Sales – Sales – Flashcards
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On May 2, Mason orally contracted with Acme Appliances to buy for $480 a washer and dryer for household use. Mason and the Acme salesperson agreed that delivery would be made on July 2. On May 5, Mason telephoned Acme and requested that the delivery date be moved to June 2. The Acme salesperson agreed with this request. On June 2, Acme failed to deliver the washer and dryer to Mason because of an inventory shortage. Acme advised Mason that it would deliver the appliances on July 2 as originally agreed. Mason believes that Acme has breached its agreement with Mason. Acme contends that its agreement to deliver on June 2 was not binding. Acme's contention is a) Correct, because Mason is not a merchant and was buying the appliances for household use. b) Correct, because the agreement to change the delivery date was not in writing. c) Incorrect, because the agreement to change the delivery date was binding. d) Incorrect, because Acme's agreement to change the delivery date is a firm offer that cannot be withdrawn by Acme.
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c) Incorrect, because the agreement to change the delivery date was binding. Under the UCC, an oral modification of an existing contract for the sale of goods for a price less than $500 is considered binding. Since the washer and dryer Mason contracted to buy cost less than $500, Acme's oral agreement to change the date of delivery would be enforceable. The fact that Mason is not a merchant won't affect whether or not the oral modification is binding. In order to have a firm offer, the offer must be made by a merchant in a signed writing which gives assurance that the offer will be held open. In this situation, the modification of an offer already accepted is being discussed rather than a firm offer.
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Under the Sales Article of the UCC, which of the following statements is correct? a) The obligations of the parties to the contract must be performed in good faith. b) Merchants and nonmerchants are treated alike. c) The contract must involve the sale of goods for a price of more than $500. d) None of the provisions of the UCC may be disclaimed by agreement.
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a) The obligations of the parties to the contract must be performed in good faith. Under the Sales Article of the UCC, both the seller and buyer are obligated to perform a contract in good faith. Answer (b) is incorrect because certain provisions, such as the battle of forms provision, only apply to merchants. Answer (c) is incorrect because the Sales Article of the UCC applies to the sale of goods without regard to the price of goods. Answer (d) is incorrect because certain provisions of the UCC may be disclaimed by written or oral agreement, such as warranty liability
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Under the Sales Article of the UCC, when a written offer has been made without specifying a means of acceptance but providing that the offer will only remain open for ten days, which of the following statements represent(s) a valid acceptance of the offer? I. An acceptance sent by regular mail the day before the ten-day period expires that reaches the offeror on the eleventh day. II. An acceptance faxed the day before the ten-day period expires that reaches the offeror on the eleventh day, due to a malfunction of the offeror's printer. a) I only. b) II only. c) Both I and II. d) Neither I nor II
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c) Both I and II. Under the Sales Article of the UCC, acceptance is valid when sent if a reasonable method is used; therefore answer (c) is correct as both acceptances were sent prior to the end of the ten-day period.
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Under the Sales Article of the UCC, a firm offer will be created only if the a) Offer states the time period during which it will remain open. b) Offer is made by a merchant in a signed writing. c) Offeree gives some form of consideration. d) Offeree is a merchant.
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b) Offer is made by a merchant in a signed writing. A firm offer is a written, signed offer concerning the sale of goods, by a merchant, giving assurance that it will be held open for a specified time and is irrevocable for that period, not to exceed three months. Answer (a) is incorrect because if the firm offer does not state a period of time, it will remain open for a reasonable period of time, not to exceed three months. Answer (c) is incorrect as consideration is not required for a firm offer, but for an option contract. Answer (d) is incorrect because under the firm offer rule, only the offeror need be a merchant.
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Which of the following contracts is handled under common law rules rather than under Article 2 of the Uniform Commercial Code? 1) Oral contract to have hair styled in which expensive products will be used on the hair. 2) Oral contract to purchase a textbook for $100. 3) Written contract to purchase an old handcrafted chair for $600 from a private party. 4) Written contract to purchase a heater from a dealer to be installed by the buyer in her home.
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1) Oral contract to have hair styled in which expensive products will be used on the hair. Article 2 of the UCC applies to sales of goods. Common law generally applies to contracts for services and real estate. Even though goods are used in this service contract, the predominate feature of this contract is the service. Article 2 of the UCC governs this contract even though it is oral and for a small sum. Even though the chair at one time involved a lot of labor, it is still a sale of goods. Also, whether the parties are merchants or not is not an issue on whether Article 2 applies. The heater which is not yet installed in the home is a sale of goods. Once it is installed in the home, it becomes part of the real estate for any future sale of the home. Common law rules would apply to any such future sale.
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Cookie Co. offered to sell Distrib Markets 20,000 pounds of cookies at $1.00 per pound, subject to certain specified terms for delivery. Distrib replied in writing as follows: We accept your offer for 20,000 pounds of cookies at $1.00 per pound, weighing scale to have valid city certificate. Under the UCC a) A contract was formed between the parties. b) A contract will be formed only if Cookie agrees to the weighing scale requirement. c) No contract was formed because Distrib included the weighing scale requirement in its reply. d) No contract was formed because Distrib's reply was a counteroffer.
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a) A contract was formed between the parties. Under common law, an acceptance must be unequivocal and unqualified in agreeing to the precise terms specified by the offer. However, the Uniform Commercial Code alters this general rule as far as the sales of goods is concerned. Under the UCC, an acceptance containing additional terms is a valid acceptance unless the acceptance is expressly conditional upon the offeror's agreement to the additional terms. In this situation, a valid contract has been formed between Cookie Co. and Distrib Markets. Distrib Markets' acceptance was not conditional upon Cookie's agreement to the additional term and, thus, a contract is formed regardless of Cookie's agreement or objection to the additional term. This contract was for the sale of goods and is governed by the UCC rather than by common law. Under common law, Distrib Markets' reply would have been a rejection and counteroffer; but under the UCC, a contract was formed.
