroyed in transit without fault. Who bears the risk of loss?

Answer: The buyer, because risk passed when the seller duly delivered the goods to the carrier

In a shipment contract, risk of loss passes to the buyer once the seller properly delivers conforming goods to the carrier.