The UCC displaces some aspects of the common law. But § 1-103(b) of the UCC specifically discusses that common law principles of law and equity supplement the Code.

In other words, where the UCC is silent, we import the relevant concepts and definitions from the common law. For example, you'll see that various UCC sections refer to an "offer" but "offer" is not a defined term under the UCC. What to do? Use the common law definition, including the definition provided in § 24 of the Restatement (Second) of Contracts.

The **Uniform Commercial Code (UCC)** and the **common law** of contract formation both govern contracts, but they apply in different contexts and sometimes have different rules.

- **Common Law**: Governs contracts involving services, real estate, and employment. It requires stricter adherence to contract principles like the "mirror image rule" (acceptance must exactly match the offer) and consideration (both parties must exchange something of value).

- **Uniform Commercial Code (UCC)**: Governs contracts for the sale of goods (movable items). The UCC is more flexible than common law in some areas. For example, under UCC § 2-207, an acceptance can still be valid even if it contains additional or different terms from the offer (which wouldn’t be allowed under common law).

### Key Differences:
1. **Offer and Acceptance**: Under the UCC, an acceptance that adds or changes terms may still form a contract (the "battle of the forms"). Under common law, any change in terms creates a counteroffer, not an acceptance.
   
2. **Consideration**: Both UCC and common law require consideration, but the UCC sometimes relaxes this requirement in certain situations (like modifying a contract for the sale of goods without new consideration, under UCC § 2-209).

Interplay:
When a contract involves both goods and services (a **mixed contract**), courts often apply the **predominant purpose test** to determine whether the UCC or common law governs. If the sale of goods is the primary purpose, the UCC applies. If services are the main purpose, common law applies.

In sum, while common law and the UCC have similar foundations, the UCC modifies or relaxes certain rules to better suit modern commercial transactions involving goods.

UCC § 2-102. Scope; Certain Security and Other Transactions Excluded From This Article.

(1) Unless the context otherwise requires, and except as provided in subsection (3), this Article applies to transactions in goods and, in the case of a hybrid transaction, it applies to the extent provided in subsection (2).

(2) In a hybrid transaction:

[1] UCC 2-105 defines “goods” as

all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (Article 8) and things in action. ‘Goods’ also includes the unborn young of animals and growing crops and other identified things attached to realty as described in the section on goods to be severed from realty (Section 2-107).

Fact Pattern

Reggie and Latisha first became friends in 2011 based on their shared interest in real estate development. Reggie owned a condo in the State of Ellyn, and Latisha owned a nearby piece of vacant land on Brown Street. In late 2011 and early 2012, Reggie and Latisha exchanged ideas about co-developing Latisha’s Brown Street property, financed by the sale of Reggie’s condo. Reggie and Latisha met repeatedly during this time to discuss their possible plans. In December 2011, Latisha referred to Reggie as her “partner” in an email to a commercial real estate broker.

On February 6, 2012, Latisha emailed Reggie with possible terms regarding their two properties. Her email involved selling the condo, with $200,000 from the sale paid to Latisha. In exchange, Latisha’s email suggested that the two friends would be “50 percent dual ownership” of the redeveloped Brown Street property. Latisha’s email also discussed the need to “form a limited liability company (a LLC),” and for a $400,000 construction loan to redevelop the Brown Street property. Latisha’s email suggests all costs related to the Brown Street property and the condo will be “split 50-50.” Latisha ends her email by saying, “there are more little details . . . it’s a start.”

On February 8, 2012, Reggie responds to Latisha’s email. His email begins, “Take a look, did I miss anything??? Did we have more scenarios?? I can’t recall.” His email goes on to summarize Latisha’s terms and then provides as follows: “(1) Reggie will give Latisha an additional $200,000 towards the land associated with the development of an 11-unit mixed use (residential and commercial) apartment building located at the Brown Street property; (2) Reggie will handle all zoning approvals and LLC-formation arrangements; (3) Latisha will obtain a construction mortgage for the property to fund additional development costs; and (4) Reggie will contribute construction management/consulting services valued at 15% of the total project cost.”

Latisha never directly responds to Reggie’s February 8^th email. Instead, on February 19, 2012, Latisha initiates a new email thread by asking Reggie four questions about the sale of his condo, including the timing of the proposed sale and the use of proceeds to develop the Brown Street property. Latisha also proposes that when the sale of the condo is complete that “we form an LLC with an equal partnership of 50% and we develop the property as planned with 6 floors, 10 or more residential units, and a ground floor commercial unit.” Reggie responds on February 23^rd by answering Latisha’s questions about the sale of his condo and tells Latisha that he’s waiting for his attorney to get back to him so that they can close on the condo.

Both Latisha and Reggie take actions based on their negotiations. Reggie takes at least four actions related to the discussions with Latisha. First, Reggie forwarded the February 6^th and 8^th emails to his attorney, stating “below are the terms of the agreement between Latisha and I regarding the development of the Brown Street property. Please start drafting our partnership agreement.” Second, Reggie formed an LLC, called Brown Street LLC. Third, Reggie acquired several proposals for the concrete work on the Brown Street property, to begin in April 2012. Finally, Reggie begins working on the necessary zoning changes for the Brown Street property. Latisha meets with several banks to discuss construction mortgages for the Brown Street property.

Reggie and Latisha gave others the impression they were partners. For example, Latisha hired an attorney to assist with the Brown Street rezoning and the attorney met with both Reggie and Latisha and jointly emailed them questions about her work. They also jointly retained an architect for the redevelopment project.

Reggie and Latisha have a falling out and are no longer friends. Reggie no longer wishes to have anything to do with Latisha. He comes to you for advice. Reggie never sold his condo, nor paid any money to Latisha.

Does the UCC apply? If not, why not?

Contracts Final Exam

General Instructions

• Please read each question carefully and make sure you answer it fully.
  • You are advised to read the question’s prompt before reading the facts.
• Please do not make any assumptions regarding “missing” facts. Facts that are “missing” are likely intentionally absent. The appropriate response is usually to discuss the implications of that ambiguity.
  • If you believe that an essential fact is missing, and the fact pattern no longer makes sense without this fact, please contact the proctor, who will get in touch with Dean Olivares. Please be advised that I can only entertain questions regarding missing essential facts. Any other questions may constitute a violation of the Student Academic Code of Conduct and any other applicable School of Law rules and policies.
• Please do not discuss law that we have not covered in class because there are no points available for discussing areas of law (or cases) that we did not cover.
• Please remember to provide a rules-based analysis for each question, including appropriate case analogies and counter-arguments.
• Conciseness and clarity of expression, organization and presentation, while not separately considered, necessarily have some impact on the grader's evaluation of your understanding of the subject matter.
• Please do not disclose the exam questions to any other student. It’s possible that students may need to take the same exam at a later date.
• If U.C.C. § 2-207 (the “Battle of the Forms”) applies, assume that a court would apply the rule stated in § 2-207(2) to both different terms and additional terms.
• Your exam is completely closed book. No outside materials are allowed.

Notes on the Exam

• This exam consists of 2 fact-patterns and __ questions.
  • The questions are of uneven weight.
• You have three hours to complete this exam.
• Assume that the facts of this examination take place in the State of Ellyn.
  • Judges in the State of Ellyn give great weight to the Restatement (Second) of Contracts, but it is not binding on them.
  • By contrast, the State of Ellyn has adopted revised Article 1 and unrevised Article 2 of the Uniform Commercial Code. It has not adopted revised Article 2.
    • Where applicable, the UCC is binding on courts in the State of Ellyn.
  • Nearby jurisdictions have decided every case in our textbook that you read this semester. The decisions of these nearby jurisdictions hold great sway (but are not binding) on the decisions of the judges in the State of Ellyn.
• This exam has __ pages in total, including these directions. Please ensure that you have every page.

First Fact Pattern

John had an MBA and nearly 20 years of experience working in the Midwest for a large package delivery company. John was tired of working for other people. So, he was enticed when he saw a headline that read “Kickstart your future: Take the first step toward running your own package-delivery business with Amazing.”

