1. Sally has an exclusive shop in New York City where she sells hand-carved desk
ID: 427659 • Letter: 1
Question
1. Sally has an exclusive shop in New York City where she sells hand-carved desks make by Joe from Kentucky. Sally has an output contract with Joe under which she has purchased four desks a quarter for years. After Joe’s untimely death, Joe’s son-in-law automates the desk production. When the truck drives up with 100 desks instead of four, Sally will have to purchase all 100 desks because it is an output contract. True or false
2. A contract that contains language stating that any assignment is “void unless approved in writing” by the parties may still be assigned “anyway” giving rights to a third party even though such consent was not obtained. True False
3. A business (“Business”) selling goods “on time” can generally assign its right to receive payments from customers to a financing company for cash. True or False
Explanation / Answer
1. False
It is an output contract, however, UCC requires that both parties act in good faith, which means that the seller will not produce unreasonably disproportionate amount to the estimated amount that the buyer plans to purchase. In this case, an output of 100 desks against the usual output of 4 per quarter is unreasonably disproportionate and Sally would not be on the line for all 100 desks.
Furthermore, the contract is for hand-carved desks, whereas Joe's son-in-law automated the production, which is also against the terms of the contract. Hence, Sally is not bound to purchase all 100 desks produced by an automated process.
2. False
Such a clause which prohibits assignment without written consent by the parties is called anti-assignment clause. Assignment cannot be enforced, when it is specifically prohibited by the contract vide anti-assignment clause.
3. True
A company sellings goods on credit may assign its right to receive payments from customers to the financing company for cash.
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