- A supplier and a bakery have a longstanding relationship. They entered into a new contract for the sale of 1,000 pounds of flour per month. The written contract specified quantity but was silent on price and payment terms. For the first three months, the supplier sent an invoice with each delivery at the prevailing market price, and the bakery paid each invoice within 15 days. In the fourth month, the market price of flour rose 20%. The supplier delivered and invoiced at the new, higher market price. The bakery refused to pay, arguing they never agreed to a fluctuating price.
Answer: The bakery must pay the new, higher market price, as the parties' course of performance established a variable pricing term.
The correct answer is B. This question tests the hierarchy of terms under the UCC. While the UCC gap-filler for price (§ 2-305) is a 'reasonable price,' the parties' own conduct is more important. Under UCC § 1-303, a 'course of performance' exists when a contract involves repeated occasions for performance and the other party, with knowledge and opportunity to object, accepts the performance without objection. Here, for three months, the bakery accepted deliveries and paid invoices based on the prevailing market price. This course of performance establishes that the agreement was for a variable, market-based price. Therefore, the bakery must pay the higher price in the fourth month. A is incorrect because the course of performance established a method (market price), not a fixed price. C is incorrect because the contract is enforceable. D is close, but B is better because the course of performance is the primary interpretive tool, even though it leads to the same result as the gap-filler in this case. The reasoning based on course of performance is more precise.
- A winery in California and a distributor in New York entered into a contract for the sale of 1,000 cases of wine. At the time of contracting, both parties knew the specific 1,000 cases were being stored in a climate-controlled warehouse in Chicago, Illinois. The contract was silent regarding the place of delivery. The distributor sent its trucks to the winery in California to pick up the wine, but the winery informed them the wine was in Chicago.
Answer: The proper place for delivery is the warehouse in Chicago.
The correct answer is C. While the general UCC rule for a missing delivery term is the seller's place of business (UCC § 2-308(a)), there is a key exception. UCC § 2-308(b) provides that if at the time of contracting the goods are identified and are known by both parties to be in some other place, that place is the place for their delivery. Here, both parties knew the specific wine was in the Chicago warehouse. Therefore, Chicago is the correct place for delivery. A is incorrect because it applies the general rule without considering the specific exception. B is incorrect because the buyer's place of business is not the default. D is incorrect because the UCC provides a clear gap-filler for this situation.
- Contract is silent on delivery. Identified goods sit in a Kentucky warehouse known to both parties. Seller must tender:
Answer: At the Kentucky warehouse
Because the goods are identified and both parties know they are sitting in the Kentucky warehouse, UCC 2-308 makes that location the place for delivery. The tempting default of seller's place of business applies only when the goods are not identified and known to be elsewhere. So tender must occur at the Kentucky warehouse.
- An installment contract has no end date. Seller stops after 3 years. Which is true?
Answer: Runs for a reasonable time
An installment contract that specifies no end date is enforceable and lasts only for a reasonable time, so the seller's stop after three years is judged by that standard. The tempting error is to treat it as perpetual until terminated, but the law won't impose an endless obligation; reasonable time and reasonable notice govern termination.
- A coffee roaster and a café owner signed a document that stated: 'The parties agree to the sale of 500 pounds of whole bean coffee. We will agree on the price and delivery date next week, and if we do not, this agreement is null and void.' The parties subsequently failed to agree on a price. The café owner argues that a contract exists and a court should supply a reasonable price.
Answer: No contract exists because the parties' express language made agreement on the price a condition precedent to being bound.
This question tests your understanding of contract formation, specifically when parties explicitly make certain terms conditions precedent to being bound. When you see language that appears to make the contract conditional on future agreement, you need to carefully analyze whether the parties intended to be bound immediately or only after satisfying the stated conditions.
The correct answer is D because the parties' written agreement explicitly states "if we do not [agree on price and delivery date], this agreement is null and void." This express language makes reaching agreement on price a condition precedent to contract formation. The parties clearly indicated they would not be bound unless they could agree on these essential terms. Since they failed to agree on price, no contract was formed according to their own stated intentions.
Answer A is wrong because while UCC § 2-305 can supply a reasonable price when parties intend to contract but leave price open, it doesn't apply when parties expressly condition their agreement on reaching consensus about price. Answer B incorrectly assumes a contract exists and imposes the roaster's list price, but again, the parties made clear no contract would exist without their mutual agreement on price. Answer C reaches the right conclusion (no contract) but for the wrong reason - this sale of goods would be governed by the UCC, not common law, and the UCC generally doesn't require definite pricing.
