B-79
ALTERNATE CASE PROBLEM ANSWERS
CHAPTER 19
THE FORMATION OF SALES
AND LEASE CONTRACTS
19-1A. Goods versus services
(Chapter 19—Pages 359–360)
The Supreme Court of Colorado ruled that the contract was for the sale of goods and hence fell under
19-2A. Statute of Frauds
(Chapter 19—Page 368)
19-3A. Open terms
(Chapter 19—Pages 362–365)
B-80 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 19
The court granted IBM’s motion for summary judgment, and ASC appealed to the U.S. Court of Appeals
for the Eighth Circuit, which affirmed the judgment of the lower court. The appellate court explained
19-4A. Goods and services combined
(Chapter 19—Pages 359–360)
The court held that the contracts were subject to Article 2 of the UCC. The court applied the
“predominant factor test” to determine whether the contracts primarily involved sales of goods, under
19-5A. Statute of Frauds
(Chapter 19—Pages 368–369)
Under the Statute of Frauds, any contract for the sale of goods priced at $500 or more must be in
19-6A. Statute of Frauds
(Chapter 19—Page 368)
19-7A. Goods associated with real estate
(Chapter 19—Page 358–359)
The court concluded that “the Entran II hose is a ‘good’ for purposes of the Colorado UCC,” and on this
19-8A. Statute of Frauds
(Chapter 19—Page 370)
The court ruled in Quality’s favor for the amount of the third order. Rupari appealed to a state
19-9A. Contract modification
(Chapter 19—Pages 359–360 & 367)
An agreement modifying a contract for the sale of goods within the UCC, needs no consideration to be
binding. Thus, if a sale qualifies as a sale of goods, the modification is binding without consideration.
B-82 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 19
19-10A. A QUESTION OF ETHICS
1. The court held that the letter of intent did not contractually bind the parties when it
2. Under the common law of contracts (which applied in this case), as well as under UCC 1–203,
the obligation of good faith applies to the performance of contracts. The court held that the provision in
the letter of intent—in which Federal-Mogul and Schwanbeck stated their intention “immediately to
3. As the court noted, the letter of intent stated that “[i]t has been agreed that we are under no
moral or legal obligation to refrain from negotiating the sale of [Vellumoid] with others until [a]
definitive agreement has been executed” (emphasis added). The same argument might be made against