Bar Exam (Uniform) Quiz: Governing Law
20 questions · exam conditions
0:00
Governing LawQuestion 1 of 20

A steel mill entered into a long-term contract with a regional utility company for the supply of electricity needed to power its furnaces. The contract specified a delivery rate and price per kilowatt-hour. A massive power surge originating from the utility's transmission lines damaged the mill's equipment, causing millions of dollars in losses. The mill sued the utility, alleging a breach of the UCC's warranty provisions.

Is the steel mill's claim likely to be governed by the UCC? Select one.

No, because the provision of electricity is a service, not the sale of a good.
Yes, because the electricity passes through a meter, at which point its sale is complete, and it is considered a good.
No, because public utilities are subject to a separate regulatory framework that preempts the UCC.
Yes, because the contract is between two merchants, so the UCC automatically applies to the transaction.
← Back to quizzes

Bar Exam (Uniform) Quiz

Bar Exam (Uniform) Quiz: Governing Law

Practice Governing Law in Bar Exam (Uniform) with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

What this quiz covers

This quiz focuses on Governing Law, giving you a quick way to practice the rules, question types, and explanations that matter most for Bar Exam (Uniform).

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

All questions

Question 1

A steel mill entered into a long-term contract with a regional utility company for the supply of electricity needed to power its furnaces. The contract specified a delivery rate and price per kilowatt-hour. A massive power surge originating from the utility's transmission lines damaged the mill's equipment, causing millions of dollars in losses. The mill sued the utility, alleging a breach of the UCC's warranty provisions.

Is the steel mill's claim likely to be governed by the UCC? Select one.

  1. No, because the provision of electricity is a service, not the sale of a good.
  2. Yes, because the electricity passes through a meter, at which point its sale is complete, and it is considered a good. (correct answer)
  3. No, because public utilities are subject to a separate regulatory framework that preempts the UCC.
  4. Yes, because the contract is between two merchants, so the UCC automatically applies to the transaction.
Explanation: When you encounter questions about whether the UCC applies to a transaction, the key is determining if the subject matter constitutes a "good" under UCC Article 2. This requires analyzing whether you're dealing with tangible, movable personal property versus services or real estate. The correct answer is B because electricity, once it passes through a meter and is delivered to the customer, transforms from mere energy transmission into a measurable, quantifiable commodity that constitutes a "good" under the UCC. Most courts treat metered electricity as tangible personal property at the point of delivery, making warranty provisions applicable. The utility is selling a product (kilowatt-hours of electricity) rather than merely providing a service. Answer A incorrectly characterizes electricity delivery as purely a service. While utilities do provide services, the actual sale of metered electricity involves the transfer of a commodity that courts generally recognize as a good under UCC Article 2. Answer C misapplies preemption doctrine. Although utilities operate under regulatory frameworks, this doesn't automatically preempt UCC warranty protections. Regulatory oversight and UCC remedies can coexist unless specifically displaced by statute. Answer D states an incorrect rule. The UCC doesn't apply simply because both parties are merchants. Article 2 only governs transactions involving goods, regardless of the parties' commercial status. Merchant status affects specific UCC provisions but doesn't determine overall applicability. Remember: UCC Article 2 application hinges on whether goods are involved, not the nature of the parties or industry regulation. Focus on whether the subject matter is tangible, movable personal property.

Question 2

A law firm subscribed to an online legal research service for an annual fee of $50,000. The service provides access to a database of statutes, case law, and secondary sources. The contract is for access to this information, which is delivered electronically. The law firm alleges that a critical statute in the database was outdated, causing it to commit malpractice, and sues the service provider for breach of warranty under the UCC.

Which body of law is a court most likely to apply to this subscription agreement? Select one.

