Contracts, sales and retail leases

A merchant signs a written offer promising to keep a fabric price available for 30 days. One week later, the merchant tries to withdraw it. Under UCC § 2-205, what is the most likely result?

A. The merchant can revoke the offer at any time.

B. The offer is irrevocable during the promised period, assuming the requirements are met.

C. The offer is valid only if the buyer pays a deposit.

D. The offer automatically expires after one week.

B. The offer is irrevocable during the promised period, assuming the requirements are met.

A fashion retailer sends a purchase order with its own terms. The supplier responds with an acknowledgment containing additional terms. Which law governs the analysis of these conflicting forms in a domestic sale of goods?

A. UCC § 2-207

B. CISG Article 19

C. UCC § 2-205

D. The law of residential leases

A. UCC § 2-207

Two fashion companies are merchants. A supplier accepts a purchase order but adds a warranty disclaimer that materially changes the deal. Under the UCC approach, what is the most likely result?

A. The warranty disclaimer automatically becomes part of the contract.

B. The entire contract is automatically void.

C. The additional term generally does not become part of the contract if it materially alters the deal.

D. The buyer must accept every term in the acknowledgment.

C. The additional term generally does not become part of the contract if it materially alters the deal.

A retailer receives goods, pays the invoice, and never signs the supplier's acknowledgment containing an arbitration clause. What is the most accurate conclusion under the UCC analysis?

A. Payment automatically means the retailer agreed to arbitration.

B. The supplier's last document always controls.

C. The retailer automatically waived all legal rights.

D. Accepting goods and paying does not automatically establish agreement to every additional term.

D. Accepting goods and paying does not automatically establish agreement to every additional term.

A fabric supplier signs a written offer promising to hold a price for 60 days. The buyer gives nothing in exchange for that promise. Assuming the requirements of UCC § 2-205 are satisfied, how long can the offer remain irrevocable?

A. Only 10 days

B. Up to three months, including the promised 60-day period

C. Indefinitely

D. Only until the supplier receives another order

B. Up to three months, including the promised 60-day period

An Italian supplier sells materials to a U.S. fashion company. Both countries are parties to the CISG, and the contract does not exclude it. Which law may govern the international sale?

A. Only the buyer's state's law

B. Only the seller's local commercial customs

C. The CISG

D. No law until a lawsuit is filed

C. The CISG

A U.S. company contracts with an Italian supplier and states that the agreement is governed by Italian law. The contract does not mention the CISG. What is the most likely result?

A. Choosing Italian law automatically excludes the CISG.

B. The CISG may apply because it forms part of the applicable Italian law for qualifying international sales.

C. Colorado law automatically overrides the contract.

D. The contract is unenforceable because the parties selected different countries.

B. The CISG may apply because it forms part of the applicable Italian law for qualifying international sales.

A fashion company wants to ensure that the CISG does not govern its international sales contract. Which provision is the clearest approach?

A. “The contract is governed by Italian law.”

B. “All disputes must be resolved in New York.”

C. “The buyer must pay within 30 days.”

D. “The CISG does not apply to this contract.”

D. “The CISG does not apply to this contract.”

An Italian supplier sends an offer to a U.S. buyer. The buyer responds by materially changing the proposed quality and liability terms. Under CISG Article 19, what is the response generally treated as?

A. A counteroffer

B. An unconditional acceptance

C. An automatic cancellation of all future contracts

D. A retail lease

A. A counteroffer

A fashion company challenges the enforceability of a contractual penalty clause in an international sales agreement governed by the CISG. Which statement is most accurate?

A. The CISG always determines whether the penalty is valid.

B. The CISG governs every legal issue involving the parties.

C. Contract validity is generally outside the CISG's scope, so applicable domestic law may determine enforceability.

D. The penalty is automatically valid if both parties signed.

C. Contract validity is generally outside the CISG's scope, so applicable domestic law may determine enforceability.

Finproject supplies foam to Crocs under an agreement governed by Italian law, with disputes handled in the supplier's home forum. What does this arrangement illustrate?

A. The buyer always controls the contract's terms.

B. Governing law and dispute-forum provisions can reflect the bargaining power of the party negotiating the agreement.

C. International contracts cannot allocate risk.

D. The CISG automatically eliminates all disputes.

B. Governing law and dispute-forum provisions can reflect the bargaining power of the party negotiating the agreement.

A supply agreement does not specify a rule for a particular issue. What may happen?

