CHAPTER 19
THE FORMATION OF SALES
AND LEASE CONTRACTS
ANSWERS TO QUESTIONS
AT THE ENDS OF THE CASES
CASE 19.1—QUESTION (PAGE 360)
WHAT IF THE FACTS WERE DIFFERENT?
Suppose that the contract had stated that the truck and other equipment were worth $50,000 and the
goodwill value of the business was worth $100,000. Would that have changed the outcome of this case?
Why or why not? If the parties agreed that the majority of the value in the contract was not in goods,
CASE 19.2—QUESTIONS (PAGE 370)
WHAT IF THE FACTS WERE DIFFERENT?
Suppose that Lindgren had admitted to a lesser quantity than he had orally promised to Glacial Plains
but that other proof of the true terms was available. What might have been the result? Explain your
164 UNIT FOUR: DOMESTIC AND INTERNATIONAL SALES AND LEASE CONTRACTS
Lindgren entered into an agreement in the spring of 2006 to deliver corn to Great Plains in the fall of
2007. Should the court have denied the enforcement of this agreement under the one-year rule?
CASE 19.3—QUESTIONS (PAGE 373)
1A. Why would the seller’s knowledge of the buyers’ limited resources support a finding of
unconscionability? It may be that the court viewed the sellers’ knowledge of the buyers’ limited
resources as evidence that the defendant’s approach to the transaction was knowingly exploitative and
overreaching.
2A. Why didn’t the court rule that the buyers, as adults, had made a decision of their own free will
and therefore were bound by the terms of the contract, regardless of the difference between the
ANSWERS TO QUESTIONS IN THE REVIEWING FEATURE
AT THE END OF THE CHAPTER
1A. Scope
The key factor is whether the transaction between Holcomb and TCG was for a good or a service,
because the UCC covers only goods. Most goods require some related service—their design, assembly,
installation, or manufacture—but the effort and expertise to make a good does not mean that the buyer
is buying the service instead of the good. The focus is on the buyer’s objective. Does the buyer want a
good or a service? To fall under the UCC, the service must be incidental to the buyer’s purpose. Here, a
CHAPTER 19: THE FORMATION OF SALES AND LEASE CONTRACTS 165
contract between Holcomb and TCG consist of a Web site, for which Holcomb may not be a merchant
because his business is adult entertainment (arguably a service), not technology.
3A. Valid contract
The contract between TCG and Holcomb is a valid contract. It sets out all of the essential terms—price,
ANSWER TO DEBATE THIS QUESTION IN THE REVIEWING FEATURE AT THE END OF THE
CHAPTER
The UCC should require the same degree of definiteness of terms, especially with respect to price
and quantity, as contract law does. Contract law requires definiteness sufficient for the parties to
ascertain the contract’s essential terms when it is accepted. The UCC, in its quest to encourage more
commerce, went overboard by removing this definiteness requirement. In so doing, the UCC opened up
too many possibilities for fraud and unethical behavior on the part of one of the parties to a sales
contract. Simply requiring that the parties’ actions show an intent to enter into a contract seems like an
awfully weak standard.
ANSWERS TO QUESTIONS AND CASE PROBLEMS
AT THE END OF THE CHAPTER
19–1A. Statute of Frauds
(Chapter 19—Page 370)
Under the Statute of Frauds [UCC 2–201(1)], any contract for the sale of goods priced at $500 or more
must be in writing in order to be enforceable. An exception to this rule is made when the contract has
19-2A. QUESTION WITH SAMPLE ANSWER: Acceptance
The entire answer falls under UCC 2–206(1)(b), because the situation deals with a buyer’s order to buy
goods for prompt shipment. The law is that such an order or offer invites acceptance by a prompt
19-3A. Additional terms
(Chapter 19—Pages 366–367)
The answer falls under UCC 2–207. Bailey is incorrect in claiming that the modification of carriers is
sufficient reason to claim an acceptance was not made. The law states that if the offeree (Bailey) makes
19–4A. Goods and services combined
(Chapter 19—Pages 359–360)
Article 2 of the Uniform Commercial Code (UCC) covers contracts for sales of goods but not services. A
19-5A. Offer
(Chapter 19—Pages 362–365)
Onics argued that the price quotations constituted offers and JCI’s purchase orders were acceptances,
which contained additional terms subject to UCC 2–207. According to Onics, the purchase orders’
19–6A. CASE PROBLEM WITH SAMPLE ANSWER: Parol evidence
Normally, the terms of a written contract that the parties intend to be the final expression of their
agreement cannot be contradicted by evidence of prior agreements or contemporaneous oral
agreements. Under the UCC, in interpreting a commercial agreement, a court will assume that the usage
19-7A. Additional terms
(Chapter 19—Pages 366–367)
Under UCC 2–207, the first step is to determine whether the parties formed a valid contract under UCC
2–207(1). Was there an offer and was there an acceptance? Oakley’s contract form listed the goods to
UCC 2–207(3) is limited to situations in which the writings of the parties do not establish a valid
contract but the parties act as if a contract exists. The subsection does not apply in this case because
Oakley’s and Ameropa’s forms established a valid contract. Continental’s argument is not correct. UCC
2–207(2)—not UCC 2–207(3)—determined whose title-and-risk term applied. In the actual case, the
19-8A. A QUESTION OF ETHICS: Contract terms
(a) Under the UCC’s Statute of Frauds, a contract for a sale of goods priced at $500 or more
must be in writing. A writing is sufficient if it indicates a contract between the parties and is signed by
the party against whom enforcement is sought. A contract is not enforceable beyond the quantity of
goods stated in the writing. Among other exceptions to these requirements, a contract will be
enforceable to the extent that the buyer has received or accepted the goods. This can occur when, for
example, a buyer does any act inconsistent with the seller’s ownership of those goods. This is the
“partial performance” exception.