  1. The common law, because the contract is for the provision of an intangible information service. (correct answer)
  2. The UCC, because the transaction is between two merchants.
  3. The UCC, because the electronic data is a movable product delivered to the customer.
  4. The common law, because the contract is a license, not a sale.
Explanation: When you encounter a contract dispute, the first step is determining whether the UCC (which governs sales of goods) or common law (which governs services and other contracts) applies. This classification drives which rules govern formation, performance, and remedies. The correct answer is A because this contract is fundamentally for an information service. The law firm is paying for access to legal research capabilities—the ability to search, retrieve, and use legal information. The electronic delivery method doesn't transform this service into a sale of goods. Courts consistently treat information services, database access, and research subscriptions as services governed by common law, regardless of how the information is delivered. Answer B is wrong because merchant status alone doesn't determine which body of law applies. Even when both parties are merchants, you must still analyze whether the transaction involves goods (UCC) or services (common law). Answer C incorrectly focuses on the delivery method. While electronic data can sometimes be considered goods in certain contexts (like purchasing software), here the data isn't being "sold" as a product—it's providing ongoing access to a research service. The movable nature of electronic delivery doesn't make this a goods transaction. Answer D reaches the right conclusion but for an imprecise reason. While the contract may involve licensing aspects, the key distinction isn't license versus sale—it's service versus goods. Some licenses can involve goods transactions under the UCC. Remember: Focus on the essence of what's being provided. Information access and research capabilities are services, regardless of electronic delivery methods.

Question 3

A homeowner wanted to install a custom home theater. She hired a company that specialized in such installations. The total contract price was $40,000. This included a projector, a screen, surround-sound speakers, and specialized seating, which cost the company $25,000. The price also included the company's services in designing the room's acoustics, running wiring through the walls, and calibrating all the equipment. A dispute arose over the quality of the audio calibration service.

To resolve the dispute, which body of law will a court most likely apply? Select one.

  1. The common law, because the dispute is specifically about the quality of a service performed.
  2. The common law, because the installation involved modifications to real property.
  3. The UCC, because the predominant purpose of the contract was to acquire the home theater equipment. (correct answer)
  4. The UCC, because the value of the equipment was greater than the implied value of the services.
Explanation: The correct answer is C. In this scenario, the homeowner's primary goal is to obtain a functioning home theater system, which is a collection of goods. The design, installation, and calibration services, while important and requiring skill, are incidental to the primary purpose of providing the goods and making them work as intended. Because the predominant purpose is the sale of goods, the UCC will govern the entire contract, including the dispute over the service component.

Question 4

A hospital contracted with a software developer to create, install, and maintain a highly customized electronic health record (EHR) system. The total contract price was $2 million. The price included designing the software architecture from scratch, writing hundreds of thousands of lines of new code, integrating the system with the hospital's existing laboratory and imaging equipment, and providing on-site staff training and five years of technical support. The software itself was delivered on a secured server. A dispute arose when the hospital claimed the software failed to meet critical performance specifications.

In a breach of contract action, which body of law will a court most likely apply to resolve the dispute? Select one.

  1. The UCC, because the final deliverable was a software product installed on a tangible server.
  2. The UCC, because the value of a functioning EHR system as a product is the essence of the contract.
  3. The common law, because the contract's predominant purpose was the provision of skilled services in designing and developing a custom system. (correct answer)
  4. The common law, because contracts with healthcare providers are always governed by the common law.
Explanation: The correct answer is C. In a hybrid contract involving both goods and services, courts apply the predominant purpose test. Here, the contract was not for a pre-existing, off-the-shelf software product but for the developer's substantial services in designing, coding, integrating, and supporting a custom system. These extensive service elements, which require specialized skill and labor, are the primary thrust of the agreement, making the common law the governing body of law. The delivery of the software on a server is incidental to the primary purpose of providing a service.

Question 5

A homeowner hired a company to remove a large, diseased tree from her property for $3,000. The contract stated that the company would cut down the tree, grind the stump, and haul away all the wood. The company planned to sell the valuable hardwood logs for a profit. After cutting down the tree, the company failed to grind the stump or haul away the wood. The homeowner sued.

Which body of law is most likely to govern this tree removal contract? Select one.