A. The contract automatically becomes void.

B. The seller always wins the dispute.

C. The buyer always wins the dispute.

D. Applicable default legal rules may fill the gap.

D. Applicable default legal rules may fill the gap.

A fashion brand agrees to purchase goods, but the contract specifies that risk transfers to the buyer when the goods leave the supplier's factory. The goods are damaged during transportation. What is the key legal issue?

A. Whether the risk of loss had transferred to the buyer under the applicable delivery terms.

B. Whether the buyer owns the supplier's trademark.

C. Whether the buyer has a right to renew a retail lease.

D. Whether the delivery driver is a general partner.

A. Whether the risk of loss had transferred to the buyer under the applicable delivery terms.

A retailer leases a store for $180,000 per year and agrees to pay 6% of sales above a specified breakpoint. What is the natural breakpoint?

A. $1,800,000

B. $2,000,000

C. $3,000,000

D. $6,000,000

C. $3,000,000

A retail lease requires $180,000 in annual base rent plus 6% of sales exceeding $2 million. If annual sales reach $3 million, how much additional percentage rent is owed under this formula?

A. $30,000

B. $60,000

C. $120,000

D. $180,000

B. $60,000

A landlord proposes a 10-year lease with no renewal option for a new fashion boutique. Why might the tenant negotiate a renewal right?

A. To eliminate all rent obligations.

B. To automatically transfer the lease to a competitor.

C. To avoid complying with all lease provisions.

D. To preserve the ability to remain in the location beyond the initial term, subject to agreed conditions.

D. To preserve the ability to remain in the location beyond the initial term, subject to agreed conditions.

A landlord's lease states that selling 49% of the tenant company's stock counts as an assignment. Why is this provision important?

A. It may restrict ownership changes or investment transactions without the landlord's consent.

B. It automatically reduces base rent by 49%.

C. It guarantees the tenant a renewal option.

D. It excludes the CISG from the tenant's supply contracts.

A. It may restrict ownership changes or investment transactions without the landlord's consent.

A store owner personally guarantees every obligation under a 10-year commercial lease. The business later fails and cannot pay rent. What is the owner's main risk?

A. The owner automatically becomes the landlord.

B. The lease becomes a general partnership.

C. The owner may be personally liable for the guaranteed obligations, exposing personal assets.

D. The owner is protected from all lease-related claims.

C. The owner may be personally liable for the guaranteed obligations, exposing personal assets.

A New York retail tenant negotiates a good-guy guaranty. Under the arrangement described, when can the guarantor's liability end?

A. Whenever the tenant stops making a profit.

B. When the tenant gives the required notice, pays through the departure date, and returns the keys, subject to the guaranty's terms.

C. Only after the landlord sells the property.

D. Automatically after the first year of the lease.

B. When the tenant gives the required notice, pays through the departure date, and returns the keys, subject to the guaranty's terms.

A fashion retailer is negotiating its first commercial lease. The proposed terms include high base rent, percentage rent beginning too early, no renewal option, broad assignment restrictions, and a personal guaranty. What is the best negotiation strategy?

A. Accept every provision to avoid delaying the opening.

B. Focus exclusively on the rent and ignore all other provisions.

C. Refuse to negotiate any term.

D. Prioritize the most costly and risky terms, make targeted requests, and offer concessions in exchange.

D. Prioritize the most costly and risky terms, make targeted requests, and offer concessions in exchange.

A fashion brand agrees to purchase materials exclusively from one supplier. In exchange, the supplier expects the brand to purchase a specified minimum volume. What is the main risk for the buyer?

A. The buyer automatically loses its trademark rights.

B. The buyer may be committed to purchasing a minimum quantity even if demand falls.

C. The supplier must provide unlimited materials for free.

D. The agreement automatically terminates if sales decrease.

B. The buyer may be committed to purchasing a minimum quantity even if demand falls.

Crocs receives foam from Finproject, but the foam does not meet the contract's quality requirements. Which provisions are most important in determining Crocs' options?

A. The supplier's advertising budget and brand colors.

B. The retail lease's renewal clause.

C. The defect-notice requirements, quality standards, and available remedies.

D. The number of stores Crocs operates.

C. The defect-notice requirements, quality standards, and available remedies.

A fashion company discovers defective materials but waits several months before notifying its supplier. The contract contains a strict defect-notice deadline. What is the biggest potential problem?

A. The company may lose or limit its ability to pursue remedies because it missed the deadline.

B. The supplier automatically owes double damages.

C. The contract automatically becomes a retail lease.

D. The company automatically receives a refund.

A. The company may lose or limit its ability to pursue remedies because it missed the deadline.

A supply agreement limits the damages a buyer can recover for defective products. What is the purpose of this provision?