Remember: When parties use explicit conditional language like "null and void if we don't agree," respect their stated intentions. Don't let gap-filling provisions override clear conditional language that prevents contract formation.
- A clothing retailer sent a purchase order to a wholesaler for 'all the men's wool sweaters we require for the upcoming winter season.' The wholesaler accepted the purchase order. The purchase order did not specify a price for the sweaters. Before any sweaters were shipped, the market price of wool increased significantly. The wholesaler now seeks to avoid the contract, arguing it is unenforceable.
Answer: The contract is enforceable as a requirements contract with the price to be a reasonable price at the time of delivery.
The correct answer is C. The language 'all the men's wool sweaters we require' creates a valid requirements contract under UCC § 2-306, which makes the quantity term definite enough to be enforceable. Because a valid contract was formed but the price was left open, UCC § 2-305 applies, filling the gap with a 'reasonable price at the time for delivery.' A is incorrect because UCC § 2-306 explicitly validates requirements contracts, measuring quantity by the good faith requirements of the buyer. B is incorrect because the UCC's gap-filler for price (UCC § 2-305) prevents the contract from failing for indefiniteness on that basis. D is incorrect because while a course of dealing could establish a price, it is not required; in its absence, the UCC provides the 'reasonable price' default rule.
- Price was to follow an index that is discontinued before delivery. Seller delivers. Buyer owes:
Answer: Reasonable price at delivery
The index was the agreed way to set the price, but when it is discontinued before delivery, the contract does not fail. The UCC fills the gap by requiring the buyer to pay a reasonable price at delivery. The tempting wrong answer is no price because the index is gone, but the parties clearly intended a sale, so a reasonable price is supplied instead.
- A sculptor agreed in a signed writing to sell a specific, large bronze statue to a gallery for a price to be determined by a certified art appraiser. Before the appraiser could value the statue, it was destroyed by a fire at the sculptor's studio through no fault of the sculptor. The gallery sues the sculptor for breach of contract, seeking damages based on the expected market value of the statue.
Answer: The sculptor will prevail because performance became impossible when the identified goods were destroyed.
This question tests your understanding of contract formation, impossibility of performance, and the destruction of specific goods under contract law.
When a contract involves specific, identified goods (like this particular bronze statue), and those goods are destroyed without fault of either party before delivery, performance becomes objectively impossible. Under both common law and the UCC, impossibility of performance excuses contractual duties. Since the sculptor cannot deliver the specific statue that was destroyed in the fire, and this destruction occurred through no fault of his own, his performance obligation is discharged.
Answer D is correct because the destruction of the identified goods made performance impossible, excusing the sculptor from his delivery obligation.
Answer A is wrong because while a valid contract may have been formed, the sculptor's failure to deliver wasn't a breach—it was due to impossibility of performance, which is a valid defense that excuses non-performance.
Answer B incorrectly focuses on the pricing mechanism. Courts generally find contracts valid even when price terms are to be determined later, especially when a reasonable method (like certified appraisal) is specified. The pricing issue doesn't void this contract.
Answer C is incorrect because contracts can be formed even with open price terms, particularly when there's an agreed-upon method for determining price. The contract was likely valid despite the pending appraisal.
Remember this key distinction: when specific goods identified in a contract are destroyed without fault before delivery, performance becomes impossible and excuses the seller's obligations. This differs from contracts for generic goods, where the seller typically remains obligated to obtain substitute goods.
- A manufacturer of electric bicycles received a signed purchase order from a retailer for '50 e-bikes, models to be determined by retailer from manufacturer's catalog.' The purchase order did not contain a price. The manufacturer sent a written confirmation and began production. Before the retailer selected the models, the manufacturer's key supplier went bankrupt, dramatically increasing its costs. The manufacturer informed the retailer that it could not honor the agreement because it was not a valid contract.
Answer: A contract was formed because the parties clearly intended to make a contract and there is a reasonably certain basis for a remedy.
The correct answer is B. Under UCC § 2-204, a contract for sale of goods may be made in any manner sufficient to show agreement, even though one or more terms are left open, if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy. Here, the quantity (50 e-bikes) is clear, giving a basis for a remedy. The failure to specify the models is covered by UCC § 2-311, which gives the option of assortment to the buyer. The open price term is covered by the UCC § 2-305 gap-filler. The parties' exchange of a purchase order and confirmation shows intent to be bound. A is incorrect because the UCC allows for these terms to be left open. C is incorrect because while impracticability might be a defense to breach, it does not mean a contract was never formed; further, a simple increase in costs is usually not sufficient for an impracticability defense. D is incorrect because UCC § 2-311 expressly permits the buyer to specify the assortment of goods.