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EG Door Co., a manufacturer of custom exterior doors, verbally contracted with Art Contractors to design and build a $2,000 custom door for a house that Art was restoring. After EG had completed substantial work on the door, Art advised EG that the house had been destroyed by fire and Art was canceling the contract. EG finished the door and shipped it to Art. Art refused to accept delivery. Art contends that the contract cannot be enforced because it violated the Statute of Frauds by not being in writing. Under the Sales Article of the UCC, is Art's contention correct? a) Yes, because the contract was not in writing. b) Yes, because the contract cannot be fully performed due to the fire. c) No, because the goods were specially manufactured for Art and cannot be resold in EG's regular course of business. d) No, because the cancellation of the contract was not made in writing.
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c) No, because the goods were specially manufactured for Art and cannot be resold in EG's regular course of business. This exception for specially manufactured goods, even if the contract is for over $500, is one of the important exceptions found in the Statute of Fraud provisions of the Uniform Commercial Code. Answer (a) is incorrect because the exception for specially manufactured goods applies to this fact pattern and thus this contract need not be in writing. Answer (b) is incorrect because the fire did not prevent the custom door contract from being performed. Answer (d) is incorrect because the contract was fully enforceable and Art had no legal right to cancel the contract
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On May 2, Handy Hardware sent Ram Industries a signed purchase order that stated, in part, as follows: Ship for May 8 delivery 300 Model A-X socket sets at current dealer price. Terms 2/10/net 30. Ram received Handy's purchase order on May 4. On May 5, Ram discovered that it had only 200 Model A-X socket sets and 100 Model W-Z socket sets in stock. Ram shipped the Model A-X and Model W-Z sets to Handy without any explanation concerning the shipment. The socket sets were received by Handy on May 8. Which of the following statements concerning the shipment is correct? a) Ram's shipment is an acceptance of Handy's offer. b) Ram's shipment is a counteroffer. c) Handy's order must be accepted by Ram in writing before Ram ships the socket sets. d) Handy's order can only be accepted by Ram shipping conforming goods.
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a) Ram's shipment is an acceptance of Handy's offer. Ram may accept the offer by shipping the goods. Under the UCC, shipping nonconforming goods constitutes an acceptance, also unless the seller notifies the buyer that the shipment is given only as an accommodation to the buyer. Answer (b) is incorrect because this shipment counts as an acceptance, not as a counteroffer. Answer (c) is incorrect because an order to buy goods for prompt shipment allows the seller to accept by either a prompt promise to ship or by the actual prompt shipment itself.
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Under the UCC Sales Article, which of the following conditions will prevent the formation of an enforceable sale of goods contract? a) Open price. b) Open delivery. c) Open quantity. d) Open acceptance.
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d) Open acceptance. In order to have a contract, there must be both an offer and an acceptance. Even though an acceptance can occur in different ways, by speech, by writing, or by action, the actual acceptance is a required element of a contract. Under the UCC Sales Article, a binding contract may be present if the parties had intended to form a contract even though certain elements of the contract are missing. These open terms will be filled by specific provisions of the UCC, including provisions for open price, open delivery, or open quantity. Note that in the case of quantity, output contracts, requirements contracts, and exclusive dealing's contracts are enforceable though the actual quantity may not be known in advance.
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Webstar Corp. orally agreed to sell Northco, Inc. a computer for $20,000. Northco sent a signed purchase order to Webstar confirming the agreement. Webstar received the purchase order and did not respond. Webstar refused to deliver the computer to Northco, claiming that the purchase order did not satisfy the UCC Statute of Frauds because it was not signed by Webstar. Northco sells computers to the general public and Webstar is a computer wholesaler. Under the UCC Sales Article, Webstar's position is a) Incorrect because it failed to object to Northco's purchase order. b) Incorrect because only the buyer in a sale-of-goods transaction must sign the contract. c) Correct because it was the party against whom enforcement of the contract is being sought. d) Correct because the purchase price of the computer exceeded $500.
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a) Incorrect because it failed to object to Northco's purchase order. The UCC provides that a confirmation satisfies the UCC Statute of Frauds, if an oral contract between merchants is confirmed in writing within a reasonable period of time, and the confirmation is signed by the party sending it and received by the other party. Both parties are bound unless the party receiving the confirmation submits a written objection within ten days of receipt. In this situation, a valid contract has been formed since Webstar did not object to Northco's purchase order. In a sale-of-goods transaction, the contract must be signed by the party to be charged to be enforceable. However, in the case of a written confirmation of an oral agreement between merchants, the confirmation need only be signed by the party sending the confirmation. The use of a signed purchase order satisfies the UCC Statute of Frauds.
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Patch, a frequent shopper at Soon-Shop Stores, received a rain check for an advertised sale item after Soon-Shop's supply of the product ran out. The rain check was in writing and stated that the item would be offered to the customer at the advertised sale price for an unspecified period of time. A Soon-Shop employee signed the rain check. When Patch returned to the store one month later to purchase the item, the store refused to honor the rain check. Under the Sales Article of the UCC, will Patch win a suit to enforce the rain check? a) No, because one month is too long a period of time for a rain check to be effective. b) No, because the rain check did not state the effective time period necessary to keep the offer open. c) Yes, because Soon-Shop is required to have sufficient supplies of the sale item to satisfy all customers. d) Yes, because the rain check met the requirements of a merchant's firm offer even though no effective time period was stated.