  1. The UCC, because the contract involved the severance of timber from land, which is a sale of goods.
  2. The UCC, because the company, by taking the wood to sell, was effectively purchasing the timber from the homeowner.
  3. The common law, because the tree was initially part of the real property.
  4. The common law, because the homeowner's primary purpose was to obtain the service of having a tree removed. (correct answer)
Explanation: When you encounter a contract that involves both goods and services, you need to determine whether the UCC (for goods) or common law (for services) applies. The key is identifying the contract's primary purpose from the buyer's perspective. Why D is correct: The homeowner's main goal was obtaining the service of tree removal. She wanted the diseased tree gone from her property, along with stump grinding and debris removal. The fact that the company planned to profit from selling the wood is irrelevant to determining what the homeowner was primarily purchasing. Since her primary purpose was receiving services, common law governs this contract. Why the wrong answers fail: A incorrectly focuses on the timber severance. While the UCC does cover timber sales when the buyer severs the trees, that's not what happened here—the homeowner hired someone else to do the cutting as part of a service contract. B mischaracterizes the transaction. The company wasn't purchasing timber from the homeowner; they were being paid $3,000 to provide removal services and happened to plan to keep the wood as additional compensation. C starts correctly by identifying common law but gives the wrong reasoning. Whether the tree was initially part of real property doesn't determine which law applies—the primary purpose test does. Study tip: Always ask "What was the buyer's main objective?" when facing mixed goods-and-services contracts. The buyer's primary purpose—not what the seller plans to do with materials—determines whether UCC or common law applies.

Question 6

A farmer contracted with a company to design, furnish, and install a new irrigation system for his 100-acre farm. The contract price was $150,000. This price included pumps, pipes, and sprinklers, as well as extensive services for system design, trenching, and installation. The value of the physical components was approximately $90,000. After installation, the farmer sued, alleging the system failed to water the crops evenly, a claim related to the system's overall performance.

In determining the rights and obligations of the parties, a court will most likely apply which body of law? Select one.

  1. The UCC, because the farmer's primary objective was to acquire a functioning irrigation system, which is comprised of goods. (correct answer)
  2. The common law, because the contract involved significant and complex installation services.
  3. The UCC, because the cost of the goods component exceeded the cost of the service component.
  4. The common law, because the irrigation system became a fixture attached to the farmer's real property.
Explanation: The correct answer is A. This is a classic hybrid contract. In applying the predominant purpose test, a court would likely conclude that the farmer's main goal was to purchase a good—a working irrigation system. The design and installation services, though significant, were necessary incidents to make the good useful for its intended purpose. The essence of the contract was the sale of the equipment, not the labor to install it. Therefore, the UCC governs.

Question 7

A farmer delivered 20,000 bushels of corn to a local grain elevator. The farmer received a receipt stating that the corn would be stored and that the farmer could, upon demand, receive back an equal quantity of corn of the same type and grade. The agreement permitted the elevator to commingle the farmer's corn with that of others. Before the farmer reclaimed his corn, the elevator sold all of its contents and declared bankruptcy. The farmer sued the elevator's owner, claiming a breach of a sales contract under the UCC.

What is the proper classification of the agreement between the farmer and the grain elevator? Select one.

  1. A sale of goods governed by the UCC, because the farmer relinquished control of specific bushels of corn.
  2. A sale of goods governed by the UCC, because the elevator was a merchant and was permitted to sell the corn.
  3. A bailment governed by the common law, but only if the farmer's specific corn was segregated from the others.
  4. A bailment governed by the common law, because the farmer retained title and expected the return of a like-kind quantity. (correct answer)
Explanation: When you encounter questions about storing goods with the right to receive equivalent items back, you need to distinguish between sales contracts and bailments based on whether title transfers. This arrangement is a bailment governed by common law because the farmer retained ownership of his corn and expected to receive back an equivalent quantity of the same grade. In a bailment, the bailor (farmer) temporarily transfers possession but retains title, while the bailee (elevator) has a duty to return the goods or their equivalent. The key indicator here is that the farmer received a receipt acknowledging his right to reclaim "an equal quantity of corn of the same type and grade" - this shows an expectation of return, not a completed sale. Answer A incorrectly focuses on relinquishing control of specific bushels. Losing control of particular items doesn't automatically create a sale when the agreement contemplates return of equivalent goods. Answer B misunderstands the elevator's merchant status and permission to sell. While the elevator could sell corn in its ordinary business, this doesn't transform the farmer's deposit into a sale - the elevator was essentially borrowing against the farmer's corn. Answer C incorrectly requires segregation for bailment classification. Bailments can involve fungible goods that are commingled, as long as the bailee can return equivalent items. Remember: If someone expects to get back the same or equivalent goods they deposited, it's typically a bailment, not a sale - even when the specific items get mixed with others. Look for language indicating a duty to return rather than transfer of ownership.

