Essay Guide

June 10, 2008

Grocery Answer for BUS 415 of University of Phoenix

1) Does Article 2 of the Uniform Commercial Code (UCC) apply to the contracts between grocery and its vendors? Do common law contracts apply? Explain, in detail, why or why not. Your answer should compare and contrast common law contracts and UCC Article 2 contracts. Yes Article 2 of the UCC does apply to the contracts between Grocery and their vendors. Article 2 applies to all contracts for the sale of goods (2-102). The code contains a somewhat complicated definition of goods (2-105), the most important thing to understand is that the term goods means tangible personal property.

Article 2 does not apply to contracts for the sale of real estate or stocks and bonds and other intangibles. The drafters of the code also tried to promote fair dealing and higher standards of behavior in the marketplace. They attempted to do this in several ways in Article 2. The Code imposes a duty on everyone making agreements under the Code to act in good faith (1-203). The Code also imposes certain standards of quality on sellers of goods as a matter of law.

Common law contracts would also apply to the Grocery and their vendors, due to the mixture of goods and services. Common law would apply to the service element that is predominant in the contract with regards to the delivery of the goods. (Barnes, J). The difference between Article 2 and common law is that if the contract is for the sale of goods then Article 2 would apply, if it is not then the principles of common law under contracts would apply.

Article 2 reflects an attitude about contracts that is fundamentally different from that of the common law. The Code is more concerned with rewarding people’s legitimate expectations than with technical rules, so it is generally more flexible than traditional contract law. A court that applies the Code is more likely to find the parties had a contract than a court that applies contract law (2-204). In some cases, the Code gives less weight to technical requirements such as consideration than is the case in contract law. (Barnes, J).

2) Grocery contracted with Masterpiece Construction to renovate the store on Main Street in My Town. Masterpiece, unable to complete the renovation within the six month time limit due to a sudden increase in jobs, sub-contracted the entire job to Build Them to Fall. Grocery was unaware of the sub-contract. When Grocery realized (due to poor quality of work) that Build, not Masterpiece, was handling the renovation, Grocery petitioned the court for an injunction and then sued Masterpiece for breech of contract and specific performance. Masterpiece argued that it had a right to delegate the duties of the contract, or in the alternative, to discharge the contract due to commercial impracticability. Who wins? Explain your answer.

Based on the information provided, Grocery would win the case based on breech of contract and specific performance. Under breech of contract, promisors must perform their contractual duties in the manner they have promised to perform them. Since Masterpiece did not perform the duties in the manner in which they promised they are liable for breech of contract. The courts recognize that there are three basic degrees of performance: complete or satisfactory performance, substantial performance, and material breech of contract. (Barnes, J).

A contract consists of both rights and duties. A contracting party has the duty to perform his or her own promise and the right to receive the other party’s promised performance. These rights and duties can usually be transferred to third persons. When rights under a contract are transferred, this is called assignment. The transfer of duties is called a delegation. Not all contracts are assignable over the objection of the promisor. The promisor who delegates duties is still liable to the promise if the party to whom the duties were delegated fails to satisfactorily perform them. This would make Masterpiece liable for the quality of work that Build Them to Fall produced for Grocery. The only exception to this rule would have been if the parties had entered into a novation which is a new, separate agreement by the promisee to release the original promisor from liability in exchange for a third party’s agreement to assume the promisor’s duties.

As for Masterpieces claim that they had a right to delegate the duties to Build them to Fall under commercial impracticability they would have to show that unforeseen conditions would have caused a delay or inability to make delivery of the goods (make performance impracticable), then they would have been able to claim commercial impracticability. In the absence of compelling circumstances, the courts do not readily excuse parties from their contractual obligations, particularly where it is clear that the parties anticipated a problem and sought to provide for it in the contract. Since Masterpiece had contracted to perform the work for Grocery and then had a sudden increase in jobs this would not be considered compelling circumstances for sub-contracting the job to a company that would perform a poor quality of work.

3.) At the end of the summer, Jeff fresh had earned enough money to put a down payment on a car. He decided to continue working part time during school to earn money for the car payments. Jeff purchased a car from smooth sales used cars. Smooth did not ask Jeff how old he was; the salesman assumed he had reached the age of majority. Jeff paid the down payment and signed the contract stating that he would make payments of $200.00 each month. Six months later Jeff first his job and could no longer make the payments. Jeff took the car back to Smooth and said he wanted to cancel the contract and that he wanted his money back. What are the possible outcomes? Explain your answers.

1.) Because Smooth Car Sales failed to get proof of age from Jeff, they may very well have to pay back the money Jeff put into the car over the period of time it was in Jeff’s possession. The reason why this action could take place is because under the law most minors (under the age of 18) do not have the maturity, experience and sophistication needed to enter into a contract with adults (Cheeseman, 2004). In most cases the infancy doctrine was create, which gives minors the right to disarm or cancel the contract.