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d) Yes, because the rain check met the requirements of a merchant's firm offer even though no effective time period was stated. A firm offer is an offer for the sale of goods that is written and signed by a merchant (or employee of the merchant) that agrees to keep the offer open. This offer is valid without consideration for three months since no time was specified in the fact pattern. Patch will win in a suit to enforce the rain check because Patch tried to use it one month later. Answer (a) is incorrect because the UCC specifies a three-month period when no time is detailed in the firm offer. Answer (b) is incorrect because when no time is specified, the UCC gives Patch three months to accept the offer. Answer (c) is incorrect because there was no offer and acceptance when Patch first tried to purchase the advertised item.
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A sheep rancher agreed in writing to sell all the wool shorn during the shearing season to a weaver. The contract failed to establish the price and a minimum quantity of wool. After the shearing season, the rancher refused to deliver the wool. The weaver sued the rancher for breach of contract. Under the Sales Article of the UCC, will the weaver win? a) Yes, because this was an output contract. b) Yes, because both price and quantity terms were omitted. c) No, because quantity cannot be omitted for a contract to be enforceable. d) No, because the omission of price and quantity terms prevents the formation of a contract.
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a) Yes, because this was an output contract. An output contract is enforceable under the UCC even though an actual quantity is not mentioned in the contract. The output contract is supported by consideration because the seller has agreed not to sell that output to any other party. Answer (b) is incorrect because when the price is omitted, the UCC construes it as the reasonable price at the time of delivery. The quantity is construed as the output of the sheep rancher. Answer (c) is incorrect because although quantity is an important term in the contract, the UCC allows the quantity term to be defined by output. Answer (d) is incorrect because the UCC allows price terms to be based on the reasonable price and quantity terms to be defined by output.
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Under the Sales Article of the UCC, the warranty of title a) Provides that the seller cannot disclaim the warranty if the sale is made to a bona fide purchaser for value. b) Provides that the seller deliver the goods free from any lien of which the buyer lacked knowledge when the contract was made. c) Applies only if it is in writing and assigned by the seller. d) Applies only if the seller is a merchant.
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b) Provides that the seller deliver the goods free from any lien of which the buyer lacked knowledge when the contract was made. Under the warranty of title, the seller warrants good title, rightful transfer and freedom from any security interest or lien of which the buyer has no knowledge at the time of sale. Answer (a) is incorrect because the warranty of title can be disclaimed by specific language or circumstances which give the buyer reason to know s/he is receiving less than full title. Answer (c) is incorrect because the warranty does not have to be in writing. Answer (d) is incorrect because the seller does not have to be a merchant for the seller to give the warranty of title
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Under the Sales Article of the UCC, most goods sold by merchants are covered by certain warranties. An example of an express warranty would be a warranty of a) Usage of trade. b) Fitness for a particular purpose. c) Merchantability. d) Conformity of goods to sample.
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d) Conformity of goods to sample. In the Sales Article of the UCC, express warranties include warranties that the goods will conform to any description used or any sample or model shown. Answer (a) is incorrect because although usage of trade can help interpret terms used in contracts, it is not a warranty. Answers (b) and (c) are incorrect because the warranty of fitness for a particular purpose and the warranty of merchantability are both implied warranties.
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Under the Sales Article of the UCC, which of the following statements is correct regarding the warranty of merchantability arising when there has been a sale of goods by a merchant seller? a) The warranty must be in writing. b) The warranty arises when the buyer relies on the seller's skill in selecting the goods purchased. c) The warranty cannot be disclaimed. d) The warranty arises as a matter of law when the seller ordinarily sells the goods purchased.
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d) The warranty arises as a matter of law when the seller ordinarily sells the goods purchased. The implied warranty of merchantability, which guarantees that goods are fit for ordinary purposes, arises as a matter of law when the seller is a merchant who ordinarily sells the goods purchased. Answer (a) is incorrect because the warranty is implied, and therefore need not be in writing. Answer (c) is incorrect because the warranty applies unless specifically disclaimed by the merchant.
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On May 2, Handy Hardware sent Ram Industries a signed purchase order that stated, in part, as follows: Ship for May 8 delivery 300 Model A-X socket sets at current dealer price. Terms 2/10/net 30. Ram received Handy's purchase order on May 4. On May 5, Ram discovered that it had only 200 Model A-X socket sets and 100 Model W-Z socket sets in stock. Ram shipped the Model A-X and Model W-Z sets to Handy without any explanation concerning the shipment. The socket sets were received by Handy on May 8. Assuming a contract exists between Handy and Ram, which of the following implied warranties would result? I. Implied warranty of merchantability. II. Implied warranty of fitness for a particular purpose. III. Implied warranty of title. a) I only. b) III only. c) I and III only. d) I, II, and III.
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c) I and III only. The implied warranty of merchantability is always implied if the seller is a merchant with respect to the type of goods being sold. Since Ram is a merchant, this warranty would apply. Also, under the UCC, the seller warrants good title, rightful transfer, and freedom from any security interest or lien of which the buyer has no knowledge when the contract was made. This warranty of title applies unless the merchant specifically disclaims it. In this situation, both the implied warranty of merchantability and the implied warranty of title apply. The implied warranty of fitness for a particular purpose is created only when a seller has reason to know the buyer's particular purpose and knows the buyer is relying on the skill and judgment of the seller selecting the goods.
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Under the UCC Sales Article, an action for breach of the implied warranty of merchantability by a party who sustains personal injuries may be successful against the seller of the product only when a) The seller is a merchant of the product involved. b) An action based on negligence can also be successfully maintained. c) The injured party is in privity of contract with the seller. d) An action based on strict liability in tort can also be successfully maintained.