Question 8

A university contracted with a company to cater its annual alumni fundraising gala. The contract price was $100,000. This price included the food and beverages, as well as all necessary services, including menu planning, meal preparation, setup of tables and decorations, service staff for the event, and cleanup. After the event, the university refused to pay, claiming the service was unprofessional and disorganized. The catering company sued.

Which body of law will govern this catering contract? Select one.

  1. The UCC, because the contract's primary component was the provision of food and drink, which are goods.
  2. The UCC, because the caterer is a merchant with respect to the goods it sells.
  3. The common law, because the contract included a substantial service component in addition to the food.
  4. The common law, because the predominant purpose was the provision of a comprehensive event service. (correct answer)
Explanation: The correct answer is D. While food and beverages are goods, a catering contract for a large event is predominantly a service contract. The customer is not just buying food; they are buying the service of having an event planned, prepared, staffed, served, and cleaned up. These extensive service components are the essence of the bargain, making the provision of food incidental. Therefore, the common law governs.

Question 9

A car owner brought her vintage sports car to a specialized mechanic for a complete engine rebuild. The total cost was $15,000. The invoice showed $10,000 for rare, custom-ordered parts and $5,000 for the highly skilled labor required for the rebuild. Shortly after the owner got the car back, the engine seized due to what the owner claims was a defective part supplied by the mechanic. The owner sued for breach of contract.

Which body of law will a court most likely use to analyze the contract? Select one.

  1. The UCC, because the value of the parts was two-thirds of the total contract price.
  2. The UCC, because the dispute arose from an allegedly defective good supplied under the contract.
  3. The common law, because the owner's purpose was to obtain the mechanic's diagnostic and repair services. (correct answer)
  4. The common law, because contracts for the repair of personal property are a specific category of service contracts.
Explanation: The correct answer is C. In contracts for repairs, the predominant purpose is generally considered to be the service of the repair person—their skill, judgment, and labor. The customer is seeking to have their property fixed, which is a service. The provision of parts, even if they constitute a majority of the cost, is incidental to the primary purpose of performing the repair service. Therefore, the common law governs.

Question 10

A corporation hired a landscape architecture firm to completely redesign the grounds of its headquarters for a total price of $250,000. The contract included creating a new design, significant grading and soil work, and the installation of a pond, walkways, and lighting. It also required the firm to supply and plant $75,000 worth of mature trees and exotic shrubs. One year after completion, nearly all the expensive trees died. The corporation sued the firm.

Which body of law is most likely to govern this dispute? Select one.