2.) Jeff could also have to act under the rule Minor’s duty of restitution in which he would have to return the property that he received from the adult in the condition it is in at the time of disaffirmance. Or in a case where the minor has misrepresented him or her self they would be charged under the law as Misrepresentation of age which in this case most would still have the right to disarm (Cheeseman, 2004). But most states have recognized the unfairness to the adult and revised the rule to where the minor who misrepresent their age must place the adult in status quo if they disarm the contract (Cheeseman, 2004). This means restoring the property back to its condition on the first day of possession by the minor. If Jeff had turn 18 after purchasing the car he could also be under the ratification rule which states if a minor does not disarm the contract during the period of minority or with in a reasonable time after reaching the age of majority, the contract is considered ratified (accepted). Hence the minor is bound by the contract: the right to disarm the contract has been lost.

4) Grocery has a written contract with Cereal Inc., to purchase 20 cases of cereal per month at $22 per case. The contract does not state the types of cereal or how the 20 cases will be divided up between Grocery’s 20 stores in any state. After a "twenty-year" flood, Cereal suffers severe water damage in its warehouse. With the exception of Soggy Flakes, Cereal delivery was due; Grocery receives 10 cases of Soggy Flakes at the three stores located in my town and two stores in your town. Twelve days before delivery was due, Grocery had requested, by facsimile that 15 cases containing a variety of cereals be delivered to the five stores listed above with the remaining five cases going to Grocery’s warehouse in Corp Town. Grocery wants to reject the shipments of Soggy Flakes and cancel its contract with Cereal.

a. Discuss Grocery’s rights under contract law.

A material breach or minor of contract has occurred when party has failed to perform express or implied contractual obligations that impair or destroys the essence of the contract (Cheeseman, 2004). Therefore Grocery has the right to rescind the contract and seek restitution of any compensation paid under the contract to the breaching party (Cheeseman, 2004). Leaving the non-breaching party discharged from any further performance under the contract (Cheeseman, 2004). Depending on the out come the non breaching party can also evaluate their monetary damages depending on the situation.

b. Cereal argues that based on the gap-filling rule, it had the right to modify the terms of the contract. Analyze the gap filling provisions of UCC Article 2 as they pertain to the terms of this contract.

Because the contract between Grocery and Cereal did not state the type of cereal or how the cereal would be divided up between the different locations this left an open term (gap-filling) clause in the contract.

c. What rights and/or defenses, if any does Cereal have under contract law?

If Cereal can show proof through the stipulations of the contract showing how the contract in detail has open terms relating to delivery of goods, they may have defense.

d. Analyze the remedies available to Grocery and or Cereal. Explain all answers in detail

Any of the modification rules could be considered in order to work out the differences between the buyer and the distributor. One that might be considered is the Methods of acceptance can by any reasonable manner or method of communications (Cheeseman, 2004). Or when an accommodation shipment has been sent to accommodate the buyer as a replacement of the original shipment when the original shipment can not be filled (Cheeseman, 2004).

5) Tom Green spent his time away from work on his hobby, model trains. His train set was very large and consisted of rare and one-of-a-kind trains. One day, while visiting with a fellow train hobbyist Harry, Tom said, "When I retire in two years from Grocery, I’m going to sell my trains and spend the rest of my years traveling on real trains." Tom then told Harry that he was the only person he planned to offer his trains to because he knew Harry would take good care of them. Harry said he looked forward to the day when he could buy the trains. Harry then spent the next two years and most of his savings building a new 2,000 sq. ft. room onto his house to make room for the trains. When Harry told Tom that he was building the new room, Tom just smiled. Tom also heard that Harry had borrowed money from his aunt to buy the trains. When Tom retired, he sold his trains to David. Harry sued Tom claiming breach of contract, or in the alternative, for promissory estoppels. Who wins? Explain your answer.

The courts have developed the doctrine of promissory estoppel (or detrimental reliance) to avoid injustice. This is a broad, policy-based doctrine. It is used to provide a remedy to a person who has relied on another person’s promise, but that person withdraws his or her promise and is not subject to a breach of contract action because one of the two elements discussed in this chapter (i.e., agreement or consideration) is lacking. The doctrine of promissory estoppels estops (prevents) the promisor from revoking his or her promise. Therefore, the person who has detrimentally relied on the promise for performance may sue the promisor for performance or other remedy the court feels is fair to award in the circumstances. For the doctrine of promissory estoppels to be applied, the following elements must be shown: (H. R. Cheeseman)

1. The promisor made a promise.

Tom the promisor, told Harry the promisee that he was the only person he planned to offer his trains to because he knew Harry would take good care of them.

2. The promisor should have reasonably expected to induce the promisee to rely on the promise. Harry should have given Tom some notification of his plans to possibly selling to another party. If Tom would have withdrawn his promise he would have not been subject to a breach of contract.

3. The promisee actually relied on the promise and engaged in an action or forbearance of a right of a definite and substantial nature. Harry spent the next two years and most of his savings building a new 2,000 sq. ft. room onto his house to make room for the trains he also borrowed the money from his sister.

4. Injustice would be caused if the promise were not enforced.

Therefore, Harry who has detrimentally relied on the promise for performance would win the case for performance or other remedy the court feels is fair to award in the circumstances.