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a) The seller is a merchant of the product involved. The implied warranty of merchantability applies only when the seller is a merchant with respect to the type of goods being sold. The seller must be a merchant in order for the buyer to successfully sue under this warranty. Answer (b) is incorrect because the buyer does not have to prove negligence to be able to recover under this implied warranty. Answer (c) is incorrect because the implied warranty of merchantability extends to parties other than the purchaser even without privity of contract. Answer (d) is incorrect because an action for a breach based on the warranty of merchantability would not depend on the outcome of an action based on strict liability.
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Which of the following conditions must be met for an implied warranty of fitness for a particular purpose to arise in connection with a sale of goods? I. The warranty must be in writing. II. The seller must know that the buyer was relying on the seller in selecting the goods. a) I only. b) II only. c) Both I and II. d) Neither I nor II.
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b) II only. The implied warranty of fitness for a particular purpose is created when a seller (merchant or nonmerchant) has reason to know the buyer's particular purpose and knows the buyer is relying on the skill and judgment of the seller selecting the goods. Since the warranty of fitness for a particular purpose is an implied warranty, there is no requirement that it be made in writing.
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High sues the manufacturer, wholesaler, and retailer for bodily injuries caused by a power saw High purchased. Which of the following statements is correct under strict liability theory? a) Contributory negligence on High's part will always be a bar to recovery. b) The manufacturer will avoid liability if it can show it followed the custom of the industry. c) Privity will be a bar to recovery insofar as the wholesaler is concerned if the wholesaler did not have a reasonable opportunity to inspect. d) High may recover even if he cannot show any negligence was involved.
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d) High may recover even if he cannot show any negligence was involved. Under the theory of strict liability, the plaintiff must establish the following: (1) the seller was engaged in the business of selling the product, (2) the product was defective, (3) the defect was unreasonably dangerous to the plaintiff, and (4) the defect caused injury to the plaintiff. If the plaintiff can prove these elements, then the seller will be liable regardless of whether the seller was negligent or at fault for the defect. Thus, High can recover even if he cannot show any negligence was involved. Answer (a) is incorrect because contributory negligence is not an available defense in a strict liability case. Answer (b) is incorrect because the manufacturer's only defenses are misuse and assumption of risk by the buyer. The fact that the manufacturer followed the custom of the industry is irrelevant under strict liability. Answer (c) is incorrect because privity of contract is not a defense under strict liability since the suit is not based on contract law.
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Yancie took her bike in to Pete's Bike Sales and Repair to have it repaired. Pete said he would need to have her leave it for two days. The next day, one of Pete's employees sold Yancie's bike to Jake. Jake paid for the bike with a credit card, unaware that Pete did not own the bike. Which of the following is correct? a) Yancie can repossess the bike from Jake if she pays Jake. Yancie then recovers the price from Pete. b) Pete can repossess the bike from Jake and then return it to Yancie. c) Yancie can sue Jake for monetary damages only. d) Jake has title to the bike.
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d) Jake has title to the bike. If a person entrusts possession of goods to a merchant who normally deals in that type of goods, a good-faith purchaser obtains title to those goods. Jake purchased the bike as he was unaware that Pete did not own the bike. As a good-faith purchaser, he obtains title to the bike. Answer (a) is incorrect because Yancie cannot repossess the bike from Jake because Jake obtained good title to the bike. Yancie can, however, get the value of the bike from Pete. Answer (b) is incorrect because Jake obtains title to the bike and, thus, Pete cannot repossess it from him. Answer (c) is incorrect because Yancie can recover the value of the bike from Pete, not Jake.
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Under the UCC Sales Article, the implied warranty of merchantability a) May be disclaimed by a seller's oral statement that mentions merchantability. b) Arises only in contracts involving a merchant seller and a merchant buyer. c) Is breached if the goods are not fit for all purposes for which the buyer intends to use the goods. d) Must be part of the basis of the bargain to be binding on the seller.
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a) May be disclaimed by a seller's oral statement that mentions merchantability. The implied warranty of merchantability may be disclaimed by a seller's oral or written statement. This statement normally must contain some form of the word "merchantability" to be effective. However, goods sold "as is" or "with all faults" are an exception to that rule. Answer (b) is incorrect because the implied warranty of merchantability arises whenever the seller is a merchant with respect to the goods being sold. The status of the buyer is irrelevant. Answer (c) is incorrect because the implied warranty of merchantability guarantees that the goods are of an average fair quality and are fit for ordinary purposes. Under this warranty, the seller does not guarantee that the goods are fit for all purposes for which the buyer intends to use the goods. Answer (d) is incorrect because this warranty is always implied if the seller is a merchant. It does not have to be a part of the basis of the bargain to be binding on the seller.
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To establish a cause of action based on strict liability in tort for personal injuries that result from the use of a defective product, one of the elements the injured party must prove is that the seller a) Was aware of the defect in the product. b) Sold the product to the injured party. c) Failed to exercise due care. d) Sold the product in a defective condition.
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d) Sold the product in a defective condition. Under the theory of strict liability, the plaintiff must establish the following: (1) the seller was engaged in the business of selling the product, (2) the product was defective when sold, (3) the defect was unreasonably dangerous to the plaintiff, and (4) the defect caused injury to the plaintiff. If the plaintiff can prove these elements, then the seller will be liable regardless of whether the seller was negligent or at fault for the defect.
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Under the Sales Article of the UCC, unless a contract provides otherwise, before title to goods can pass from a seller to a buyer, the goods must be a) Tendered to the buyer. b) Identified to the contract. c) Accepted by the buyer. d) Paid for.
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b) Identified to the contract. A requirement needed for the title of goods to pass to the buyer is that the goods must have been identified to the contract. Answers (a) and (c) are incorrect because the seller can keep possession of goods and identify them to the contract and still have title pass to the buyer. Answer (d) is incorrect because title passes to the buyer based upon the terms of the agreement. Payment can take place before or after.