  1. The common law, because the contract was predominantly for the service of designing and constructing a landscape. (correct answer)
  2. The UCC, because the trees were movable at the time of identification to the contract.
  3. The UCC, because the dispute specifically concerns the viability of goods (the trees).
  4. The common law, because contracts involving improvements to real property are always governed by common law.
Explanation: When you encounter a contract involving both goods and services, you need to determine whether the UCC (for goods) or common law (for services) governs by applying the "predominant purpose" test. Courts look at the primary objective of the contract as a whole, not just the disputed element. Here, the contract's predominant purpose was landscape architecture services - designing and constructing a complete landscape transformation for $250,000. The work included creating designs, grading, soil work, installing ponds, walkways, and lighting. While $75,000 worth of trees were included, they represented only 30% of the total contract value and were incidental to the primary service of landscape transformation. Choice A correctly identifies that common law governs because the contract was predominantly for landscape design and construction services, with the trees being a component of that larger service. Choice B incorrectly focuses on whether trees are "movable goods." While technically true, this misses the predominant purpose analysis - the mobility of goods is irrelevant when services dominate the contract. Choice C falls into the trap of applying law based on what's being disputed rather than the contract's overall nature. The UCC doesn't govern just because the lawsuit happens to concern the trees. Choice D states an overly broad rule. While real property improvements often involve common law, the key isn't the location but whether services or goods predominate the contract's purpose. Remember: For mixed contracts, always ask "What was the primary purpose?" Don't let the disputed element distract you from analyzing the contract as a whole.

Question 11

A research laboratory purchased a powerful electron microscope from a manufacturer for $1.5 million. The contract required the manufacturer to install the microscope, a process that took a team of engineers two weeks, and to provide six months of training for the lab's technicians. The cost of the installation and training was not separately stated in the contract. When the microscope failed to achieve the specified resolution, the lab sued.

Which body of law will govern this contract? Select one.

  1. The common law, because the contract included essential and complex services of installation and training.
  2. The common law, because the microscope is a highly specialized piece of equipment, not an ordinary good.
  3. The UCC, because the lab's predominant purpose was to acquire the microscope itself. (correct answer)
  4. The UCC, but only for the microscope, while the common law would govern the installation and training services.
Explanation: The correct answer is C. The predominant purpose of this transaction was the acquisition of a good—the electron microscope. The price of the good itself is the overwhelming component of the contract's value. The complex installation and training were necessary services to enable the lab to use the good, but they were incidental to the primary purpose of the sale. Therefore, the UCC governs the entire contract.

Question 12

A patient underwent a complex surgical procedure during which a surgeon implanted a pacemaker, a sophisticated medical device. The total cost billed by the hospital for the surgery and related care was $75,000. The hospital's cost for the pacemaker itself was $15,000. Two years later, the pacemaker malfunctioned due to a manufacturing defect, requiring additional surgery. The patient sued the hospital for breach of the UCC's implied warranty of merchantability.

What is the hospital's strongest argument that the UCC does not apply to its transaction with the patient? Select one.

  1. The UCC does not apply because the cost of the device was a small fraction of the total medical bill.
  2. The UCC does not apply because the predominant purpose of the transaction was the provision of medical services. (correct answer)
  3. The UCC does not apply because hospitals are not considered 'merchants' with respect to the medical devices they use.
  4. The UCC does not apply because the patient's claim is fundamentally a tort claim, not a contract claim.
Explanation: The correct answer is B. Courts almost universally hold that when a medical device is implanted as part of a surgical procedure, the transaction is predominantly one for services, not a sale of goods. The patient is seeking the skill and judgment of the surgeon and the care of the hospital. The provision of the pacemaker, while essential, is incidental to the overarching medical service. Therefore, the common law applies, and the UCC's implied warranties do not.

Question 13

An entrepreneur purchased a franchise from a national coffee chain for a one-time fee of $50,000. The franchise agreement gave the entrepreneur the right to use the chain's trademark and proprietary business methods. It also required the franchisee to purchase all coffee beans, cups, and branded paper products exclusively from the franchisor. A dispute arose when the franchisee claimed the mandatory business operations software provided by the franchisor was defective.

In resolving the dispute over the software, which body of law will most likely govern the franchise agreement? Select one.