The Amazing Delivery Service Partner (“DSP”) program[1] advertises as follows:

John applied and was approved to participate. Despite living in the Midwest, John was offered a position in the Northeast, which he accepted. He tells you that he accepted, in part, because of oral representations made by an Amazing representative. These representations allegedly include a statement to John that he “has the background, skills, and temperament to outperform all of Amazing’s current delivery service partners.” After accepting, he rented a small studio apartment for himself and lived alone while his family continues to live in the Midwest. He misses his family but thought this was the right choice for them.

John launched his business as cities descended into a COVID-19 lockdown, and demand for Amazing deliveries skyrocketed. In his first year, John’s DSP business delivered 3 million packages using 30 vehicles and passed his yearly audit with flying colors. 

Six months later, John received a call from Amazing giving him two weeks' notice to wind down operations; Amazing was terminating his participation in its DSP program. The company provided no explanation for the termination, but John suspects it was because Amazing contracted with too many DSPs and needed to reduce headcount even among high-quality providers. John’s contract with Amazing was for an indefinite duration and provided that it could be terminated at will by either party. John has convincing evidence that other companies that hire DSPs, such as FedEx and UPS, provide a months’ notice when winding down operations.

John is now facing bankruptcy from debts related to his DSP participation. These debts include a two-year lease on an apartment ($1800/month) and a parking spot ($350/month) in his new city. He also has a five-year lease on parking for his delivery vans ($3200/month) and office space for his business ($1200/month). He signed or extended these leases one year ago when he passed all of his annual Amazing audits.

Please answer the following questions:

• What law governs?

• Assume there was a validly formed contract; do NOT assess whether John formed a valid contract with Amazing.

Answer Q1

UCC v. Common law

The common law applies here and not the UCC. The UCC applies to all transactions in goods and the common law to everything else. Here, Amazing hired John to provide a service (package delivery). While Amazing is allowing John to take packages, which mostly contain goods, Amazing isn’t selling the goods to John who is then selling them to customers. Title is not changing hands. Instead, John is merely taking the packages from Amazing’s warehouses and providing the service of dropping them at people’s homes (and businesses). As a result, the common law applies.

The case of Leibel v. Raynor (p.462) is not otherwise. In that case, the parties had an exclusive dealer-distributorship agreement related to the sale of garage doors. In that case, there was some disagreement about whether the appellant was a commissioned salesperson that sold garage doors to customers on behalf of the company or whether Leibel bought the doors for his own account and then resold the doors to customers. There, the court found that the UCC applied because it found that the doors were being sold from Raynor to Leibel and then from Leibel to customers. Unfortunately, the court doesn’t explain its reasoning, just saying “we have a clear situation where the dealer-distributor was to sell the goods of the manufacturer-supplier.” That said, the opinion does provide that Libel “borrowed substantial sums of money … to … purchase an inventory.” Since Amazing says that new businesses can get started with a $10,000 investment it seems clear that John wasn’t buying inventory as Leibel was.

Relatedly, I believe it’s clear that drivers for companies like UPS, FedEx, DHL and the like never buy the items from companies and then resell them customers. As a result, it should be similarly obvious that John didn’t buy the packages from Amazing and resell them to customers. Again, that would be impossible to do with only a $10,000 initial investment (unless goods were being sold on credit).

And there’s no evidence that John even knew what was in the packages. As a result, this case seems unlike Leibel and the court is likely to find the common law applies.

Is John entitled to reasonable notice of termination? If so, does two weeks qualify?

John is entitled to have Amazing act in accordance with reasonable commercial standards, which would appear to require reasonable notice. But it’s not clear that two weeks is insufficient. There is no common law rule that is directly on point here. The rule that we used for this issue in Leibel was UCC 2-309. And that’s not directly applicable here. But we use it anyway since it’s what we’ve got and we’ll see if it makes sense to apply it. It’s not clear why the rule for goods should necessarily be different from non-goods.

It’s not clear if 2-309(2) or (3) applies. The former provides that a contract calling “for successive performances but [that] is indefinite in duration it is valid for a reasonable time but unless otherwise agreed may be terminated at any time by either party.” The contract between John and Amazing was for indefinite duration and so 2-309(2) could apply. But it’s not clear exactly what it means for the contract to call for “successive performances.” One could conceptualize the John-Amazing relationship has something akin to an employment agreement. John has one job: deliver packages for Amazing. He does this job every day but that doesn’t make it successive. Alternatively, one could conceptualize the job as delivery package 1. New job: deliver package 2. New job: deliver package 3. That seems to me more akin to successive performances. And that doesn’t seem to be what’s happening here since John and Amazing have an ongoing relationship where, among other things, John uses Amazing’s vans. That makes their relationship seem less like a series of discrete transactions. Nevertheless, if 2-309(2) applies, the agreement can be terminated at any time by either party. Which means that Amazing owes John no notice beyond what he’s gotten, unless the duty of good faith and fair dealing (and observance of commercially reasonable standards requires more).

Does the observance of commercially reasonable standards require more? Good faith is implied into every contract and so it applies here. There doesn’t seem to be any particular evidence of bad faith other than John’s claims that Amazing may be terminating high-quality providers because it overstaffed itself. That doesn’t appear to rise to the standard from Locke in the Warner Brothers case. There, the court found that Locke wasn’t given a chance to prove herself because they were never going to do a movie deal with her. Here, there’s no evidence that John couldn’t have been one of the DSPs that were retained. Rather, he was a high-quality provider that was cut. It’s unfortunate, but that doesn’t appear to be evidence of bad faith.

By contrast, John’s evidence from UPS and FedEx is potentially evidence of Amazing’s failure to adhere to commercially reasonable standards of fair dealing. If his evidence is admissible (discuss PER issue?), a court could find that Amazing is also required to give a longer notice because they gave only half as much notice as other players in this market. That was relevant in Nanakuli, where the court found the failure to price protect was a breach of good faith and fair dealing because Shell didn’t act as other local companies acted. Here, John is alleging that Amazing didn’t act as other companies acted and, if the court agrees, could also require Amazing to provide more notice (just as Shell was required to provide more notice before raising prices). Of course, that’s not what John wants. He wants to not be terminated. But even a longer notice period might be somewhat useful.

Alternatively, the court might use UCC 2-309(3) instead, which provides that “Termination of a contract by one party except on the happening of an agreed event requires that reasonable notification be received by the other party and an agreement dispensing with notification is invalid if its operation would be unconscionable.”  There is no “agreed event” here. The contract provided that the relationship was at will and there’s no allegation that John failed to do something and that’s why he was terminated. Thus, 2-309(3) requires that “reasonable notification be given.” Whether two weeks is reasonable notification when other companies give twice that is an open question. On the one hand, they allegedly give only half as much notice. On other hand, they only give two weeks less notice. It’s not particularly clear why two weeks of extra notice would do very much for John and his ability to terminate two- or five-year leases.

In addition, Amazing would argue that they’ve got an agreement dispensing with notification because the contract is at will and that’s not unconscionable. In Amazing’s view, they gave more notice than is required. It’s not clear whether this agreement is unconscionable, which requires both a deeply flawed process and a deeply flawed bargain. It’s far from clear that a bargain which resulted in providing two weeks instead of four weeks’ notice would shock the conscience. And we lack any information about the bargaining process, other than that John seemed eager to work for the company and they were eager to hire people. That doesn’t seem like Walker Thomas-like bullying. There is no evidence of the potential for intimidation, like when a traveling salesmen enters your house full of children.

First Fact Pattern

John had an MBA and nearly 20 years of experience working in the Midwest for a large package delivery company. John was tired of working for other people. So, he was enticed when he saw a headline that read “Kickstart your future: Take the first step toward running your own package-delivery business with Amazing.”

The Amazing Delivery Service Partner (“DSP”) program[1] advertises as follows:

John applied and was approved to participate. Despite living in the Midwest, John was offered a position in the Northeast, which he accepted. He tells you that he accepted, in part, because of oral representations made by an Amazing representative. These representations allegedly include a statement to John that he “has the background, skills, and temperament to outperform all of Amazing’s current delivery service partners.” After accepting, he rented a small studio apartment for himself and lived alone while his family continues to live in the Midwest. He misses his family but thought this was the right choice for them.