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Under the Sales Article of the UCC, in an FOB place of shipment contract, the risk of loss passes to the buyer when the goods a) Are identified to the contract. b) Are placed on the seller's loading dock. c) Are delivered to the carrier. d) Reach the buyer's loading dock.
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c) Are delivered to the carrier. In an FOB place of shipment contract, the buyer obtains the risk of loss once the goods are delivered to the carrier.
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On May 2, Lace Corp., an appliance wholesaler, offered to sell appliances worth $3,000 to Parco, Inc., a household appliances retailer. The offer was signed by Lace's president, and provided that it would not be withdrawn before June 1. It also included the shipping terms: "FOB Parco's warehouse." On May 29, Parco mailed an acceptance of Lace's offer. Lace received the acceptance June 2. If Lace inadvertently ships the wrong appliances to Parco and Parco rejects them two days after receipt, title to the goods will a) Pass to Parco when they are identified to the contract. b) Pass to Parco when they are shipped. c) Remain with Parco until the goods are returned to Lace. d) Revert to Lace when they are rejected by Parco.
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d) Revert to Lace when they are rejected by Parco. The title of goods generally passes to the buyer when the seller completes performance with respect to the physical delivery of the goods. Because the shipping terms of the contract are FOB Parco's warehouse, the title of goods passes to Parco on tender at the destination. This is true even if the goods are nonconforming. However, Parco's rejection of the appliances will revert the title of the goods back to Lace at the time of the rejection.
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Under the Sales Article of the UCC and the United Nations Convention for the International Sale of Goods (CISG), absent specific terms in an international sales shipment contract, when will risk of loss pass to the buyer? a) When the goods are delivered to the first carrier for transmission to the buyer. b) When the goods are tendered to the buyer. c) At the conclusion of the execution of the contract. d) At the time the goods are identified to the contract.
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a) When the goods are delivered to the first carrier for transmission to the buyer. Under the Sales Article of the Uniform Commercial Code and the United Nations Convention for the International Sale of Goods, generally the risk of loss of the goods sold will pass to the buyer when the seller delivers goods to the first carrier for transmission to the buyer. Answers (b), (c), and (d) are incorrect because these would result in risk of loss to the buyer only if the contract specifically stated so, thus changing the general rule.
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Which of the following statements applies to a sale on approval under the UCC Sales Article? a) Both the buyer and seller must be merchants. b) The buyer must be purchasing the goods for resale. c) Risk of loss for the goods passes to the buyer when the goods are accepted after the trial period. d) Title to the goods passes to the buyer on delivery of the goods to the buyer.
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c) Risk of loss for the goods passes to the buyer when the goods are accepted after the trial period. The purchase of goods on a sale on approval allows the buyer to return the goods even if they conform to the contract. Therefore, the seller retains the title and the risk of loss until the buyer accepts the goods.
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Under the Sales Article of UCC, which of the following events will result in the risk of loss passing from a merchant seller to a buyer? -Tenders of the goods at the seller's place of business -Use of the seller's truck to deliver of goods 1) Yes Yes 2) Yes No 3) No Yes 4) No No
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4) No No Risk of loss transfers from a merchant seller to a buyer upon the buyer's physical receipt of goods. Therefore, neither tender of the goods at the seller's place of business, nor use of the seller's truck to deliver the goods are events which transfer risk of loss to the buyer as the merchant seller still retains possession of the goods.
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Cey Corp. entered into a contract to sell parts to Deck, Ltd. The contract provided that the goods would be shipped "FOB Cey's warehouse." Cey shipped parts different from those specified in the contract. Deck rejected the parts. A few hours after Deck informed Cey that the parts were rejected, they were destroyed by fire in Deck's warehouse. Cey believed that the parts were conforming to the contract. Which of the following statements is correct? a) Regardless of whether the parts were conforming, Deck will bear the loss because the contract was a shipment contract. b) If the parts were nonconforming, Deck had the right to reject them, but the risk of loss remains with Deck until Cey takes possession of the parts. c) If the parts were conforming, risk of loss does not pass to Deck until a reasonable period of time after they are delivered to Deck. d) If the parts were nonconforming, Cey will bear the risk of loss, even though the contract was a shipment contract.
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d) If the parts were nonconforming, Cey will bear the risk of loss, even though the contract was a shipment contract. The UCC places risk of loss on the breaching party. Since Cey shipped nonconforming goods, it breached the contract and would have risk of loss until the nonconforming goods were accepted by the buyer or until the goods were cured by Cey. Since Deck rejected the goods and Cey did not cure the goods, risk of loss remained with Cey. Shipping terms have no bearing on risk of loss in this situation because the goods did not conform to the contract. Answer (a) is incorrect because Deck would only bear risk of loss if the goods conformed to the contract. Answer (b) is incorrect because the risk of loss was never transferred to Deck since the goods were nonconforming. Answer (c) is incorrect because if the goods were conforming, risk of loss would pass to Deck at Cey's warehouse based on the shipping terms "FOB Cey's warehouse."
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Under the Sales Article of the UCC, which of the following factors is most important in determining who bears the risk of loss in a sale of goods contract? a) The method of shipping the goods. b) The contract's shipping terms. c) Title to the goods. d) How the goods were lost.
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b) The contract's shipping terms. The parties to the contract may agree as to which party bears risk of loss. In the absence of this, under the UCC, the shipping terms determine who bears risk of loss.
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Bond purchased a painting from Wool, who is not in the business of selling art. Wool tendered delivery of the painting after receiving payment in full from Bond. Bond informed Wool that Bond would be unable to take possession of the painting until later that day. Thieves stole the painting before Bond returned. The risk of loss a) Passed to Bond at Wool's tender of delivery. b) Passed to Bond at the time the contract was formed and payment was made. c) Remained with Wool, because the parties agreed on a later time of delivery. d) Remained with Wool, because Bond had not yet received the painting.
