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ALTERNATE CASE PROBLEM ANSWERS
CHAPTER 20
FORMATION OF
SALES AND LEASE CONTRACTS
20-1A. Statute of Frauds
The trial court granted a summary judgment in favor of SNK, and Entertainment appealed. The
20-2A. Open terms
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
20-3A. Goods and services combined
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 the UCC, or sales of services, subject to the general principles of the common law of
B-2 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 20
20-4A. Statute of Frauds
Under the Statute of Frauds, any contract for the sale of goods priced at $500 or more must be
in writing, or come under an applicable exception, to be enforceable. One such exception deals
with oral contracts for the sale of goods to be specially manufactured (goods not suitable for
20-5A. Statute of Frauds
The court held that the Davis memorandum constituted a sufficient writing to satisfy the UCC
20-6A. Goods associated with real estate
The court concluded that “the Entran II hose is a ‘good’ for purposes of the Colorado UCC,” and
on this basis denied Goodyear’s motion for summary judgment on the homeowners’ contract
claims. The court explained that the plaintiffs’ cause of action arose from “the contract between
20-7A. Statute of Frauds
The court ruled in Quality’s favor for the amount of the third order. Rupari appealed to a state
intermediate appellate court, which reversed the judgment of the lower court. Quality appealed
APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 20 B-3
20-8A. Contract modification
An agreement modifying a contract for the sale of goods within the UCC, needs no con-
sideration to be binding. Thus, if a sale qualifies as a sale of goods, the modification is binding
without consideration. The court held that a contract to supply pre-manufactured housing units
20–9A . Delivery without movement of the goods
Aleris is entitled to the loader. Under the UCC, any explicit understanding between the buyer
and the seller determines when title passes. But there are limits to any such agreement. When a
seller relinquishes possession of the goods, title to the goods also passes, even if the parties’
20-10A. A QUESTION OF ETHICS
1. The court held that the letter of intent did not contractually bind the parties when it
B-4 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 20
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
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
