MD Bar Contracts and Sales 3 — Questions and Answers
Question 1: A Maryland farmer orally agrees to sell 1,000 bushels of wheat for $8,000. The buyer sends a signed written confirmation, and the farmer, a merchant, does not object within 10 days. The farmer later refuses to deliver, citing the statute of frauds. Who prevails?
- The buyer, because the merchant confirmation exception satisfies the statute of frauds against the farmer (Correct answer)
- The farmer, because he never signed any writing
- The farmer, because oral contracts for goods over $500 are void
- The buyer, but only if he can show part performance
Correct answer: The buyer, because the merchant confirmation exception satisfies the statute of frauds against the farmer
Under UCC 2-201(2), a signed written confirmation between merchants satisfies the statute of frauds against the recipient if not objected to within 10 days.
Question 2: A wedding venue contract requires a $10,000 payment if the couple cancels, regardless of when cancellation occurs. The couple cancels a year in advance and the venue rebooks the date at full price. The couple challenges the $10,000 provision. How should a court rule?
- The provision is an unenforceable penalty because it is not a reasonable forecast of actual or anticipated harm (Correct answer)
- The provision is enforceable because parties may freely agree to liquidated damages
- The provision is enforceable because the venue suffered inconvenience
- The provision is void because cancellation clauses violate public policy
Correct answer: The provision is an unenforceable penalty because it is not a reasonable forecast of actual or anticipated harm
A liquidated damages clause is unenforceable as a penalty when it is not reasonably related to anticipated or actual damages, especially where no loss occurred.
Question 3: Seller ships nonconforming goods to Buyer, who accepts them without inspection. Two weeks later, Buyer discovers a latent defect substantially impairing their value. What may Buyer do?
- Revoke acceptance within a reasonable time, because the defect was difficult to discover and substantially impairs value (Correct answer)
- Nothing, because acceptance is always final
- Reject the goods under the perfect tender rule
- Sue only for fraud, because acceptance waives all warranty claims
Correct answer: Revoke acceptance within a reasonable time, because the defect was difficult to discover and substantially impairs value
UCC 2-608 permits revocation of acceptance when a nonconformity substantially impairs the goods' value and acceptance occurred without discovery due to the difficulty of detection.
Question 4: A general contractor uses a subcontractor's bid to compute its own winning bid on a project. The subcontractor then refuses to honor its bid. What doctrine best allows the general contractor to enforce the bid?
- Promissory estoppel, making the sub-bid irrevocable due to foreseeable reliance (Correct answer)
- The mailbox rule, because the bid was accepted upon dispatch
- Unilateral contract, because using the bid was full performance
- Novation, because the sub was substituted into the prime contract
Correct answer: Promissory estoppel, making the sub-bid irrevocable due to foreseeable reliance
Under Drennan v. Star Paving reasoning, a subcontractor's bid is held open by promissory estoppel when the general contractor foreseeably relies on it in submitting its own bid.
Question 5: A contract requires a singer to perform at a concert hall on June 1. The hall burns down through no one's fault on May 20. The promoter sues the singer's agent for refusing alternate arrangements. What doctrine excuses performance?
- Impossibility (impracticability), because destruction of the essential venue makes performance objectively impossible (Correct answer)
- Frustration of purpose, because the singer no longer wishes to perform
- Anticipatory repudiation by the concert hall
- Mutual mistake as to the hall's condition at formation
Correct answer: Impossibility (impracticability), because destruction of the essential venue makes performance objectively impossible
Destruction of a thing essential to performance, without fault, discharges contractual duties under the doctrine of impossibility or impracticability.
Question 6: Buyer contracts to buy 100 laptops at $500 each. Seller breaches, and Buyer reasonably purchases substitute laptops at $600 each. What are Buyer's direct damages under the UCC?
- $10,000, the difference between the cover price and the contract price (Correct answer)
- $50,000, the full contract price
- $60,000, the full cover price
- Nothing, because Buyer obtained the goods elsewhere
Correct answer: $10,000, the difference between the cover price and the contract price
Under UCC 2-712, a covering buyer recovers the difference between the cover price and the contract price, here $100 per laptop times 100 units.
Question 7: A debtor owes a creditor $10,000, undisputed and due. The debtor sends a check for $6,000 marked "payment in full," which the creditor cashes. May the creditor sue for the remaining $4,000?
- Yes, because there is no valid accord and satisfaction when the debt is liquidated and undisputed (Correct answer)
- No, because cashing the check accepted the accord
- No, because the notation created a novation
- Yes, but only if the creditor returns the $6,000 first
Correct answer: Yes, because there is no valid accord and satisfaction when the debt is liquidated and undisputed
An accord and satisfaction requires a good-faith dispute or unliquidated debt; part payment of a liquidated, undisputed debt is not consideration for discharging the balance.
MD Bar Contracts and Sales 3
A Maryland farmer orally agrees to sell 1,000 bushels of wheat for $8,000.
The buyer sends a signed written confirmation, and the farmer, a merchant, does not object within 10 days.
The farmer later refuses to deliver, citing the statute of frauds.
Who prevails?