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a) Passed to Bond at Wool's tender of delivery. In this situation, since Wool is not a merchant seller, the risk of loss passed to Bond on Wool's tender of delivery. If Wool had been a merchant seller, then the risk of loss would not have passed until the buyer received the goods. Answers (c) and (d) are incorrect because the risk of loss passed when the nonmerchant seller (Wool) tendered delivery of the painting. Answer (b) is incorrect because the risk of loss would not pass at the time the contract was formed since the seller still had possession of the painting and had not attempted to deliver it to the buyer.
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Cook Company, a common carrier trucking company, made a contract to transport some video equipment for Jackson Company. Cook is trying to limit its liability in the contract. In which of the following situations can Cook not avoid liability? I. In transit, the driver of Cook's truck damages the video equipment when the driver causes an accident. II. An unknown thief steals the video equipment while in transit. Cook committed no negligence in this theft. III. The video equipment is destroyed when a bridge under the truck collapses because of an earthquake. a) I only. b) I and II only. c) I, II, and III. d) I and III only.
answer
b) I and II only. Common carriers' liability is based on strict liability. As such, the common carrier is liable for losses to property whether or not the common carrier was negligent. Common law exceptions to strict liability include natural disasters which are responsible for damages
question
A common carrier bailee generally would avoid liability for loss of goods entrusted to its care if the goods are a) Stolen by an unknown person. b) Negligently destroyed by an employee. c) Destroyed by the derailment of the train carrying them due to railroad employee negligence. d) Improperly packed by the party shipping them.
answer
d) Improperly packed by the party shipping them. The standard of care required for a common carrier bailee is based on strict liability rather than reasonable care. Common carrier bailees, however, are not liable for acts of God, acts of the shipper, or acts of a public enemy. In this case, the improper packing was done by the party doing the shipping. Answer (a) is incorrect because acts or theft by other parties make the common carrier liable. Answer (b) is incorrect because acts such as negligence, by others, still leave the common carrier liable. Answer (c) is incorrect because acts of a railroad employee cause the common carrier to be liable.
question
McGraw purchased an antique rocking chair from Tillis by check. The check was dishonored by the bank due to insufficient funds. In the meantime, McGraw sold the rocking chair to Rio who had no knowledge that McGraw's check had been dishonored. Which of the following is correct? a) Tillis may repossess the rocking chair from Rio. b) Tillis may recover money damages from Rio. c) Tillis may recover money damages from McGraw. d) Tillis may recover damages from McGraw based on fraud.
answer
c) Tillis may recover money damages from McGraw. Since Rio was a good-faith purchaser, Rio obtains good title to the rocking chair. Therefore, the remedy that Tillis has left is to sue McGraw for money damages. There are insufficient facts to show fraud.
question
Funston, a retailer, shipped goods worth $600 to a customer by using a common carrier. The contract used by the common carrier, and agreed to by Funston, limited liability to $100 unless a higher fee is paid. Funston did not pay the higher fee. The goods were shipped FOB destination point and were destroyed in transit due to a flash flood. Which of the following is correct? a) Funston will suffer a loss of $500. b) Funston will suffer a loss of $600. c) Funston's customer will suffer a loss of $500. d) Funston's customer will suffer a loss of $600.
answer
b) Funston will suffer a loss of $600. Common carriers are not liable for losses due to causes deemed acts of God. Although a common carrier may limit its damages to a dollar amount specified in the contract, it is not liable at all in this case. Funston, not the customer, had the risk of loss due to the FOB terms.
question
Under the Sales Article of the UCC, which of the following statements regarding liquidated damages is(are) correct? I. The injured party may collect any amount of liquidated damages provided for in the contract. II. The seller may retain a deposit of up to $500 when a buyer defaults even if there is no liquidated damages provision in the contract. a) I only. b) II only. c) Both I and II. d) Neither I nor II.
answer
b) II only. Statement I is incorrect because a liquidated damages provision is enforced if it is not punitive but amounts to a reasonable estimate of what the loss will be in the event of a breach of contract. If a reasonable estimate of the loss from a breach of contract cannot be estimated with a reasonable degree of certainty, the parties can agree on an amount, but still the amount cannot be punitive. Statement II is correct because a seller is allowed to retain a deposit of up to $500 when a buyer defaults even if the parties had not agreed to a liquidated damages clause.
question
Under the Sales Article of the UCC, and unless otherwise agreed to, the seller's obligation to the buyer is to a) Deliver the goods to the buyer's place of business. b) Hold conforming goods and give the buyer whatever notification is reasonably necessary to enable the buyer to take delivery. c) Deliver all goods called for in the contract to a common carrier. d) Set aside conforming goods for inspection by the buyer before delivery.
answer
b) Hold conforming goods and give the buyer whatever notification is reasonably necessary to enable the buyer to take delivery. The seller generally discharges his obligation to the buyer by placing conforming goods at the buyer's disposition and giving the buyer reasonable notice to enable the buyer to take delivery.
question
Under the Sales Article of the UCC, which of the following rights is(are) available to a seller when a buyer materially breaches a sales contract? -Right to cancel the contract -Right to recover damages a) Yes Yes b) Yes No c) No Yes d) No No
answer
a) Yes Yes Under the Sales Article of the UCC, the seller has the following remedies against the buyer upon breach: withhold delivery of the goods; stop delivery of the carrier of the goods; resell the goods; recover compensatory and incidental damages; recover the goods from the buyer upon the buyer's insolvency; cancel the contract. Therefore, answer (a) is correct as the seller has the rights of contract cancellation and damage recovery available to him/her.