In this case, the court awarded Fox $41,262.32 in damages, and Craftsmen appealed to a state
intermediate appellate court, which affirmed the lower court’s decision. The appellate court concluded,
“Partial performance . . . occurred when Craftsmen entered [Fox’s] showroom, modified displays, and
removed portions of the displays to Craftsmen’s showroom. These actions were inconsistent with
(b) In Craftsmen’s appeal from the judgment against it, an Ohio state intermediate appellate
court disagreed with Craftsmen’s contention that the “predominant factor” of its agreement with Fox
was a lease for the Hussongs’ building. The court found nothing to indicate that the parties intended to
enter into a contract for a lease. “In fact, none of the writings even mention a lease agreement.”
170 UNIT FOUR: DOMESTIC AND INTERNATIONAL SALES AND LEASE CONTRACTS
Besides, the “predominant factor” test concerns whether a contract for a sale of goods and services
should fall under the UCC because it is primarily a contract for a sale of goods. The court said, “This
would not be an issue in the present case, since the agreed-upon terms were for the sale of goods. In
any event, there was no agreement for a lease.”
Of course, it can be fair to hold a party to a contract to buy a business’s assets when a lease of
the premises on which the assets are located cannot be negotiated favorably for the buyer. Unless the
ANSWER TO VIDEO QUESTION NO. 19–9
Sales and Lease Contracts: Price As a Term
(a) Is Anna correct in assuming that a contract can exist even though the sales price for the
computer equipment was not specified? Explain. Yes, a contract can exist even if the price was
not specified. If the parties have not agreed on a price, the court will determine a “reasonable
price at the time of delivery” [UCC 2–305(1)]. If one of the parties is to determine the price, the
price must be fixed in good faith [UCC 2–305(2)]. The only problem Anna could face is if Wizard
Internet was at fault for the failure to set a price. In that situation, the seller could treat the
contract as canceled under UCC 2–305(3). (The seller could also set a reasonable price.)
of an ongoing contract [UCC 2–309(2), (3)], and the specific shipping arrangements [UCC 2–311].
CHAPTER 19: THE FORMATION OF SALES AND LEASE CONTRACTS 171
(c) Are the e-mail messages that Anna refers to sufficient proof of the contract? Would parol
evidence be admissible? Yes. Under the current provisions of the UCC, a contract involving the
1–201(39)]. Thus, assuming that the computer goods that Wizard Internet is purchasing are
valued at more than $500, e-mail communications with the seller’s “typed” signature should be
sufficient. As long as the quantity of goods subject to the sale is clear in the writing, all other
terms can be proved in court by oral testimony. If, by contrast, the parties have set forth all the
terms of their agreement in a single writing (such as a confirmatory memorandum), the court will
not allow parol evidence to contradict the terms of that writing. The terms of a contract may,
however, be explained or supplemented by consistent additional terms or by prior dealing, usage
of trade, or course of performance. The key is whether there is some ambiguity in the written
instrument. If so, the court may accept evidence of consistent additional terms to clarify or re-
move the ambiguity.
(d) Would parol evidence be admissible? Under the UCC, so long as the quantity of goods
performance. The key is whether there is some ambiguity in the written instrument. If so, the
court may accept evidence of consistent additional terms to clarify or remove the ambiguity.