  1. The UCC, because the agreement requires the ongoing purchase of goods like coffee beans and cups.
  2. The common law, because the predominant purpose of the agreement is the license of intangible rights and a business system. (correct answer)
  3. The UCC, because the dispute is about software, which is often treated as a good.
  4. The common law, because the one-time franchise fee for intangible rights is the largest single payment under the agreement.
Explanation: When you encounter a contract dispute, you must first determine whether the Uniform Commercial Code (UCC) or common law governs. This choice depends on identifying the agreement's "predominant purpose" - what the parties primarily intended to accomplish. The correct answer is B because this franchise agreement's predominant purpose involves licensing intangible rights and a comprehensive business system. The entrepreneur paid $50,000 primarily for the right to use the franchisor's trademark, proprietary business methods, and operational framework. These are intangible assets governed by common law, not goods covered by the UCC. Choice A is wrong because although the agreement requires ongoing purchases of goods like coffee beans and cups, these purchases are ancillary to the main franchise relationship. The UCC doesn't govern just because some goods are involved - you must look at the agreement's primary purpose. Choice C incorrectly focuses on the specific dispute item (software) rather than the overall agreement. Even if software might sometimes be treated as a good, the governing law is determined by analyzing the entire contract's predominant purpose, not individual disputed components. Choice D makes a common error by focusing solely on the dollar amount of the franchise fee. While the $50,000 fee supports the intangible rights conclusion, the size of the payment alone doesn't determine governing law - the nature and purpose of what's being exchanged matters most. Remember: In mixed contracts involving both goods and services/intangibles, always apply the predominant purpose test by examining what the parties primarily sought to accomplish through their agreement.

Question 14

A publisher entered into a contract with a printing company to print 50,000 copies of a full-color art history textbook. The total price was $500,000. The printing company was responsible for sourcing all paper, ink, and binding materials. The publisher provided the digital files for the text and images. When the books were delivered, the publisher rejected them, claiming the color reproduction in the images was substandard. The printing company sued for the contract price.

Which body of law will govern the dispute between the publisher and the printing company? Select one.

  1. The common law, because the printer was providing the service of printing, using its specialized skills and equipment.
  2. The common law, because the publisher provided the essential intellectual property for the book.
  3. The UCC, because the publisher's main objective was to acquire a quantity of finished, movable goods—the books. (correct answer)
  4. The UCC, but only because the printer, not the publisher, sourced the raw materials like paper and ink.
Explanation: The correct answer is C. Although printing involves significant services, the end product of the contract is a large quantity of movable goods (books). The publisher's predominant purpose is to obtain these goods for resale. The services provided by the printer are the means to produce the goods. Therefore, the transaction is considered a sale of goods governed by the UCC.

Question 15

A steel mill entered into a long-term contract with a regional utility company for the supply of electricity needed to power its furnaces. The contract specified a delivery rate and price per kilowatt-hour. A massive power surge originating from the utility's transmission lines damaged the mill's equipment, causing millions of dollars in losses. The mill sued the utility, alleging a breach of the UCC's warranty provisions.

Is the steel mill's claim likely to be governed by the UCC? Select one.

  1. No, because the provision of electricity is a service, not the sale of a good.
  2. Yes, because the electricity passes through a meter, at which point its sale is complete, and it is considered a good. (correct answer)
  3. No, because public utilities are subject to a separate regulatory framework that preempts the UCC.
  4. Yes, because the contract is between two merchants, so the UCC automatically applies to the transaction.
Explanation: When you encounter questions about whether the UCC applies to a transaction, the key is determining if the subject matter constitutes a "good" under UCC Article 2. This requires analyzing whether you're dealing with tangible, movable personal property versus services or real estate. The correct answer is B because electricity, once it passes through a meter and is delivered to the customer, transforms from mere energy transmission into a measurable, quantifiable commodity that constitutes a "good" under the UCC. Most courts treat metered electricity as tangible personal property at the point of delivery, making warranty provisions applicable. The utility is selling a product (kilowatt-hours of electricity) rather than merely providing a service. Answer A incorrectly characterizes electricity delivery as purely a service. While utilities do provide services, the actual sale of metered electricity involves the transfer of a commodity that courts generally recognize as a good under UCC Article 2. Answer C misapplies preemption doctrine. Although utilities operate under regulatory frameworks, this doesn't automatically preempt UCC warranty protections. Regulatory oversight and UCC remedies can coexist unless specifically displaced by statute. Answer D states an incorrect rule. The UCC doesn't apply simply because both parties are merchants. Article 2 only governs transactions involving goods, regardless of the parties' commercial status. Merchant status affects specific UCC provisions but doesn't determine overall applicability. Remember: UCC Article 2 application hinges on whether goods are involved, not the nature of the parties or industry regulation. Focus on whether the subject matter is tangible, movable personal property.