question
Under the Sales Article of the UCC, the remedies available to a seller when a buyer breaches a contract for the sale of goods may include -The right to resell goods identified to the contract -The right to stop a carrier from delivering the goods a) Yes Yes b) Yes No c) No Yes d) No No
answer
a) Yes Yes The UCC gives the seller a choice of many remedies when the buyer breaches the contract involving a sale of goods. These remedies include allowing the seller to resell the goods identified to the contract and to recover the amount that the seller receives that is less than the contract price. Also, once the buyer breaches, the seller may suspend his/her performance and may prevent the carrier from making the delivery of the goods.
question
Lazur Corp. entered into a contract with Baker Suppliers, Inc. to purchase a used word processor from Baker. Lazur is engaged in the business of selling new and used word processors to the general public. The contract required Baker to ship the goods to Lazur by common carrier pursuant to the following provision in the contract: "FOB Baker Suppliers, Inc. loading dock." Baker also represented in the contract that the word processor had been used for only ten hours by its previous owner. The contract included the provision that the word processor was being sold "as is" and this provision was in a larger and different type style than the remainder of the contract. Assume that Lazur refused to accept the word processor even though it was in all respects conforming to the contract and that the contract is otherwise silent. Under the UCC Sales Article, a) Baker can successfully sue for specific performance and make Lazur accept and pay for the word processor. b) Baker may resell the word processor to another buyer. c) Baker must sue for the difference between the market value of the word processor and the contract price plus its incidental damages. d) Baker cannot successfully sue for consequential damages unless it attempts to resell the word pro-cessor.
answer
b) Baker may resell the word processor to another buyer. A seller has the right to resell goods to another if the buyer refuses to accept the goods upon delivery. Answer (a) is incorrect because specific performance is not a remedy available to the seller. Baker cannot force Lazur to accept the word processor. Answer (c) is incorrect because Baker has a couple of additional remedies available. Baker can recover the full contract price plus incidental damages if he is unable to resell the identified goods. Alternatively, if the difference between the market value and contract price is inadequate to place Baker in as good a position as performance would have, then Baker can sue for lost profits plus incidental damages. Answer (d) is incorrect because Baker could sue for consequential damages that Lazur had reason to know Baker would incur as a result of Lazur's breach.
question
On February 15, Mazur Corp. contracted to sell 1,000 bushels of wheat to Good Bread, Inc. at $6.00 per bushel with delivery to be made on June 23. On June 1, Good advised Mazur that it would not accept or pay for the wheat. On June 2, Mazur sold the wheat to another customer at the market price of $5.00 per bushel. Mazur had advised Good that it intended to resell the wheat. Which of the following statements is correct? a) Mazur can successfully sue Good for the difference between the resale price and the contract price. b) Mazur can resell the wheat only after June 23. c) Good can retract its anticipatory breach at any time before June 23. d) Good can successfully sue Mazur for specific performance.
answer
a) Mazur can successfully sue Good for the difference between the resale price and the contract price. By advising Mazur on June 1 that it would not accept or pay for the wheat, Good has engaged in anticipatory repudiation. Anticipatory repudiation occurs when a party renounces the duty to perform the contract before the party's obligation to perform arises. Anticipatory repudiation discharges the nonrepudiating party (Mazur) from the contract and allows this party to sue for breach immediately. In this situation, Mazur could successfully sue Good for the difference between the resale price and the contract price on June 2. Answer (b) is incorrect because Mazur was discharged from the contract on June 1 and would not have to wait until after June 23 to resell the wheat. Answer (c) is incorrect because Good would only be allowed to retract its anticipatory breach if Mazur had ignored this breach and awaited performance at the appointed date. Answer (d) is incorrect because specific performance is only allowed for unique goods or for other situations in which monetary damages are not appropriate.
question
Pickens agreed to sell Crocket 100 cases of napkins with the name of Crocket's restaurant on the napkins. In the enforceable contract, it was specified that delivery will take place on April 15, 2010, which is one month after Pickens and Crocket signed the contract. Crocket wanted the napkins by April 15 because the grand opening of the restaurant was scheduled for April 17. On April 11, Pickens tells Crocket that he has too many orders and will not be able to deliver the napkins. What options does Crocket have? I. Treat it as a present breach of contract and cancel the contract. II. Wait for a reasonable time to see if Pickens will deliver. a) I only. b) II only. c) Either I or II. d) Neither I nor II.
answer
c) Either I or II. Pickens has committed an anticipatory breach of contract. Thus, Crocket, as the aggrieved party, has different options. Crocket may treat it as a present breach of contract with the remedies available for breach of contract. One of these remedies is that the aggrieved party (Crocket) may cancel the contract. Another option is that Crocket may wait for a reasonable time to see if Pickens will change his/her mind and still deliver.
question
Under the Sales Article of the UCC, which of the following rights is(are) available to the buyer when a seller commits an anticipatory breach of contract? -Demand assurance of performance -Cancel the contract -Colleget punitive damages a) Yes Yes Yes b) Yes Yes No c) Yes No Yes d) No Yes Yes
answer
b) Yes Yes No The buyer has the following remedies against the seller: upon receipt of nonconforming goods, the buyer may reject the goods, accept the goods, or accept any unit and reject the remainder; the buyer has the right to cover (purchase goods elsewhere upon the seller's breach); the buyer may recover damages (not punitive) for nondelivery of goods or repudiation of the sales contract by the seller; the buyer may recover damages (not punitive) for breach in regard to accepted goods; the buyer may recover goods identified in the contract in possession of the seller upon the seller's insolvency; the buyer may sue for specific performance when the goods are unique; the buyer has the right of replevin (form of legal action to recover specific goods from the seller which are being withheld from the buyer wrongfully); the buyer can cancel the contract; the buyer has a security interest in the goods after the seller's breach; the buyer can recover liquidated damages.