- A winery sent a signed written offer to a restaurant, stating, 'We offer to sell you 100 cases of our 2023 Chardonnay at a price to be mutually agreed upon in good faith next month. This offer is firm for 30 days.' The restaurant owner immediately signed and returned the offer. One week later, before any discussion on price, the winery received a much higher offer from a distributor and notified the restaurant that it was revoking its offer. The restaurant claims a valid contract was formed.
Answer: A valid contract was formed, and a court will enforce it at a reasonable price at the time of delivery.
The correct answer is B. Under UCC § 2-204, a contract for the sale of goods may be made in any manner sufficient to show agreement. Under UCC § 2-305, a contract for sale can be concluded even if the price is not settled, provided the parties intended to form a contract. In such a case, the price is a reasonable price at the time for delivery. Here, the parties exchanged signed writings for a specific quantity of goods, indicating an intent to be bound. The failure to agree on a price does not invalidate the contract; the UCC gap-filler for price applies. A is incorrect because while the offer was a firm offer, the key issue is whether an acceptance of an offer with an open price term creates a contract, not just whether the offer was irrevocable. C is incorrect because under the UCC, price is not an essential term that must be agreed upon for a contract to be formed, unlike under the common law. D is incorrect because an agreement to agree on a price in good faith does not, by itself, defeat the overall intent to be bound when other terms (like quantity) are definite. The UCC presumes enforceability in such cases.
- A chemical company agreed to sell a specialty solvent to a paint manufacturer. The written contract specified the quantity of 1,000 gallons and the price, but provided that the delivery date would be 'at the seller's convenience.' Two months passed, and the paint manufacturer, running low on the solvent, demanded delivery. The chemical company stated it was experiencing production issues and could not say when it would deliver.
Answer: The seller must deliver the solvent within a reasonable time, notwithstanding the 'at the seller's convenience' clause.
The correct answer is B. Even with a term like 'at the seller's convenience,' the UCC imposes an obligation of good faith (UCC § 1-304) and commercial reasonableness. A term leaving performance to one party's discretion does not mean they can fail to perform. Courts will interpret such a clause to mean that delivery must still occur within a reasonable time, informed by good faith. The seller cannot use this clause to delay indefinitely or fail to deliver at all. An unreasonable delay would constitute a breach. A is incorrect because the duty of good faith prevents the promise from being illusory. C is incorrect because the seller's discretion is limited by reasonableness. D is premature; the buyer's remedy is to demand adequate assurance of performance or, after a reasonable time has passed, treat the delay as a breach, but the seller's failure to set a date is not yet an automatic breach without more context on what constitutes a reasonable time.
- A corporation in State A ordered 10,000 custom microchips from a supplier in State B. The written contract specified the price and quantity but was silent on risk of loss and delivery terms. The supplier placed the conforming microchips on a common carrier for shipment to the corporation. The truck carrying the microchips crashed, destroying the entire shipment. The corporation refuses to pay, arguing it never received the goods. The supplier sues for the contract price.
Answer: The supplier wins because the corporation bore the risk of loss once the goods were delivered to the common carrier.
The correct answer is A. This question connects the UCC gap-filler for delivery with the rules on risk of loss. When a contract is silent on delivery, the default under UCC § 2-308 is the seller's place of business. This creates a 'shipment contract' by default (UCC § 2-504). In a shipment contract, the risk of loss passes to the buyer when the seller duly delivers the goods to the carrier (UCC § 2-509(1)(a)). Here, the supplier delivered conforming goods to the carrier, so the risk of loss passed to the corporation at that moment. The subsequent destruction of the goods is the corporation's loss, and it must pay the contract price. B is incorrect because the default is a shipment contract, not a destination contract. C is incorrect because it describes the rule for a destination contract. D is incorrect because the UCC provides gap-fillers for these terms.
- You are representing a lumber mill that entered into a written agreement with a furniture maker. The agreement states: 'Lumber mill agrees to sell and furniture maker agrees to buy 10,000 board feet of kiln-dried cherry wood. Price to be set by lumber mill upon delivery.' Before delivery, the market price for cherry wood was approximately $8 per board foot. The lumber mill delivered the wood and set the price at $15 per board foot. The furniture maker refused to pay, arguing the price was commercially unreasonable. The lumber mill argues it had the contractual right to set the price.
Answer: The furniture maker must pay a reasonable price, which is the market price of $8 per board foot at the time of delivery.