John launched his business as cities descended into a COVID-19 lockdown, and demand for Amazing deliveries skyrocketed. In his first year, John’s DSP business delivered 3 million packages using 30 vehicles and passed his yearly audit with flying colors. 

Six months later, John received a call from Amazing giving him two weeks' notice to wind down operations; Amazing was terminating his participation in its DSP program. The company provided no explanation for the termination, but John suspects it was because Amazing contracted with too many DSPs and needed to reduce headcount even among high-quality providers. John’s contract with Amazing was for an indefinite duration and provided that it could be terminated at will by either party. John has convincing evidence that other companies that hire DSPs, such as FedEx and UPS, provide a months’ notice when winding down operations.

John is now facing bankruptcy from debts related to his DSP participation. These debts include a two-year lease on an apartment ($1800/month) and a parking spot ($350/month) in his new city. He also has a five-year lease on parking for his delivery vans ($3200/month) and office space for his business ($1200/month). He signed or extended these leases one year ago when he passed all of his annual Amazing audits.

Please answer the following questions:

• What law governs?

[1] Amazing relies on its DSP to deliver packages from its warehouses to customers’ homes and businesses.

UCC on Formation

• 2-204. Formation in General.

(1) A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.

(2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.

(3) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.

• 2-305. Open Price Term.

(1) The parties if they so intend can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if

(a) nothing is said as to price; or

(b) the price is left to be agreed by the parties and they fail to agree; or

(c) 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.

(2) A price to be fixed by the seller or by the buyer means a price for him to fix in good faith.

(3) When a price left to be fixed otherwise than by agreement of the parties fails to be fixed through fault of one party the other may at his option treat the contract as cancelled or himself fix a reasonable price.

(4) Where, however, the parties intend not to be bound unless the price be fixed or agreed and it is not fixed or agreed there is no contract. In such a case the buyer must return any goods already received or if unable so to do must pay their reasonable value at the time of delivery and the seller must return any portion of the price paid on account.

• 2-310. Open Time for Payment or Running of Credit; Authority to Ship Under Reservation.

Unless otherwise agreed:

(a) payment is due at the time and place at which the buyer is to receive the goods even though the place of shipment is the place of delivery; and

(b) if the seller is authorized to send the goods he may ship them under reservation, and may tender the documents of title, but the buyer may inspect the goods after their arrival before payment is due unless such inspection is inconsistent with the terms of the contract (Section 2-513); and

(c) if delivery is authorized and made by way of documents of title otherwise than by subsection (b) then payment is due at the time and place at which the buyer is to receive the documents regardless of where the goods are to be received; and

(d) where the seller is required or authorized to ship the goods on credit the credit period runs from the time of shipment but post-dating the invoice or delaying its dispatch will correspondingly delay the starting of the credit period.

F. The Battle of the Forms

UCC § 2-207 is one of those disasters of law that happen occasionally when a statute is drafted to handle a complex legal problem for the first time. Commentators Duesenberg & King said it "is one of the most important, subtle, and difficult in the entire Code, and well it may be said that the product as it finally reads is not altogether satisfactory.” 3 Richard W. Duesenberg & Lawrence P. King, Sales & Bulk Transfers Under The Uniform Commercial Code § 3.02 (1992).

They understate the difficulties considerably. The statute was drafted to address the problem of forms sent between companies ordering and shipping goods. The forms might or might (probably will) not reflect what the buyer and seller consciously agreed. Typically, an ordering company will send a purchase order and the shipping company will respond by shipping the goods and sending an invoice. In virtually all such situations, the terms listed on the purchase order (usually on the back) do not agree with the terms listed on the invoice (again, usually on the back of the invoice).

Here are two problems to walk you through the statute:

PROBLEM 47. Tom Manufacturing Company sends a purchase order for tools to Jerry Tools Company. Tom's purchase order contains terms A-J and a clause stating that "shipment of goods ordered herein shall constitute acceptance of the terms and conditions of this purchase order.” Jerry promptly ships the tools in response to Tom's purchase order and with the tools sends an invoice which contains terms -B, -D, -J (meaning the terms provide exactly the opposite of the corresponding terms in Tom's purchase order, i.e., if B requires arbitration, -B requires a court trial and explicitly says no arbitration will take place). Jerry’s invoice also contains terms K-Q. Jerry's form has a clause stating that "acceptance of the goods shipped herein constitutes acceptance of the terms of this invoice, which shall supersede the terms of any purchase order received prior to shipment.” But both the purchase order and invoice on their front sides describe the same ordered tools. Tom accepts the tools and promptly pays for them. The reverse sides of the forms Tom and Jerry sent look something like this:

   Tom                              Jerry

A         F                      -B        M

B         G                     -D        N

C         H                     -J         O

D         I                       K         P

E          J                      L          Q

Questions:

1. Common Law

1. Under the common law rule, did Jerry accept Tom's order?
   
   
2. Under common law rules, did Tom accept Jerry's invoice?

1. UCC § 2-207(1)

1. Was Jerry's invoice a definite and seasonable expression of acceptance?
2. Was Jerry's response to the purchase order expressly made conditional on Tom's assent to its terms?
3. Did a contract form when Jerry sent the invoice? (You might consider comments 1 & 2 in regard to this question. The answer to this question is "Yes," but I want you to be able to read the statute and tell me why.)

1. UCC § 2-207(2) (comments 3-6 to section 2-207 are helpful here)

1. Term K negates standard warranties of merchantability and fitness for a particular purpose. Does it become part of the contract?
2. Clause L requires Tom as purchaser to pay 15% interest on overdue invoices, but Jerry's invoice does not restrict Tom's credit or vary from ordinary trade practices in the industry. Is L part of the contract?
3. What does section (2) say about whether -J is part of the contract? (Careful! The drafters of section 2-207 made this a trick question! Section (1) talks about additional and different terms. What does (2) say about different terms?)
4. What does comment 3 say about whether -J becomes part of the contract?
5. What does comment 6 say about whether -J becomes part of the contract?

PROBLEM 48. Bugs Production Co. sends a purchase order for supplies to Elmer Supply Co. Bugs's purchase order orders from Elmer 2000 model XJ4aZ keyboards. Bugs's purchase order also contains terms A-J and a clause stating that "shipment of goods ordered herein shall constitute acceptance of the terms and conditions of this purchase order." Elmer promptly ships the keyboards in response to Bugs's purchase order. Elmer sends an invoice with the keyboards which contains terms -B, -D, -J (purporting to negate corresponding terms in Bugs's purchase order) and also terms K-Q. Elmer's form also describes the products shipped differently, however. It says that Bugs ordered 3000 model XJ7bX keyboards, which are another model entirely and much more expensive. In fact, Elmer shipped with the invoice 2000 model XJ4aZ keyboards, so Elmer's product and invoice do not match. Elmer's form also contains a clause stating that "this invoice as an acceptance of any purchase order is expressly made conditional on the purchaser's assent to any additional or different terms contained herein." Bugs accepted the keyboards, which are defective. Bugs wants Elmer to take them back, but Elmer claims that term -D on its invoice disclaimed all warranties (as opposed to term D in the purchase order, which provided for warranties), so Elmer refuses to take the keyboards back.

1. UCC § 2-207(1)

1. Was Elmer's invoice a definite and seasonable expression of acceptance? The answer to this question is "No," but the answer is not in the statute. Consider the following from Alliance Wall Corp. v. Ampat Midwest Corp., 477 N.E.2d 1206 (Ohio Ct. App. 1984):

[¶1]      At issue, of course, was not the date of delivery, but the date of shipment. The goods were to be shipped F.O.B. seller’s plant. This was a shipment contract. R.C. 1302.32(A).[1]  The seller was required only to place the goods in the possession of a carrier, make a reasonable contract for shipment, tender documents of title, and notify the buyer of the shipment. R.C. 1302.48.[2]

[¶2]      The parties did not agree in their correspondence to a shipment date, nor is there persuasive evidence that the parties orally agreed upon a definite shipment date. Seller’s vice-president at trial admitted that seller was aware of buyer’s urgent need for prompt shipment. This fact, in conjunction with buyer’s statement in its letter of September 1, 1981, that shipment should “certainly” occur within seven weeks, is persuasive evidence that the parties had agreed that “time was of the essence.” It was a crucial term of the contract. Nevertheless, the seller did not expressly agree to the shipment date of seven weeks, but instead proposed a “tentative shipping date” of November 6, 1981.