question
Larch Corp. manufactured and sold Oak a stove. The sale documents included a disclaimer of warranty for personal injury. The stove was defective. It exploded causing serious injuries to Oak's spouse. Larch was notified one week after the explosion. Under the UCC Sales Article, which of the following statements concerning Larch's liability for personal injury to Oak's spouse would be correct? a) Larch cannot be liable because of a lack of privity with Oak's spouse. b) Larch will not be liable because of a failure to give proper notice. c) Larch will be liable because the disclaimer was not a disclaimer of all liability. d) Larch will be liable because liability for personal injury cannot be disclaimed.
answer
d) Larch will be liable because liability for personal injury cannot be disclaimed. UCC Section 2-719(3) states that a limitation of damages for personal injury in the case of consumer goods is considered to be unconscionable and thus not allowed. Although limitations of damages for personal injury in the case of nonconsumer goods can be allowed, answer (d) is correct since one limits "personal injury" to the stove which was apparently being used for consumer use in this fact pattern. Answer (a) is incorrect because under the UCC, the spouse, being a member of the household expecting to use the stove, may recover for damages. Answer (b) is incorrect because Larch was notified shortly after the explosion. This notice, however, was not required. Answer (c) is incorrect because even though the disclaimer did not disclaim all liability, it did attempt to disclaim personal injury. This disclaimer for personal injuries, however, is not allowed for the reasons mentioned above. Answer (d) is chosen as being more specific than answer (c).
question
Under the Sales Article of the UCC, which of the following events will release the buyer from all its obligations under a sales contract? a) Destruction of the goods after risk of loss passed to the buyer. b) Impracticability of delivery under the terms of the contract. c) Anticipatory repudiation by the buyer that is retracted before the seller cancels the contract. d) Refusal of the seller to give written assurance of performance when reasonably demanded by the buyer.
answer
d) Refusal of the seller to give written assurance of performance when reasonably demanded by the buyer. Either party in a sales contract under the Sales Article of the UCC may demand adequate assurance of performance when reasonable grounds for insecurity exist with respect to the performance of the other party. Refusal to give written assurance will release the other party from all obligations from the sales contract. Answer (a) is incorrect because the buyer has assumed the risk of loss. Answer (b) is incorrect because a seller may substitute another reasonable delivery method if the method of delivery specified in the contract has been made impracticable. A seller may recover damages based on a buyer's repudiation of the agreement, but here the repudiation has been retracted and the obligations of buyer and seller remain intact.
question
Rowe Corp. purchased goods from Stair Co. that were shipped COD. Under the Sales Article of the UCC, which of the following rights does Rowe have? a) The right to inspect the goods before paying. b) The right to possession of the goods before paying. c) The right to reject nonconforming goods. d) The right to delay payment for a reasonable period of time.
answer
c) The right to reject nonconforming goods. The Sales Article of the UCC provides that a buyer has the right to reject goods which are not in conformity with the terms of contract between seller and buyer. The buyer also has the option to accept nonconforming goods and recover damages resulting from the nonconformity. The UCC allows the buyer to inspect the goods before payment except when they are shipped COD. When goods are shipped COD, the buyer's payment for the goods is required for delivery.
question
Which of the following provisions must be included to have an enforceable written residential lease? -A description of the leased premises -A due date for the payment of rent 1) Yes Yes 2) Yes No 3) No Yes 4) No No
answer
2) Yes No A residential lease agreement must contain the following essential elements: the parties involved, lease payment amount, lease term, and a description of the leased property. The omission of any of these terms will cause the agreement to fail for indefiniteness. The other terms of payment due date, liability insurance requirements, and responsibility for repairs are optional, but not required. They will not cause the contract to fail for indefiniteness.
question
Which of the following rights is(are) generally given to a lessee of residual property? I. A covenant of quiet enjoyment. II. An implied warranty of habitability. 1) I only. 2) II only. 3) Both I and II. 4) Neither I nor II.
answer
3) Both I and II. The lessee of residential property, although not the owner, generally has the right to possession of the property and the right to quiet enjoyment of the property. The right to quiet enjoyment means that neither the lessor nor a third party with a valid claim will evict the lessee unless the lessee has breached the lease contract. The lessee also has the implied warranty of habitability which means that s/he has the right to inhabit premises that are fit for human occupation
question
Which of the following methods of obtaining personal property will give the recipient ownership of the property? -Leased -Finding abandoned property 1) Yes Yes 2) Yes No 3) No Yes 4) No No
answer
3) No Yes A lease is not a sale and does not involve a transfer of title. A lessee may have possession and control of the property but will not have ownership. When property is abandoned, the owner relinquishes possession and title of the property. Subsequent parties who acquire abandoned property with the intent to own it acquire title.
question
Which of the following forms of tenancy will be created if a tenant stays in possession of the leased premises without the landlord's consent, after the tenant's one-year written lease expires? 1) Tenancy at will. 2) Tenancy for years. 3) Tenancy from period to period. 4) Tenancy at sufferance
answer
4) Tenancy at sufferance A tenancy at sufferance is created when a tenant stays in possession of the leased property after the expiration of the lease without the landlord's consent. A tenant at sufferance is a trespasser and the landlord may evict the tenant by instituting legal proceedings. Answer (a) is incorrect because a tenancy at will is an agreement that is not for a fixed period but is terminable at the will of the landlord or tenant. In this situation, the tenant does not have the consent of the landlord to stay in possession of the property and a tenancy at will is not created. Answer (b) is incorrect because a tenancy for years is a tenancy that has a fixed beginning and end at the time of creation of the tenancy. Answer (c) is incorrect because a tenancy from period to period would only be created if the landlord allowed the tenant to remain in possession of the property.
