COMMERCE 393 PRACTICE MIDTERM ANSWER GUIDE FEB 2013
Is there a contract between Francine’s and Wendy?
Offer and acceptance are the main elements of a contract, and when they are present, a contract
has usually been formed. Wendy made Francine’s an offer on October 7, and Francine’s
accepted on October 8. (Consideration was in the form of their mutual promises to buy and sell).
A contract between Francine’s and Wendy was formed on October 8.
Is there a contract between Francine’s and Beth?
Francine’s mailed an offer to Beth on October 1. Beth mailed her acceptance to Francine’s on
October 21. There is the mutual exchange of promises to buy and sell.
When was acceptance effective?
The postal acceptance rule says that if an offer comes by mail without any directions regarding
acceptance or where acceptance by mail is stipulated, acceptance is effective when the letter is
mailed. In this case it was reasonable to accept by mail because the offer was by mail.
Acceptance was effective October 21.
Did the offer terminate by revocation? Revocation is permitted at any time prior to acceptance.
Francine’s did revoke the offer, but on October 22, after acceptance had occurred.
Did the offer terminate by lapse?
An offer lapses after a specified length of time, or if there is no specified length of time, after a
reasonable length of time. Francine’s did not set a deadline for acceptance, so one would have
to determine what a reasonable length of time was. One might say that because Francine’s sent
her offer by mail, that there was no real urgency, but a reasonable third party would conclude that
the offer would probably be open only for 10 days or so, and not the 18 days it took Beth to
There is no contract because the offer lapsed before acceptance.
According to the Sale of Goods Act, unless a different intention is evident, risk passes when title
passes. When there is a sale of specific goods and something need to be done to the goods to
put them in a deliverable state, title passes when it has been done and the seller has notified the
This was a sale of specific goods and Francine’s needed to repair the radio to put the car in a
deliverable state. Title had passed to Beth because Francine’s had repaired the radio and
notified Beth. The care belonged to Beth at the time of the theft, and so Beth is liable to pay the
Under the Sale of Goods Act when there is a sale by a dealer and the buyer makes a purpose
known and shows reliance on the seller, there is an implied term that the goods be suitable for the
buyer’s purpose. When a dealer sells goods by description there is an implied term as to
merchantability unless the defects are obvious. A car that needs these repairs a few days after
the sale would not seem to be sui