The correct answer is C. Under UCC § 2-305(2), a price to be fixed by the seller or by the buyer means a price for him to fix in good faith. A price of $15 when the market price is $8 is evidence of bad faith. Comment 3 to § 2-305 states that in the event of a bad faith price, the other party may at his option treat the contract as canceled or himself fix a reasonable price. Therefore, the furniture maker is obligated to pay a reasonable price, which is the market price at the time of delivery. A is incorrect because the right to set the price is constrained by the duty of good faith. B is incorrect because such contracts are not illusory under the UCC; they are valid but subject to the good faith requirement. D is incorrect because the UCC allows contracts to be formed even when the price is to be set by one party later.
- A manufacturer and a retailer entered into a written contract providing for the monthly supply of widgets. The contract specified quantity and price but did not specify how long the supply arrangement would continue. After performing for 18 months, the manufacturer sent a letter to the retailer stating that, due to rising costs, it was terminating the agreement effective immediately. The retailer, having come to rely on the supply, sued the manufacturer for breach of contract.
Answer: The manufacturer breached the contract because it failed to provide reasonable notification of termination.
The correct answer is C. Under UCC § 2-309(2), a contract that provides for successive performances but is indefinite in duration is valid for a reasonable time but may be terminated at will by either party. However, UCC § 2-309(3) requires that termination by one party requires 'reasonable notification' be received by the other party. Terminating 'effective immediately' without prior warning does not constitute reasonable notification. A is incorrect because the at-will termination right is limited by the reasonable notification requirement. B is incorrect because termination of an indefinite contract does not require a breach by the other party. D is incorrect because UCC § 2-309 validates contracts with indefinite duration terms, subject to the reasonable time and reasonable notification requirements.
- A farmer and a grain elevator operator entered into a written contract for the sale of 10,000 bushels of wheat. The contract was silent as to price. At the time of delivery, the farmer demanded $8.00 per bushel, which was the spot market price on that day. The operator refused, offering only $7.50 per bushel, which had been the price during the parties' extensive course of dealing over the previous five years for similar contracts. The farmer sues for the higher price.
Answer: The farmer is entitled to only $7.50 per bushel because the parties' course of dealing controls over the UCC gap-filler.
The correct answer is B. Under UCC § 1-303, a course of dealing between the parties is a primary source for interpreting their agreement and supplementing its terms. A course of dealing can establish the meaning of an open term like price. It takes precedence over the general UCC gap-filler for a 'reasonable price.' Here, the parties had an extensive course of dealing where the price was consistently $7.50. This conduct establishes an agreement to that price for the current contract, overriding the default rule that would look to the current market price. A is incorrect because it applies the general gap-filler without considering the more specific and controlling course of dealing. C is incorrect because the contract is valid despite the open price term. D is incorrect as it is not a recognized legal principle for contract interpretation under the UCC.
- A wholesaler and a retailer signed a written agreement for the sale of 1,000 toys. The agreement stated the price would be 'the price listed in the manufacturer's January 1st catalog.' On January 1st, the manufacturer, having gone out of business, did not publish a catalog. The retailer demands the toys at last year's catalog price. The wholesaler argues that the contract is void.
Answer: The contract is enforceable at a reasonable price at the time of delivery.
The correct answer is B. UCC § 2-305(1)(c) directly addresses this situation. It provides that the parties can conclude a contract for sale even if the price is not settled, and states that if the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded, the price is a reasonable price at the time for delivery. Here, the external standard (the catalog) failed. The UCC's gap-filler for price then applies. A is incorrect because the UCC provides a remedy when the price standard fails. C is incorrect because the contract specified the January 1st catalog, and using a prior catalog is not the default rule. D is incorrect because neither party has the unilateral right to set the price; the default is a reasonable price.
- A grocer contracted with a farmer to purchase 100 bushels of apples. The contract was silent on price and the type of apples. The farmer delivered 100 bushels of Granny Smith apples, which was the only type of apple the farmer grew. The farmer billed the grocer at the current market price for Granny Smith apples. The grocer rejected the shipment, claiming he wanted Red Delicious apples and that the contract was void for indefiniteness.
Answer: The contract is valid, but the grocer had the right to specify the assortment of goods.
When you encounter contract formation questions involving missing terms, focus on whether the Uniform Commercial Code (UCC) can fill the gaps and who has the right to specify omitted details.
Under UCC Article 2, contracts for the sale of goods don't fail for indefiniteness when reasonable gap-fillers exist. Here, the price gap is easily filled by current market price at delivery time. For the type of apples, the UCC provides that when a contract requires one party to specify assortments or other details, that party must make the specification. Since the grocer is the buyer purchasing apples for presumably retail purposes, the grocer had the duty to specify which type of apples he wanted.