[¶3]      Seller’s agent explained that in contracts of this type, it could not guarantee a shipping date because it depended for raw materials upon a Minnesota supplier. It could not fabricate the aluminum panels without those materials.

[¶4]      In the case at bar there was testimony that toward the end of September, the seller learned that its supplier would deliver the aluminum two weeks behind schedule. The seller promptly notified the buyer that this would delay shipment from November 6 to November 20, 1981. There was also testimony that after the exchange of letters on October 14 and October 22, 1981, the buyer orally agreed to the new delivery date, and promised not to hold seller liable for damages resulting from this delay. The buyer offered no evidence to rebut this testimony.

[¶5]      The parties did not agree, in their confirmatory memoranda, to a shipment date. The shipment date was a “material term”; in fact, it appears to have been more important to the buyer than was the exact price, because of its need to promptly complete the work. The seller appeared to be just as adamant not to be bound to any particular date.

[¶6]      The parties’ failure to reach an agreement on the matter of the shipment date and price prevented the formation of a binding contract. The buyer had proposed a date of seven weeks from September 1, 1981; to-wit, October 19, 1981. The seller had “tentatively” offered to ship on November 6, 1981. In short, the seller did not agree to be bound by any particular date of shipment.

[¶7]      In the usual case, the seller’s written confirmation “operates as an acceptance even though it states terms additional or different from those offered * * *.” R.C. 1302.10(A). .... This rule, however, does not apply where the parties disagree as to “dickered for” terms. In such a case, contract formation does not occur until both sides have at least partially performed ....

2. Was Elmer's response to the purchase order expressly made conditional on Bugs's assent to its terms?

1. UCC § 2-207(3)

1. Did a contract form under (3)?
   
   
2. Are the keyboards subject to warranties? (See UCC §§ 2-314 & 2-315, infra in Chapter 10.)
3. 
   In Alliance Wall Corp., what should the shipment date be if the parties performed but failed to agree? (See UCC §§ 2-309.)

Do you see the relationship between § 2-207(1) and (3)? Consider the following from Gardner Zemke Co. v. Dunham Bush, Inc., 850 P.2d 319 (N.M. 1993):

The one proposition on which most courts and commentators agree at this point in the construction of the statute is that Section 2-207(3) applies only if a contract is not found under Section 2-207(1). Dorton, 453 F.2d at 1166; Duesenberg & King, § 3.03[1] at 3-40; 2 Hawkland, § 2-207:04 at 178-79; White & Summers, § 1-3 at 35. However, there are courts that disagree even with this proposition. See Westinghouse Elec. Corp. v. Nielsons, Inc., 647 F. Supp. 896 (D.Colo. 1986) (dealing with different terms, finding a contract under 2-207(1) and proceeding to apply 2-207(2) and 2-207(3)).

If you have worked through these problems to find the answers, you are ready to read the cases which follow in the last part of this chapter.

[1] “Unless otherwise agreed the term F.O.B. (which means ‘free on board’) at a named place, even though used only in connection with the stated price, is a delivery term under which: “(1) when the term is F.O.B. the place of shipment, the seller must at that place ship the goods in the manner provided in section 1302.48 of the Revised Code and bear the expense and risk of putting them into the possession of the carrier * * *.” R.C. 1302.32(A)(1).

[2]           “Where the seller is required or authorized to send the goods to the buyer and the contract does not require him to deliver them at a particular destination, then unless otherwise agreed he must:

“(A) put the goods in the possession of such a carrier and make such a contract for their transportation as may be reasonable having regard to the nature of the goods and other circumstances of the case; and

“(B) obtain and promptly deliver or tender in due form any document necessary to enable the buyer to obtain possession of the goods or otherwise required by the agreement or by usage of trade; and

“(C) promptly notify the buyer of the shipment.

“Failure to notify the buyer under division (C) of this section or to make a proper contract under division (A) of this section is a ground for rejection only if material delay or loss ensures.” R.C. 1302.48.

Note: More Battles About Battle of the Forms

Back in the early 1990s, Rich and Enza Hill called Gateway 2000, Inc.’s phone order line, ordered a computer, and gave a credit card number. Gateway shipped a computer to them. In the box with the computer was a small booklet of terms that included an arbitration clause. A notice with the booklet stated that the terms would govern the relationship between Gateway and its customer unless the customer returned the computer within 30 days. The Hills kept the computer, but the computer had issues. The Hills later filed suit for a class of Gateway customers, claiming breach of contract and other things.

In Hill v. Gateway 2000, Inc., 105 F.3d 1147 (7th Cir. 1997), the court per Judge Frank Easterbrook decided that the Hills were bound by the terms in the box, including the arbitration clause. Is that what you’d expect from our studies of UCC § 2-207?

Hill claimed to be following the ProCD decision. In ProCD, Zeidenberg bought a box of software from a retail store. The box was closed, but on the outside of it “in small print at the bottom of the package” was a disclosure “stating that [the buyer was] subject to the terms and conditions of the enclosed license agreement.” ProCD, Inc. v. Zeidenberg, 908 F. Supp. 640, 654 (W.D. Wisc. 1996). Even without the disclosure on the box, though, it’s hard to imagine that Zeidenberg, a Ph.D student in computer science, was not aware that the seller of the software considered it subject to a license. Of course, Zeidenberg could not know the exact terms of the license until he bought the software, opened the box, and opened the software, but the court of appeals held him bound to the license terms nonetheless. Is Zeidenberg’s case similar to the Hills’?

Here are some excerpts from the Hill opinion. Most people hesitate to defend these statements as applicable to the Hills. What do you suppose is the basis for criticizing each of these? The first is a rhetorical question.

1. Are these terms [in the booklet] effective as the parties’ contract, or is the contract term-free because the order-taker did not read any terms over the phone and elicit the customer’s assent?

2. ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996), holds that terms inside a box of software bind consumers who use the software after an opportunity to read the terms and to reject them by returning the product. Likewise, Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 111 S. Ct. 1522, 113 L.Ed.2d 622 (1991), enforces a forum selection clause that was included among three pages of terms attached to a cruise ship ticket. ProCD and Carnival Cruise Lines exemplify the many commercial transactions in which people pay for products with terms to follow; ProCD discusses others. 86 F.3d at 1451-52. The district court concluded in ProCD that the contract is formed when the consumer pays for the software; as a result, the court held, only terms known to the consumer at that moment are part of the contract, and provisos inside the box do not count. Although this is one way a contract could be formed, it is not the only way: “A vendor, as master of the offer, may invite acceptance by conduct, and may propose limitations on the kind of conduct that constitutes acceptance. A buyer may accept by performing the acts the vendor proposes to treat as acceptance.” Id. at 1452. Gateway shipped computers with the same sort of accept-or-return offer ProCD made to users of its software.

3. Payment preceding the revelation of full terms is common for air transportation, insurance, and many other endeavors. Practical considerations support allowing vendors to enclose the full legal terms with their products. Cashiers cannot be expected to read legal documents to customers before ringing up sales. If the staff at the other end of the phone for direct-sales operations such as Gateway’s had to read the four-page statement of terms before taking the buyer’s credit card number, the droning voice would anesthetize rather than enlighten many potential buyers. Others would hang up in a rage over the waste of their time. And oral recitation would not avoid customers’ assertions (whether true or feigned) that the clerk did not read term X to them, or that they did not remember or understand it. Writing provides benefits for both sides of commercial transactions. Customers as a group are better off when vendors skip costly and ineffectual steps such as telephonic recitation, and use instead a simple approve-or-return device. Competent adults are bound by such documents, read or unread.