6) Organic Farms shipped a truckload of peaches to Grocery using an independent trucker.

In route, the truck broke down and the shipment was delayed three days. The peaches were spoiled when they arrived. The terms of the contract were F.O.B. Who bears the risk? Explain your answer.

Organic farms bear the risk and responsibility for the truck breaking down due to their hiring a truck driver on their own and not having any designations from the buyer. F.O.B. (free on board) point of shipment requires the seller to arrange to ship the goods and put the goods in the carrier’s possession. The seller bears to deliver and tender the goods alongside the named vessel or on the dock designated and provided by the buyer. The seller bears the expense and risk of loss until this is done (H. R. Cheeseman). Under UNIFORM COMMERCIAL CODE § 2-319 F.O.B. and F.A.S. Terms: Unless otherwise agreed the term F.O.B. (which means "free on board") at a named place, even though used only in connection with the stated price, is a delivery term under which (a) when the term is F.O.B. the place of shipment, the seller must at that place ship the goods in the manner provided in this Article (Section 2 – 504) and bear the expense and risk of putting them into the possession of the carrier; or (b) when the term is F.O.B. the place of destination, the seller must at his own expense and risk transport the goods to that place and there tender delivery of them in the manner provided in this Article (Section 2-503); (c) when under either (a) or (b) the term is also F.O.B. vessel, car or other vehicle, the seller must in addition at his own expense and risk load the goods on board. If the term is F.O.B. vessel the buyer must name the vessel and in an appropriate case the seller must comply with the provisions of this Article on the form of bill of lading (Section 2-323).

(1) Unless otherwise agreed the term F.A.S. vessel (which means "free alongside") at a named port, even though used only in connection with the stated price, is a delivery term under which the seller must (a) at his own expense and risk deliver the goods alongside the vessel in the manner usual in that port or on a dock designated and provided by the buyer; and (b) Obtain and tender a receipt for the goods in exchange for which the carrier is under a duty to issue a bill of lading.

(2) Unless otherwise agreed in any case falling within subsection (1)(a) or (c) or subsection (2) the buyer must seasonably give any needed instructions for making delivery, including when the term is F.A.S. or F.O.B. the loading berth of the vessel and in an appropriate case its name and sailing date. The seller may treat the failure of needed instructions as a failure of cooperation under this Article (Section 2-311). He may also at his option move the goods in any reasonable manner preparatory to delivery or shipment.

(3) Under the term F.O.B. vessel or F.A.S. unless otherwise agreed the buyer must make payment against tender of the required documents and the seller may not tender nor the buyer demand delivery of the goods in substitution for the documents. (H. R. Cheeseman).

7). Discuss the different warranties that apply to Grocery’s business. Explain your answer in detail.

a.) Grocery Inc. needs to be able to provide their vendors the quality of produce specified in their contract. High quality vendors will want produce free of bruises or blemishes, while others might accept slightly damaged produce for a discounted price. A contract will specify either high quality or slightly damaged produce. It is Grocery Inc.’s responsibility to follow the contract; otherwise, problems may arise. They can get sued.

b.) No matter what type of produce is being purchased, the produce needs to get there at a specific time. If it does not arrive the vendors will have no produce to sell. They can get sued.

c.) It is very hard to ship produce to different countries. Throughout United States is fairly easy but, when produce needs to go to other countries Grocery will be working with a new set of rules and laws stated by the Department of Agriculture that needs t0 be followed; otherwise, the produce can get confiscated and never returned.

d.) In the stores Grocery has a duty to provide clean and safe environments for its customers and employees.

8.) Supplier Inc., a large wholesaler, had a contract with Grocery. Supplier sued Grocery for breach of contract when Grocery failed to place an order for goods by a specific date as specified in the contract. Each order was worth at least $550. Grocery contended that the contract Bill Green signed was a standard preprinted supply contract without specifics regarding time of order and quantity. Green had authority to sign a standard supply contract, but could not authorize specific terms. This was unknown to Supplier. Supplier argued that terms were "boilerplate" and therefore could be modified by acceptance. Supplier offered oral testimony at trial to prove that Green agreed to the modifications. Is there a contract? If so, what are the terms? Explain your answer.

1. Yes, there is a contract. The contract that Green claims to be a standard preprinted supply contract and Suppliers claim can be modified by acceptance.

2. The terms are that Grocery was supposed to purchase goods by a specific date.

3. Each order is worth at least $550.

a.) Also, discuss the use of Suppliers oral testimony at trial.

1. The use of Suppliers oral testimony can go either way. It can be very effective if he can prove that what he is saying is true. It can also be detrimental to his case if it is proven that he is lying.

2. Presenting to the courts and the jury that the copy of the actual contract is always a good idea. It will be up to the courts to decide if the original contract stands or if it is void.

References:

University of Phoenix . (Ed) (2005). Business Law [University of Phoenix Custom

Edition e-text] Prentice-Hall Publishing. Retrieved August 25, 2005, from University of

Phoenix , Resource BUS/415-Business Law Web Site:

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