The contract is valid, but the grocer should have specified the apple variety, making answer D correct.
Answer A is wrong because the UCC doesn't void contracts merely because the buyer failed to specify the type of goods when that's the buyer's responsibility. Answer B incorrectly places the choice with the farmer—while the farmer acted reasonably by delivering what he grew, the legal right to specify belonged to the grocer. Answer C overstates the indefiniteness problem since the UCC routinely fills price gaps with market price, and the goods specification issue doesn't void the contract but rather identifies who should have made the choice.
Remember this pattern: when contracts omit specifications about assortment, quality, or similar details, look for which party should reasonably make that choice. The buyer typically specifies what they want, while the seller specifies how to deliver or perform.
- No payment term. Seller ships conforming goods by carrier. Buyer must pay:
Answer: After opportunity to inspect
Unless the contract says otherwise, payment is due when you receive the goods, and you have the right to inspect them before paying. Delivery terms affect risk and shipping costs, not the timing of payment. The tempting wrong answer is payment upon delivery to the carrier, because risk may pass then, but you still get a reasonable opportunity to inspect before paying.
- A machine shop and a factory entered into a written agreement providing that the machine shop would produce a 'substantial quantity' of custom gears for the factory over the next year. The agreement set forth detailed specifications for the gears but left the price, delivery schedule, and exact quantity open. After signing, the factory sent a purchase order for 1,000 gears at $50 per gear, a price consistent with the prior year's dealings. The machine shop refused the order, claiming no contract existed.
Answer: No valid contract exists because the quantity term is fatally indefinite.
When you encounter contract formation questions, focus on whether all essential terms are sufficiently definite to create an enforceable agreement. Under contract law, certain terms must be clear enough that a court could determine if a breach occurred and fashion appropriate remedies.
The correct answer is D because quantity is a fundamental term that cannot be left indefinitely vague. While "substantial quantity" might seem like it provides some guidance, it's far too ambiguous to create legal obligations. What constitutes "substantial" could vary wildly depending on perspective—the factory might consider 10,000 gears substantial while the machine shop might think 500 is substantial. Courts cannot enforce contracts when they cannot determine what performance is actually required.
Choice A is incorrect because while the UCC can fill gaps for price (using reasonable market price) and delivery terms (within a reasonable time), it cannot cure a fatally indefinite quantity term. The UCC's gap-filling provisions only work when there's an underlying enforceable contract.
Choice B fails because the factory's purchase order cannot unilaterally transform a fatally defective agreement into a valid contract. Since no valid contract existed initially due to the indefinite quantity, the purchase order merely constitutes an offer, which the machine shop rejected.
Choice C misapplies the concept of bad faith, which only applies to parties already bound by a valid contract. Since no contract exists here, the machine shop has no duty to perform, making their good or bad faith irrelevant.
Remember: indefinite quantity terms are typically fatal to contract formation unless they can be objectively determined through external standards or past dealings.
- A buyer and a seller orally agreed over the phone for the sale of 50 custom-printed signs for $1,000. During the call, they agreed on the design, quantity, and total price, but did not discuss when payment was due. The seller delivered the signs to the buyer's shop. The buyer accepted the signs but refused to pay, claiming the contract is invalid because they never agreed on payment terms.
Answer: The contract is valid, and payment was due when the buyer received the signs.
This question tests your understanding of contract formation, particularly how courts handle missing terms and the Statute of Frauds for goods contracts.
When parties form a contract but leave certain terms unspecified, the law doesn't automatically void the agreement. Instead, courts will supply reasonable terms to make the contract workable, especially when the essential elements (offer, acceptance, consideration) are present. Here, the parties agreed on the core terms: specific goods (50 custom signs), quantity, and price ($1,000). The absence of payment timing doesn't invalidate the contract.
Under the UCC, which governs sales of goods, when payment terms aren't specified, payment is due at the time and place where the buyer receives the goods. Since the buyer accepted delivery, payment became due immediately upon receipt.
Why the wrong answers miss the mark: Answer B incorrectly assumes that every contract term must be explicitly negotiated - the law fills gaps with reasonable terms rather than voiding contracts. Answer C misapplies the Statute of Frauds; while contracts for goods over $500 generally require writing, there's an exception when goods are specially manufactured for the buyer and not suitable for sale to others in the ordinary course of business, which applies to custom-printed signs. Answer D incorrectly imposes a 30-day payment period that has no basis in law when goods are received.
Remember: The UCC favors contract enforcement and provides default terms when parties leave gaps. Focus on whether the essential elements exist rather than whether every detail was negotiated.