4. Section 2-207(2) of the UCC, the infamous battle-of-the-forms section, states that “additional terms [following acceptance of an offer] are to be construed as proposals for addition to a contract. Between merchants such terms become part of the contract unless ...”. Plaintiffs tell us that ProCD came out as it did only because Zeidenberg was a “merchant” and the terms inside ProCD’s box were not excluded by the “unless” clause. This argument pays scant attention to the opinion in ProCD, which concluded that, when there is only one form, “sec. 2-207 is irrelevant.” 86 F.3d at 1452.

5. [T]he Hills knew before they ordered the computer that the carton would include some important terms, and they did not seek to discover these in advance. Gateway’s ads state that their products come with limited warranties and lifetime support. How limited was the warranty—30 days, with service contingent on shipping the computer back, or five years, with free onsite service? What sort of support was offered? Shoppers have three principal ways to discover these things. First, they can ask the vendor to send a copy before deciding whether to buy. Concealment would be bad for business, scaring some customers away and leading to excess returns from others. Second, shoppers can consult public sources (computer magazines, the Web sites of vendors) that may contain this information. Third, they may inspect the documents after the product’s delivery. Like Zeidenberg, the Hills took the third option. By keeping the computer beyond 30 days, the Hills accepted Gateway’s offer, including the arbitration clause.

Though Hill was widely followed for a time, it was also strongly criticized. Also, some courts directly rejected Hill. The following case, Klocek v. Gateway, Inc., 104 F. Supp. 2d 1332 (D. Kan. 2000), applied § 2-207 to “the Gateway facts,” a pattern that came up in several cases in the late 1990s.

            Brower v. Gateway 2000, Inc., 676 N.Y.S.2d 569 (Sup. Ct. App. 1998), is a good example.  In this fact pattern, plaintiffs bought computers and software from Gateway 2000, Inc. They ordered the products by mail or telephone, and the products were shipped to them. Gateway promised “service when you need it,” including 24/7 technical support. As of July 3, 1995, Gateway included with the products shipped to consumers a “Standard Terms and Conditions Agreement.” The document provided, “This document contains Gateway 2000’s Standard Terms and Conditions. By keeping your Gateway 2000 computer system beyond thirty (30) days after the date of delivery, you accept these Terms and Conditions.” Paragraph 10, titled “DISPUTE RESOLUTION,” said,

Any dispute or controversy arising out of or relating to this Agreement or its interpretation shall be settled exclusively and finally by arbitration. The arbitration shall be conducted in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce. The arbitration shall be conducted in Chicago, Illinois, U.S.A. before a sole arbitrator. Any award rendered in any such arbitration proceeding shall be final and binding on each of the parties, and judgment may be entered thereon in a court of competent jurisdiction.

Plaintiffs sued as a class, alleging that Gateway did not provide any real technical support. Gateway moved for arbitration. Plaintiffs responded that the International Chamber of Commerce (ICC) was headquartered in France and was particularly difficult to contact. Further, under ICC arbitration rules, a claim of less than $50,000 required a $4,000 fee, including a non-refundable $2,000 registration fee. Because the ICC followed England’s “loser pays” rule, a consumer would pay Gateway’s legal fees if Gateway won the arbitration. Consumers would also incur travel fees to Chicago. But all correspondence had to be sent to France. Of course, even some really smart, capable, wealthy people bought Gateway computers. Plaintiffs contended the arbitration clause was unconscionable. The court in Brower held the arbitration term unconscionable. Can you see why?

            The same arbitration term was at issue in Klocek, but the court did not reach the question of unconscionability. Instead, the court asked whether, under § 2-207, the clause ever became part of an enforceable contract:

[¶1]      Gateway urges the Court to follow the Seventh Circuit decision in Hill. That case involved the shipment of a Gateway computer with terms similar to the Standard Terms in this case, except that Gateway gave the customer 30 days—instead of 5 days—to return the computer. In enforcing the arbitration clause, the Seventh Circuit relied on its decision in ProCD, where it enforced a software license which was contained inside a product box. See Hill, 105 F.3d at 1148-50. In ProCD, the Seventh Circuit noted that the exchange of money frequently precedes the communication of detailed terms in a commercial transaction. See ProCD, 86 F.3d at 1451. Citing UCC § 2-204, the court reasoned that by including the license with the software, the vendor proposed a contract that the buyer could accept by using the software after having an opportunity to read the license.[1]  ProCD, 86 F.3d at 1452. Specifically, the court stated:

A vendor, as master of the offer, may invite acceptance by conduct, and may propose limitations on the kind of conduct that constitutes acceptance. A buyer may accept by performing the acts the vendor proposes to treat as acceptance.

ProCD, 86 F.3d at 1452. The Hill court followed the ProCD analysis, noting that “[p]ractical considerations support allowing vendors to enclose the full legal terms with their products.” Hill, 105 F.3d at 1149.[2]

[¶2]      The Court is not persuaded that Kansas or Missouri courts would follow the Seventh Circuit reasoning in Hill and ProCD. In each case the Seventh Circuit concluded without support that UCC § 2-207 was irrelevant because the cases involved only one written form. See ProCD, 86 F.3d at 1452 (citing no authority); Hill, 105 F.3d at 1150 (citing ProCD). This conclusion is not supported by the statute or by Kansas or Missouri law. Disputes under § 2-207 often arise in the context of a “battle of forms,” see, e.g., Diatom, Inc. v. Pennwalt Corp., 741 F.2d 1569, 1574 (10th Cir. 1984), but nothing in its language precludes application in a case which involves only one form. The statute provides:

Additional terms in acceptance or confirmation.

(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.

(2) The additional terms are to be construed as proposals for addition to the contract [if the contract is not between merchants]....

K.S.A. § 84-2-207; V.A.M.S. § 400.2-207. By its terms, § 2-207 applies to an acceptance or written confirmation. It states nothing which requires another form before the provision becomes effective. In fact, the official comment to the section specifically provides that §§ 2-207(1) and (2) apply “where an agreement has been reached orally ... and is followed by one or both of the parties sending formal memoranda embodying the terms so far agreed and adding terms not discussed.” Official Comment 1 of UCC § 2- 207. Kansas and Missouri courts have followed this analysis. * * * *  Thus, the Court concludes that Kansas and Missouri courts would apply § 2-207 to the facts in this case. * * * *

[¶3]      In addition, the Seventh Circuit provided no explanation for its conclusion that “the vendor is the master of the offer.” See ProCD, 86 F.3d at 1452 (citing nothing in support of proposition); Hill, 105 F.3d at 1149 (citing ProCD). In typical consumer transactions, the purchaser is the offeror, and the vendor is the offeree. * * * *  While it is possible for the vendor to be the offeror, see Brown Machine, 770 S.W.2d at 419 (price quote can amount to offer if it reasonably appears from quote that assent to quote is all that is needed to ripen offer into contract), Gateway provides no factual evidence which would support such a finding in this case. The Court therefore assumes for purposes of the motion to dismiss that plaintiff offered to purchase the computer (either in person or through catalog order) and that Gateway accepted plaintiff’s offer (either by completing the sales transaction in person or by agreeing to ship and/or shipping the computer to plaintiff).[3]  Accord Arizona Retail, 831 F. Supp. at 765 (vendor entered into contract by agreeing to ship goods, or at latest, by shipping goods).