A. To establish the buyer's trademark ownership.

B. To determine the number of products the buyer must advertise.

C. To guarantee that no products will ever be defective.

D. To limit the types or amount of recovery available for certain losses.

D. To limit the types or amount of recovery available for certain losses.

Crocs and Finproject want to change their existing agreement before it expires because demand has increased significantly. What is the best approach?

A. Ignore the existing agreement and assume the original terms no longer apply.

B. Negotiate specific amendments, identify the provisions being changed, and document what each party gives up.

C. Allow one party to rewrite the contract without the other's agreement.

D. Automatically terminate the agreement because demand has changed.

B. Negotiate specific amendments, identify the provisions being changed, and document what each party gives up.

A retail lease requires a fashion store to operate seven days a week. The business discovers that opening on Sundays is unprofitable. What should the tenant have considered during negotiations?

A. Whether the landlord owns a clothing brand.

B. Whether the CISG applies to the lease.

C. Whether the lease permits reduced operating hours or exceptions to the continuous-operation requirement.

D. Whether the supplier's warranty disclaimer is enforceable.

C. Whether the lease permits reduced operating hours or exceptions to the continuous-operation requirement.

A retail lease charges percentage rent on sales exceeding $2 million and explicitly includes online sales. The retailer generates $500,000 in online sales through its website. Why does this provision matter?

A. Online sales may count toward the percentage-rent calculation, increasing the rent owed.

B. Online sales are automatically exempt from commercial leases.

C. The landlord automatically becomes a shareholder in the retailer.

D. The provision eliminates the tenant's base rent.

A. Online sales may count toward the percentage-rent calculation, increasing the rent owed.

A fashion boutique signs a 10-year lease with rent increasing by 3% each year. What is the principal financial concern with this provision?

A. Rent can never increase under a commercial lease.

B. The tenant automatically receives a renewal option.

C. The landlord must pay the tenant's operating expenses.

D. The tenant's annual rent and long-term occupancy costs will increase over time.

D. The tenant's annual rent and long-term occupancy costs will increase over time.

A fashion retailer operates through an LLC. Its owner personally guarantees the store's lease obligations. The retailer later defaults on its rent. Which statement best describes the legal risk?

A. The LLC automatically cancels the personal guaranty.

B. The owner may be personally liable under the guaranty despite the LLC's liability protection.

C. Only the LLC's suppliers can pursue the owner.

D. The owner is automatically protected because the lease is in the LLC's name.

B. The owner may be personally liable under the guaranty despite the LLC's liability protection.

A retail lease prohibits competing businesses within a three-mile radius of the store. The tenant plans to open another location nearby. What is the main concern?

A. The restriction automatically applies to every business in the state.

B. The restriction changes the governing law of the tenant's supply agreements.

C. The new location could violate the lease's geographic restriction, depending on its wording and enforceability.

D. The landlord must automatically approve every new location.

C. The new location could violate the lease's geographic restriction, depending on its wording and enforceability.

Two fashion companies dispute a fabric contract containing an arbitration clause. Which case is identified as treating arbitration clauses as material alterations under New York law?

A. Marbury v. Madison

B. Marlene Industries v. Carnac Textiles (1978)

C. Brown v. Board of Education

D. Hadley v. Baxendale

B. Marlene Industries v. Carnac Textiles (1978)

A fashion company enters a supply agreement denominated in euros, but its revenue is primarily in U.S. dollars. Which risk should it evaluate?

A. Currency fluctuations may increase the effective cost of its purchases.

B. The contract automatically becomes void.

C. The CISG prohibits payment in foreign currencies.

D. The supplier automatically assumes all exchange-rate risk.

A. Currency fluctuations may increase the effective cost of its purchases.

A supply agreement allows either party to terminate only after specified notice and certain conditions are satisfied. Why are these provisions important?

A. They determine who owns the company's trademarks.

B. They eliminate the need to comply with the contract.

C. They determine when and how a party can exit the agreement and what obligations remain.

D. They automatically transfer the agreement to a new supplier.

C. They determine when and how a party can exit the agreement and what obligations remain.

A contract requires disputes to be arbitrated in the supplier's home city and under procedures favorable to the supplier. What should the buyer consider during negotiations?

A. Ignoring the clause because arbitration provisions are never enforceable.

B. Negotiating a neutral forum, mutually acceptable procedures, or a different dispute-resolution mechanism.

C. Accepting the clause because governing law determines every aspect of the dispute.

D. Replacing the dispute clause with a retail lease.

B. Negotiating a neutral forum, mutually acceptable procedures, or a different dispute-resolution mechanism.