Contract Law & Commercial Transactions Flashcards

What distinguishes an 'option contract' from a standard offer?

Answer: The offeror is bound not to revoke the offer for a specified period in exchange for consideration

An option contract is a binding promise to keep an offer open for a specified time, supported by separate consideration from the offeree.

Under the UCC, the 'implied warranty of merchantability' is breached when goods:

Answer: Are not fit for the ordinary purposes for which such goods are used

UCC § 2-314 provides that a warranty of merchantability is implied in any sale of goods by a merchant, requiring the goods to be fit for their ordinary purpose.

What is the legal significance of a 'liquidated damages' clause in a contract?

Answer: It pre-specifies the damages payable upon breach, enforceable if it represents a reasonable estimate of actual harm

A liquidated damages clause is enforceable if it represents a reasonable forecast of actual damages and actual damages are difficult to estimate; it is void as a penalty if it is grossly disproportionate.

Which of the following best describes a 'requirements contract' under the UCC?

Answer: A buyer agrees to purchase all of their needs of a commodity exclusively from one seller

A requirements contract obligates the buyer to purchase all of their requirements of a specified good from the seller, with quantity determined by the buyer's actual needs.

The doctrine of 'unconscionability' under UCC § 2-302 allows a court to do what?

Answer: Refuse to enforce all or part of a contract that is oppressively one-sided

UCC § 2-302 empowers courts to refuse enforcement of a contract or clause that was unconscionable at the time of contract formation.

Under contract law, what is 'novation'?

Answer: A substitution of a new party or obligation that discharges the original contract

Novation substitutes a new party or obligation for an existing one with the consent of all parties, completely discharging the original obligor.