[¶4]      Under § 2-207, the Standard Terms constitute either an expression of acceptance or written confirmation. As an expression of acceptance, the Standard Terms would constitute a counter-offer only if Gateway expressly made its acceptance conditional on plaintiff’s assent to the additional or different terms. K.S.A. § 84-2-207(1); V.A.M.S. § 400.2- 207(1). “[T]he conditional nature of the acceptance must be clearly expressed in a manner sufficient to notify the offeror that the offeree is unwilling to proceed with the transaction unless the additional or different terms are included in the contract.” Brown Machine, 770 S.W.2d at 420. Gateway provides no evidence that at the time of the sales transaction, it informed plaintiff that the transaction was conditioned on plaintiff’s acceptance of the Standard Terms. Moreover, the mere fact that Gateway shipped the goods with the terms attached did not communicate to plaintiff any unwillingness to proceed without plaintiff’s agreement to the Standard Terms. * * * *

[¶5]      Because plaintiff is not a merchant, additional or different terms contained in the Standard Terms did not become part of the parties’ agreement unless plaintiff expressly agreed to them. See K.S.A. § 84-2- 207, Kansas Comment 2 (if either party is not a merchant, additional terms are proposals for addition to the contract that do not become part of the contract unless the original offeror expressly agrees).[4]  Gateway argues that plaintiff demonstrated acceptance of the arbitration provision by keeping the computer more than five days after the date of delivery. Although the Standard Terms purport to work that result, Gateway has not presented evidence that plaintiff expressly agreed to those Standard Terms. Gateway states only that it enclosed the Standard Terms inside the computer box for plaintiff to read afterwards. It provides no evidence that it informed plaintiff of the five-day review-and-return period as a condition of the sales transaction, or that the parties contemplated additional terms to the agreement.[5]  See Step-Saver, 939 F.2d at 99 (during negotiations leading to purchase, vendor never mentioned box-top license or obtained buyer’s express assent thereto). The Court finds that the act of keeping the computer past five days was not sufficient to demonstrate that plaintiff expressly agreed to the Standard Terms. Accord Brown Machine, 770 S.W.2d at 421 (express assent cannot be presumed by silence or mere failure to object). Thus, because Gateway has not provided evidence sufficient to support a finding under Kansas or Missouri law that plaintiff agreed to the arbitration provision contained in Gateway’s Standard Terms, the Court overrules Gateway’s motion to dismiss. * * * *

Question: Which decision has the better analysis, Hill or Klocek?

[1] Section 2-204 provides: “A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such contract.” K.S.A. § 84- 2-204; V.A.M.S. § 400.2-204.

[2] Legal commentators have criticized the reasoning of the Seventh Circuit in this regard. See, e.g., Jean R. Sternlight, Gateway Widens Doorway to Imposing Unfair Binding Arbitration on Consumers, Fla. Bar J., Nov. 1997, at 8, 10-12 (outcome in Gateway is questionable on federal statutory, common law and constitutional grounds and as a matter of contract law and is unwise as a matter of policy because it unreasonably shifts to consumers search cost of ascertaining existence of arbitration clause and return cost to avoid such clause); Thomas J. McCarthy et al., Survey: Uniform Commercial Code, 53 Bus. Law. 1461, 1465-66 (Seventh Circuit finding that UCC § 2-207 did not apply is inconsistent with official comment); Batya Goodman, Honey, I Shrink-Wrapped the Consumer: the Shrinkwrap Agreement as an Adhesion Contract, 21 Cardozo L. Rev. 319, 344-352 (Seventh Circuit failed to consider principles of adhesion contracts); Jeremy Senderowicz, Consumer Arbitration and Freedom of Contract: A Proposal to Facilitate Consumers’ Informed Consent to Arbitration Clauses in Form Contracts, 32 Colum. J.L. & Soc. Probs. 275, 296-299 (judiciary (in multiple decisions, including Hill) has ignored issue of consumer consent to an arbitration clause). Nonetheless, several courts have followed the Seventh Circuit decisions in Hill and ProCD. See, e.g., M.A. Mortenson Co., Inc. v. Timberline Software Corp., 140 Wash.2d 568, 998 P.2d 305 (license agreement supplied with software); Rinaldi v. Iomega Corp., 1999 WL 1442014, Case No. 98C-09- 064-RRC (Del. Super. Sept. 3, 1999) (warranty disclaimer included inside computer Zip drive packaging ); Westendorf v. Gateway 2000, Inc., 2000 WL 307369, Case No. 16913 (Del. Ch. March 16, 2000) (arbitration provision shipped with computer); Brower v. Gateway 2000, Inc. , 246 A.D.2d 246, 676 N.Y.S.2d 569 (N.Y.App.Div.1998) (same); Levy v. Gateway 2000, Inc., 1997 WL 823611, 33 UCC Rep. Serv.2d 1060 (N.Y.Sup. Oct. 31, 1997) (same).

[3] UCC § 2-206(b) provides that “an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment ...” The official comment states that “[e]ither shipment or a prompt promise to ship is made a proper means of acceptance of an offer looking to current shipment.” UCC § 2-206, Official Comment 2.

[4] The Court’s decision would be the same if it considered the Standard Terms as a proposed modification under UCC § 2-209. See, e.g., Orris, 5 F. Supp.2d at 1206 (express assent analysis is same under §§ 2- 207 and 2-209).

[5] The Court is mindful of the practical considerations which are involved in commercial transactions, but it is not unreasonable for a vendor to clearly communicate to a buyer—at the time of sale—either the complete terms of the sale or the fact that the vendor will propose additional terms as a condition of sale, if that be the case.

Where notification is essential to acceptance by promise, the offeror is not bound by an acceptance in equivocal terms unless he reasonably understands it as an acceptance.

An acceptance which requests a change or addition to the terms of the offer is not thereby invalidated unless the acceptance is made to depend on an assent to the changed or added terms.

2-205. Firm Offers.

An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.

2-305. Open Price Term.

(1) The parties if they so intend can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if

(a) nothing is said as to price; or

(b) the price is left to be agreed by the parties and they fail to agree; or

(c) 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.

(2) A price to be fixed by the seller or by the buyer means a price for him to fix in good faith.

(3) When a price left to be fixed otherwise than by agreement of the parties fails to be fixed through fault of one party the other may at his option treat the contract as cancelled or himself fix a reasonable price.

(4) Where, however, the parties intend not to be bound unless the price be fixed or agreed and it is not fixed or agreed there is no contract. In such a case the buyer must return any goods already received or if unable so to do must pay their reasonable value at the time of delivery and the seller must return any portion of the price paid on account.

Questions:

1. Can the holder of a garage sale give a firm offer?
   
   
2. Can a law school give a firm offer to provide a legal education at a stated tuition rate?
   
   
3. Can a used car salesman give a firm offer that will remain open for six months to sell a certain car?
   
   
4. Can the used car salesman give an oral firm offer?

Note on Terms of Art

I suggest you write out a list of elements for a firm offer. Typically, students think the phrase firm offer means an offer which states unambiguous terms or is final in some way. That is how business-people sometimes use the phrase. But we are lawyers, and so for us some words are "terms of art," which have technical meanings not necessarily related to the common meanings of the words. Firm offer is one such legal term of art. So is offer.

If we look at firm offer as a term of art, the business-person's usage is nonsense. All offers contain ambiguous terms, and the level of definiteness in an offer is but one element in what makes an offer an offer at all. Moreover, all offers are final, because they invite acceptance. Otherwise, they would not be offers. So the phrase firm offer as business-people use the term is merely redundant. Of course, in this law class and generally in law school and in practice (except when you speak to your business clients), the term of art is the primarily relevant usage. Therefore, when you see the phrase firm offer from now on in contract law, you should consider whether it means an offer that complies with UCC § 2-205.

Problem #1

On Saturday, September 13, 2014, Nike debuted a pair of sneakers known as the “Lebron 11.” These sneakers are also known as the “What The Lebron.” Nike tries to build hype and excitement for its sneaker launches by, among other things, creating a sense of scarcity. For example, the Lebron 11’s were only made available at select locations, each location was given a limited number of sneakers, and each customer was allowed to purchase only one pair.

There is an active resale market in limited edition sneakers, such as the Lebron 11. Speculation on the resale value of the Lebron 11’s was rampant, and the Lebron 11’s (retail cost: $250) were expected to fetch as much as $750-900 on the resale market immediately after going on sale. Some previous limited editions sneaker runs had achieved similar prices. But sometimes the predictions of these resale markets have been incorrect. Nike encourages the secondary market because that market also helps build hype for its sneakers.

On September 1^st, the following advertisement from an athletic store ran in the local newspaper:

Sneaker Warehouse

LEBRON 11’S  IN STOCK AND GOING ON SALE, STARTING AT 8AM ON SEPTEMBER 13, 2014

Legal Disclaimer: Nike has guaranteed us only three pairs, but we expect to receive more. All Lebron 11’s will be sold on a first-come, first-served basis.