Question 16

An accounting firm contracted with a technology consultant for a new computer system. The written agreement provided that the consultant would sell the firm twenty pre-manufactured desktop computers for a total of $30,000 and, for a separately stated price of $5,000, provide twenty hours of service to install the computers and transfer data from the old system. After the work was completed, a dispute arose concerning the quality of the data transfer service.

In resolving the dispute about the data transfer service, which body of law should a court apply to the contract? Select one.

  1. The UCC, because the predominant purpose of the overall contract was the sale of computer hardware. (correct answer)
  2. The common law, because the dispute relates specifically to the service portion of the contract.
  3. The UCC, because the service was incidental to the sale of goods and therefore is governed by the UCC along with the goods.
  4. The common law, because the service portion of the contract is severable as it has its own separately stated price.
Explanation: The correct answer is A. Even though the dispute arises from the service component, courts will first apply the predominant purpose test to the contract as a whole. Here, the primary reason for the contract was the purchase of goods (computers), valued at $30,000. The service component, valued at $5,000, was incidental to the sale of goods. Because the contract's predominant purpose is the sale of goods, the UCC will govern the entire contract, including the service portion.

Question 17

A law firm subscribed to an online legal research service for an annual fee of $50,000. The service provides access to a database of statutes, case law, and secondary sources. The contract is for access to this information, which is delivered electronically. The law firm alleges that a critical statute in the database was outdated, causing it to commit malpractice, and sues the service provider for breach of warranty under the UCC.

Which body of law is a court most likely to apply to this subscription agreement? Select one.

  1. The common law, because the contract is for the provision of an intangible information service. (correct answer)
  2. The UCC, because the transaction is between two merchants.
  3. The UCC, because the electronic data is a movable product delivered to the customer.
  4. The common law, because the contract is a license, not a sale.
Explanation: When you encounter a contract dispute, the first step is determining whether the UCC (which governs sales of goods) or common law (which governs services and other contracts) applies. This classification drives which rules govern formation, performance, and remedies. The correct answer is A because this contract is fundamentally for an information service. The law firm is paying for access to legal research capabilities—the ability to search, retrieve, and use legal information. The electronic delivery method doesn't transform this service into a sale of goods. Courts consistently treat information services, database access, and research subscriptions as services governed by common law, regardless of how the information is delivered. Answer B is wrong because merchant status alone doesn't determine which body of law applies. Even when both parties are merchants, you must still analyze whether the transaction involves goods (UCC) or services (common law). Answer C incorrectly focuses on the delivery method. While electronic data can sometimes be considered goods in certain contexts (like purchasing software), here the data isn't being "sold" as a product—it's providing ongoing access to a research service. The movable nature of electronic delivery doesn't make this a goods transaction. Answer D reaches the right conclusion but for an imprecise reason. While the contract may involve licensing aspects, the key distinction isn't license versus sale—it's service versus goods. Some licenses can involve goods transactions under the UCC. Remember: Focus on the essence of what's being provided. Information access and research capabilities are services, regardless of electronic delivery methods.

Question 18

A farmer delivered 20,000 bushels of corn to a local grain elevator. The farmer received a receipt stating that the corn would be stored and that the farmer could, upon demand, receive back an equal quantity of corn of the same type and grade. The agreement permitted the elevator to commingle the farmer's corn with that of others. Before the farmer reclaimed his corn, the elevator sold all of its contents and declared bankruptcy. The farmer sued the elevator's owner, claiming a breach of a sales contract under the UCC.

What is the proper classification of the agreement between the farmer and the grain elevator? Select one.

