UT Bar Contracts and Sales 5

Question 1

A buyer under an installment contract receives one installment with a minor defect that can be cured and does not substantially impair the whole contract. May the buyer cancel the entire contract?

Accepted Answer

No, because cancellation of an installment contract requires a nonconformity that substantially impairs the value of the whole contract

Answer

Under UCC 2-612, the perfect tender rule does not apply to installment contracts; cancellation requires substantial impairment of the whole.

Question 2

A seller ships goods under a shipment contract using terms F.O.B. seller's city. The goods are destroyed in transit without fault of either party. Who bears the risk of loss?

Accepted Answer

The buyer, because risk passed when the goods were duly delivered to the carrier

Answer

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

Question 3

A contract clause fixes damages at $500,000 for any delay in delivering standard office furniture worth $10,000, regardless of the delay's length. How will a court most likely treat the clause?

Accepted Answer

As an unenforceable penalty because it is not a reasonable forecast of anticipated or actual harm

Answer

Liquidated damages must be a reasonable estimate of harm from a hard-to-measure loss; grossly disproportionate sums are unenforceable penalties.

Question 4

A minor purchases a car, uses it for six months, then disaffirms the contract and returns the damaged car. Under the majority rule, what may the minor recover?

Accepted Answer

The full purchase price, because a minor may disaffirm and need only return the consideration in its current condition

Answer

Under the majority rule, a disaffirming minor must only return what remains of the consideration and may recover the full price paid.

Question 5

An obligor owes a duty to pay $20,000 under a contract. The obligee assigns the right to payment to an assignee for value, then later assigns the same right to a second assignee who knows nothing of the first assignment. Under the majority American rule, who prevails?

Accepted Answer

The first assignee, because the first assignment for value generally prevails absent estoppel or payment to the second

Answer

Under the majority (New York) rule, the first assignee for value prevails over later assignees unless a recognized exception applies.

(UT Bar) Utah Bar Exam Practice Test

(UT Bar) Utah Bar Exam Practice Test

UT Bar Contracts and Sales 5