Andrea is a “sneaker head” and was very excited about the Lebron 11’s debut. She immediately planned to camp out in front of Sneaker Warehouse (“SW”) to guarantee herself of being one of the first three people in line so that she could buy a pair of What the Lebron sneakers. She withdrew enough money from the bank to cover the cost of the shoes, and then walked over  to SW on Wednesday, September 10^th, where she found that she was the fourth person in line. Undeterred, she decided to camp out anyway because SW has sometimes gotten more than its guaranteed allotment in the past.

Barbara would also like to own a pair of What the Lebrons, but is a busy law student and cannot wait in line for days. On Friday, September 12^th, she goes to SW and talks with Carl, who is the first person in line (he got in line on Tuesday). Barbara asks Carl if he’d be willing to sell her a pair of What the Lebrons for $500 on September 13^th. Carl tells her that she’s crazy and that these sneakers are going to resell for way more than that. He suggests that she should pay him $1000 for the pair. Barbara responds by offering $750 and says that she’s offering that much only because she wants to be one of the first people seen wearing the sneakers. Carl says, “I think that’s way less than they’re going to be worth, but…” and then sticks out his hand to Barbara. They shake hands and Barbara says, “I’ll be back at 8:05am tomorrow with $750” and walks away.

David decides that all this waiting in line for sneakers is nonsense, but he still wants a pair. He calls SW on Friday, September 12^th but no one answers. He leaves a voicemail stating that he saw SW’s offer in the newspaper and that he accepts. He states his intention to come by the store at noon on Saturday to pick up his pair of Lebron 11’s.

Assume that Andrea and Carl remain camped in front of SW until 8am on September 13^th, but—for reasons not relevant to this question—the store wasn’t open until 10am.

• At 8:05, Barbara returns with $750, sees the store isn’t open yet and that Carl doesn’t have sneakers to sell her. She tells Carl that he’s breached his agreement and storms off yelling about how she’s going to sue him.
• At 10:02am, Carl buys a pair of What the Lebrons for $250. Carl immediately goes online to try to resell his. Unfortunately, the resale market was not as robust as anticipated because Nike released more pairs of the sneakers than had been expected. The Lebron 11’s had a peak resale price of $500 at 8:30am, but by the time Carl tried to sell his pair, the price had collapsed to $300.
• When Andrea tries to buy her pair, she’s told that SW has run out and she leaves without a pair.
• David shows up at noon to pick up his pair of sneakers. A manager is called over to talk to him and explains that although they received his message and he was the only person to call about the sneakers, they’ve run out of sneakers. David leaves without a pair.

Please Note: It may (or may not) be relevant to one or more of the following questions that UCC 2-309(1) states: “The time for shipment or delivery or any other action under a contract if not provided in this Article or agreed upon shall be a reasonable time.”

Questions:

1. If Andrea sues SW for breach of contract, what result do you expect and why?
   1. 20 minutes suggested
2. If Carl sues SW for breach of contract, what result do you expect and why?
   1. 10 minutes suggested
3. If Barbara sues Carl for breach of contract, what result do you expect and why?
   1. 15 minutes suggested
4. If David sues SW for breach of contract, what result do you expect and why?
   1. 5 minutes suggested

Question 1

(If Andrea sues SW for breach of contract, what result do you expect and why? [20 minutes suggested])  

Answer 1: For the reasons set forth below, Andrea will lose. (10 points)

Issue #1: Does the UCC apply?  

Conclusion: Yes (10 points)

Issue: Does the UCC apply? (20 points)

Rule(s):         #1: Default rule is that the common law applies, unless displaced by statutory law. (10 points)

            #2 UCC 2-102: UCC “applies to transactions in goods” (10 points)

#3 UCC 2-105 defines goods as “all things . . . moveable at the time of identification to the contract for sale.” (10 points)

Analysis: Sneakers are a good because they are existing, identified and moveable at the time of identification to the contract (one can literally walk around in them). Thus, the sale of sneakers is a “transaction in goods” within the definition of the UCC. Therefore, the UCC applies, displacing the common law. (200 points)

Conclusion: The UCC applies. (10 points)

Issue #2: Was an offer for the sale of sneakers made to Andrea?  

Conclusion: No (10 points)

Issue: Did SW offer to sell Andrea Lebron 11’s via its advertisement? (20 points)

Rule(s):          #1: Advertisements are generally not offers (10 points)

#2: Advertisements can be offers if they are specific and limited enough. (10 points)

#3: An offer is words or actions creating the power of acceptance in another person. See Rstmt § 24. (20 points)

Analysis: Ads made to the general public are generally not considered offers because of a concern about unlimited liability on the part of the offeree if, for example, vastly more people accept the offer than the offeree has items for sale. But ads can be offers where they the items being advertised are limited to the pool of people to whom they are shown, or if the advertisements uses limiting language. For example, by making clear that the amount of goods for sale is limited. It’s a factual question, but the key inquiry is whether the offeree should understand that they have been given the power of acceptance. Here, the advertisement said that there would be 3 pairs in stock (though maybe more) and that they’d be sold on a “first-come, first-served basis.” This language—though addressed to everyone—made it clear that liability for the store would be limited to selling 3 pairs of shoes (unless more were received in stock). In addition, the store made clear how to accept. The first to come to the store will be the first served. Thus, if 3 pairs are sold, the fourth person is out of luck. Andrea was that fourth person. Although she hoped the store would get more than 3 pairs in stock, they did not. Therefore, SW did not make her an offer. (250 points)

Conclusion: No offer. (10 points)

Issue #3: Was a contract formed in some other way between Andrea and SW?  

Conclusion: No (10 points)

Issue: Did SW and Andrea take other actions, including conduct, “sufficient to show agreement”? (10 points)

Rule(s):          #1: UCC is more liberal in contract formation than common law (10 points)

#2: UCC 2-204 allows a contract for sale of goods to be formed in “any manner sufficient to show agreement.”(10 points)

Analysis: Although Andrea took actions demonstrating a willingness to contract with SW, SW did nothing other than let her stay in line and show an ad to her that did NOT make an offer. It’s unlikely that SW’s failure to remove Andrea from line counts as conduct recognizing the existence of a contract. First, it’s non-action. Second, if one of the first 3 people didn’t buy Lebron 11’s, they would have sold them to Andrea. This is an example where SW’s non-actions are not sufficient to create agreement. (200 points)

Conclusion: No. (10 points)

Question 2:

If Carl sues SW for breach of contract, what result do you expect and why? 10 minutes suggested  

Issue #1: Does UCC apply?

Conclusion: Yes, for reasons stated above in Question 1/issue 1 (10 points) (available to split)

Issue #2: Did SW offer to sell Carl Lebron 11’s? (70 points total)

Conclusion: Yes

Issue: see above, Question 1/issue 2 (10 points)

Rule(s): Question 1/issue 2

Analysis: As above, SW made an offer to the general public that could only be accepted by the first 3 people. Because Carl was the first person in line, they made an offer to him. (50 points)

Conclusion: Yes, SW made Carl an offer that he could accept by being first in line and buying the sneakers. (10 points)

Issue #3: What were the terms of the offer SW made to Carl? (sell at ~8? That day? A reasonable time after store opens?) (210 points)

Conclusion: Offered to sell at 8 (10 points)

Issue: Would a reasonable person understand that SW offered to sell Carl the sneakers at ~8am? (20 points)

Rule(s):          #1: Offeror is master of their offer (10 points)

                        #2: Objective theory of contract (10 points)

Analysis: SW is the master of its offer and it’s offer (the advertisement) was to sell 3 or more pairs of Lebron 11’s to the first 3 people who came to the store and wanted to buy them, starting at 8am. The Ad said “starting at 8am” and so a reasonable person would understand you could buy the sneakers that were “in stock” at 8am. Buying sneakers is a quick transaction, as evidenced by the fact that when Carl entered the store at 10, he was able to buy the sneakers within 2 minutes (by 10:02). In addition, the resale market for the sneakers is volatile, with large swings occurring within the first 2 hours (assumed to be worth $750-900, but then only goes up to $500 within 30 minutes and then down to $300 within 2 hours). Given the volatility of the market, the quick nature of the sale and the express language of the advertisement/offer, SW should be viewed as offering to sell at 8am. (150 points)

Conclusion: SW offered to sell at 8 and did not. Thus, they breached. (10 points)

Question 3:

if Barbara sues Carl for breach of contract, what result do you expect and why? 15 minutes suggested (370 points)

Issue #1: Does UCC apply?

