QUESTION NO. 9
FEBRUARY 2011
OREGON BAR EXAM
Richards, Inc., (“Richards”) was a national retailer of sporting goods headquartered
in Pennsylvania. Mikey, Inc., (“Mikey”) was a manufacturer and wholesaler of
sporting goods and apparel headquartered in Beaverton, Oregon.
On April 1, Richards sent Mikey the following e-mail:
Order No 1: Richards will buy 1 million leather
basketballs at $30 per ball. Delivery by June 1 at the
Richards warehouse. Payment by July 1.
On April 2, Mikey sent Richards the following e-mail, which included an electronic
signature on behalf of Mikey:
Accept your April 1 offer. All disputes under this
contract to be resolved through arbitration in Beaverton,
Oregon.
On April 10, Richards sent Mikey the following e-mail:
Order No. 2: Richards will buy 1 million baseballs at
$2.50 per ball. Delivery by June 1 at the Richards
warehouse. Payment by July 1.
On May 31, Mikey delivered 1 million rubber, instead of leather, basketballs and 1
million softballs, instead of baseballs, to the Richards warehouse. On June 2,
Richards inspected the balls, sent the basketballs back to Mikey with written notice
of their deficiency that they were not leather basketballs, placed the softballs into
inventory and began selling them at its stores. On June 10, Mikey sent an e-mail to
Richards: “With regard to Order No. 2, no consequential damages.”
Applying the Uniform Commercial Code, Article 2:
(30%)
1. Whether Mikey and Richards have enforceable agreements.
(30%)
2. If the agreements are enforceable, what are their terms?
(40%)
3. Assuming a valid cause of action, what are Richards' remedies
against Mikey?
© 2011
Oregon State Board
of Bar Examiners
QUESTION NO. 9
FEBRUARY 2011
OREGON BAR EXAM
Issue Outline
1. Whether the agreements are enforceable.
a. Article 2 applies – sale of goods.
b. Offer – Richards' e-mails state valid offers.
c. Acceptance – May be in any manner and by any medium reasonable
under the circumstances or a promise to ship or prompt shipment of
conforming or non-conforming goods (§2-206).
i. Here, with respect to Order No. 1, Mikey’s e-mail response
reflects acceptance and forms an enforceable agreement.
ii. With respect to Order No. 2, Mikey’s shipment of goods
constitutes acceptance. The shipment of non-conforming
goods constitutes acceptance and breach of the contract (unless
seller reasonably notifies the buyer that the shipment is offered
only as an accommodation and there are no facts suggesting
that Mikey is offering an accommodation (§2-206(1)(b)).
d. Statute of Frauds. The statute of frauds is triggered because the
agreements involve sale of goods over $500. (§2-201(1)). This
requires a writing made that is signed by the party to be charged or
such party's agent. However, statute of frauds' requirement is met with
respect to Order No. 1 because a valid writing with signature is
provided. As to Order No. 2, a writing is not required if goods are
either paid for or received and accepted (§2-201(3)). Here, the goods
under Order No. 2 have been received and accepted.
e. Any acceptance or written confirmation that indicates an intention to
enter into a contract will be effective as an acceptance, even if it states
additional or different terms for the contract, unless the acceptance is
expressly made conditional on assent to the terms of the acceptance.
(§2-207(1)). Here, with respect to Order No. 1, Mikey added new
terms but did not make its acceptance conditional on acceptance of
these additional terms.
2. Terms of the Agreements.
a. With respect to Order No. 1, additional terms – arbitration clause – are
to be construed as proposals for addition to the contract. (§2-207(1)).
If both parties to a contract are merchants (which is the case here),
additional terms become part of the contract unless:
i. They materially alter the original contract;
ii. The offer expressly limits acceptance to the terms of the offer;
or
iii. The offeror has already objected to the particular terms. (§2207(2)).
b. Arbitration clause is likely to be viewed as materially altering the
original contract and therefore not incorporated as a term into the
contract. However, points will be given for a reasoned discussion that
supports the opposite conclusion.
c. The e-mail regarding Order No. 2 does not fall under §2-207 because
the proposed new term – no consequential damages – was not made as
part of acceptance. Instead, it will be viewed as a proposed
modification of the agreement, which will not become part of the
contract without both parties' agreement.
3. Remedies
a. If goods fail to conform to the contract, buyer may reject all or accept
all or accept any commercial units and reject the rest. (§2-601).
b. Acceptance occurs when (i) buyer after a reasonable opportunity to
inspect them, indicates to the seller that they conform; (ii) when buyer
fails to reject within a reasonable time after tender or delivery or fails
to seasonably notify the seller of rejection; or (iii) when buyer does
any act inconsistent with the seller's ownership. (§2-606).
c. With respect to Order No. 2, Richards has accepted the softballs by not
rejecting them and by placing them into inventory and selling them.
d. With respect to Order No. 1, Richards has properly rejected the
basketballs.
e. With respect to Order No. 1, the general measure of damages for
properly rejected goods (i.e., basketballs) is the difference between the
contract price and either the market price (benefit of bargain) or the
cost of buying replacement goods (cover). (§2-711-713). Richards
has the option of suing for benefit of bargain damages or covering.
Richards is entitled to any incidental and consequential damages that
can be proved. (§2-715).
f. With respect to Order No. 2, buyer who has accepted non-conforming
goods may recover as a damages "loss resulting in the ordinary course
of events from the seller's breach." (§2-714). The basic measure is the
difference between the value of the goods delivered and the value they
would have had if they had been according to the contract, plus
incidental and consequential damages generally. (§2-714).
g. In order to sue for damages for non-conforming accepted goods, buyer
must within a reasonable time after she discovers or should have
discovered the breach, notify the seller of the defect and the burden of
proof will be on Richards to prove a breach. (§2-607(3)). If Richards
fails to provide such notice, it will not be able to sue for damages
under Order No. 2.
© 2011
Oregon State Board
of Bar Examiners