  1. A sale of goods governed by the UCC, because the farmer relinquished control of specific bushels of corn.
  2. A sale of goods governed by the UCC, because the elevator was a merchant and was permitted to sell the corn.
  3. A bailment governed by the common law, but only if the farmer's specific corn was segregated from the others.
  4. A bailment governed by the common law, because the farmer retained title and expected the return of a like-kind quantity. (correct answer)
Explanation: When you encounter questions about storing goods with the right to receive equivalent items back, you need to distinguish between sales contracts and bailments based on whether title transfers. This arrangement is a bailment governed by common law because the farmer retained ownership of his corn and expected to receive back an equivalent quantity of the same grade. In a bailment, the bailor (farmer) temporarily transfers possession but retains title, while the bailee (elevator) has a duty to return the goods or their equivalent. The key indicator here is that the farmer received a receipt acknowledging his right to reclaim "an equal quantity of corn of the same type and grade" - this shows an expectation of return, not a completed sale. Answer A incorrectly focuses on relinquishing control of specific bushels. Losing control of particular items doesn't automatically create a sale when the agreement contemplates return of equivalent goods. Answer B misunderstands the elevator's merchant status and permission to sell. While the elevator could sell corn in its ordinary business, this doesn't transform the farmer's deposit into a sale - the elevator was essentially borrowing against the farmer's corn. Answer C incorrectly requires segregation for bailment classification. Bailments can involve fungible goods that are commingled, as long as the bailee can return equivalent items. Remember: If someone expects to get back the same or equivalent goods they deposited, it's typically a bailment, not a sale - even when the specific items get mixed with others. Look for language indicating a duty to return rather than transfer of ownership.

Question 19

A patient underwent a complex surgical procedure during which a surgeon implanted a pacemaker, a sophisticated medical device. The total cost billed by the hospital for the surgery and related care was $75,000. The hospital's cost for the pacemaker itself was $15,000. Two years later, the pacemaker malfunctioned due to a manufacturing defect, requiring additional surgery. The patient sued the hospital for breach of the UCC's implied warranty of merchantability.

What is the hospital's strongest argument that the UCC does not apply to its transaction with the patient? Select one.

  1. The UCC does not apply because the cost of the device was a small fraction of the total medical bill.
  2. The UCC does not apply because the predominant purpose of the transaction was the provision of medical services. (correct answer)
  3. The UCC does not apply because hospitals are not considered 'merchants' with respect to the medical devices they use.
  4. The UCC does not apply because the patient's claim is fundamentally a tort claim, not a contract claim.
Explanation: The correct answer is B. Courts almost universally hold that when a medical device is implanted as part of a surgical procedure, the transaction is predominantly one for services, not a sale of goods. The patient is seeking the skill and judgment of the surgeon and the care of the hospital. The provision of the pacemaker, while essential, is incidental to the overarching medical service. Therefore, the common law applies, and the UCC's implied warranties do not.

Question 20

An accounting firm contracted with a technology consultant for a new computer system. The written agreement provided that the consultant would sell the firm twenty pre-manufactured desktop computers for a total of $30,000 and, for a separately stated price of $5,000, provide twenty hours of service to install the computers and transfer data from the old system. After the work was completed, a dispute arose concerning the quality of the data transfer service.

In resolving the dispute about the data transfer service, which body of law should a court apply to the contract? Select one.

  1. The UCC, because the predominant purpose of the overall contract was the sale of computer hardware. (correct answer)
  2. The common law, because the dispute relates specifically to the service portion of the contract.
  3. The UCC, because the service was incidental to the sale of goods and therefore is governed by the UCC along with the goods.
  4. The common law, because the service portion of the contract is severable as it has its own separately stated price.
Explanation: The correct answer is A. Even though the dispute arises from the service component, courts will first apply the predominant purpose test to the contract as a whole. Here, the primary reason for the contract was the purchase of goods (computers), valued at $30,000. The service component, valued at $5,000, was incidental to the sale of goods. Because the contract's predominant purpose is the sale of goods, the UCC will govern the entire contract, including the service portion.