Conclusion: Yes, see Question 1/issue 1 above (10 points) (available to split)

Issue #2: Did B and C make a contract? (180 total)

Conclusion: Yes (10 points)

Issue: Under the more liberal formation rules of the UCC, did B and C make a contract? (20 points)

Rule(s):          #1 UCC formation rules are more liberal (10 points)

#2 UCC 2-204(1) allows a contract for sale of goods to be formed in “any manner sufficient to show agreement.”(10 points)

#3 UCC 2-204(3): provides that open terms don’t prevent formation of a contract, so long as there is a reasonably certain basis for granting relief. (10 points)

#4: UCC 2-207 does not apply because no forms exchanged (10 points)

Analysis: B made offer to C ($500). C rejects (“you crazy”) and makes counter offer ($1000). B counters (not clear rejection of C’s counteroffer) with $750 and expresses desire to wear sneakers early. C accepts when they shake hands on the deal because, under the objective theory of contract formation and 2-204(1), any action or statements that show agreement are sufficient. Here, shaking hands after dickering is an objective indication that they had reached a deal. The fact that they do not definitely resolve when to sell the shoes does not prevent enforcement for the reasons stated in issue#3 below (100 points)

Conclusion: Yes. (10 points)

Issue #3: What were the terms of B and C’s contract? (180 points)

Conclusion: Contract for the sale of Lebron 11’s for $750 at approx. 8:05am. (10 points)

Issue: Where the parties haven’t clearly agreed on a time for delivery, does the contract fail for indefiniteness or is there a reasonably certain basis for granting relief? (20 points)

Rule(s):          #1: 2-207 does not apply because no forms are exchanged (10 points available here or above, but not both)

                        #2: 2-204(3) (10 points here or above, but not both)

                        #3: 2-309(1) (given in facts/no points available)

                        #4: contract modification sections – no points/not discussed in class

                        #5: in appropriate circumstances, silence can be an acceptance (if an objective, third party would think that a response was required and not provided) (10 points)

Analysis: B said she wanted to be among the first to wear the sneakers, which suggests that she wanted to buy them at the earliest time possible. She also says to C, “see you at 8:05.” Both of these statements suggest that she intended to purchase the shoes at ~8am. But did C agree? He might be said to have agreed through silence. A reasonable person would have known what C intended and given the circumstances, it might have been incumbent on C to object if he didn’t want to be bound. He probably didn’t object, because he saw no issue with delivering at 805a. In fact, he probably also wanted to deliver then, instead of standing around waiting for B. Thus, a court would likely conclude that both intended for the sale to occur at 805. But even if not, the 2-309(1) “gap filler” would fillin a reasonable time if not otherwise set. Although C could argue that it is unreasonable to set 805 as the sale time if the store wasn’t open, that wasn’t likely within the parties’ contemplation at the time the contract was formed. In addition, because of B’s statements and because of the volatility of the resale market, a prompt delivery is also reasonable. (120 points)

Conclusion: Although not certain, on balance it seems that B & C had a contract for the sale of shoes at or around 805a for $750 and C breached (20 points)

Question 4:

If David sues SW for breach of contract, what result do you expect and why? 5 minutes suggested (180 points)

Issue #1: Does UCC apply?

Conclusion: Yes, see Question 1/issue 1 above (10 points) (available to split)

Issue #2: Was the ad an offer that could be accepted by promising? (100 points)

Conclusion: No (10 points)

Issue: Was the ad a bilateral or unilateral contract? (20 points)

Rule(s):          #1: UCC 2-206(1): unless “unambiguously indicated by the language or circumstances: (a) an offer to make a contract shall be construed as inviting acceptance in any manner and nay medium reasonable in the circumstances” (emphasis added) (10 points)

Analysis: Although normally offers can be accepted by promising or performance, here the circumstances AND language both indicate that only performance would do. Language said “first-come, first-served”, which means the first person in the store will be the first to be served. Come does not mean call. In addition, with only a limited number of shoes, coming by at midday was far too late. There is a reason why so many people were lined up for days, which is that calling was not sufficient under the circumstances. (50 points)

Conclusion: Ad was an offer to enter into a unilateral contract, which can only be accepted by performance (10 points)

Issue #2: Did David have an option contract? (90 points)

Conclusion:  No (10 points)

Issue: Did David’s calling constitute beginning performance sufficient to create an option contract? (20 points)

Rule(s):          #1: Restatement 45: beginning performance under a unilateral contract can create an option (10 points)

#2: Cook v. Coldwell Banker: substantial performance required to create an option contract (10 points)

Analysis: Under either test, calling is not partial performance because that wasn’t what the ad requested. The ad requested coming to the store. Calling is not the start of that. (30 points)

Conclusion: No (10 points)

Question 5

If Andrea learns of the manager’s actions and comes to you for advice about whether she can sue SW, what would you advice her and why? 40 minutes suggested (840 total points)

Overall Conclusion (20 points): Based on express contract theory, PE, or irrevocable option contract theories, Andrea probably wins on every basis.

Issue #1: Does UCC apply? (10 points) 

Conclusion: Yes, see Question 1/issue 1 above (10 points) (available to split)

Issue #2: Was Ad offer to A? (70 points total)

Conclusion: Yes

Issue: see above, Question 1/issue 2 and Question 2/issue2 (10 points)

Rule(s): Question 1/issue 2 / Q2/issue2

Analysis: As above, SW made an offer to the general public that could only be accepted by the first people to respond. Since the store received 5 pairs, they made an offer to the first five people who came to buy. (50 points)

Conclusion: Yes, SW made A an offer that she could accept by being first in line and buying the sneakers. (10 points)

Issue #3: Even if SW made an offer to A, did SW revoke its offer before A could accept? (260 points)

Conclusion: A had an irrevocable offer. (10 points)  

Issue: Did A have an irrevocable offer that SW’s manager was not free to withdraw? (20 points)

Rule(s):         #1: General rule is that offers are terminable at will, even if they are stated to be irrevocable (which this one was not) (10 points)  

                        #2: Rsmt 45 provides that beginning performance of a unilateral contract creates an option contract, allowing—but not requiring—the offeree to complete performance.  The offeror’s obligation to fulfill their promise is conditional on the offeree completing performance (20 points)  

                        #3: 2-205 not relevant because AD did not state language of irrevocability (10 points)

                       #4: UCC 2-204(1) allows a contract for sale of goods to be formed in “any manner sufficient to show agreement.”(10 points)

                       #5 Cook v. Coldwell Banker: substantial performance required to create an option contract (10 points)

Analysis: Although SW could claim that it revoked its offer, it will probably lose because A began performance sufficient to create an option. 2-204(1) allows an offer to be accepted by any reasonable means and the ad stated that reasonable means required potential offerees to be one of the first people in line. Since A got in line and waited for days—which was the only way to accept—she has probably begun performance sufficient under Restatement 45. Although going to the store might be considered preparation, here it probably rises to the level of beginning performance because of the first-come, first-served basis of the offer. In addition, it wasn’t just that A went to the store, but that she waited for half a week. This is precisely the type of activity that Nike and SW are trying to incentivize to create “hype.” Thus, A did just what SW wanted her to do, which was to line up for days. As such, she has at least begun performance. (100 points)

            Under the Cook v. Coldwell Banker test, however, more than beginning performance is required. Instead, A would be required to substantially perform. It is not clear exactly how much performance constitutes substantial performance. In Cook, substantial performance was having worked for approximately half the year. Here, the transaction required three things: (i) waiting for days in line; (ii) having the money; (iii) trading money for sneakers. The problem suggests that she had the money and was willing to trade if for sneakers. In addition, the trading $ for sneakers is a very quick transaction. The difficult part is waiting in line for days. As such, A probably has an irrevocable option under the—arguably—stricter test from Cook. (70 points)

Conclusion: A likely has an option contract under either test. (20 points)