Deck 21: Performance and Breach of Sales and Lease Contracts

Question 1

If a party to a contract has reasonable grounds to believe that the other party will not perform, he or she can demand in writing assurance of performance.

Answer 1

True

Question 2

A seller who tenders nonconforming goods has reasonable grounds to believe that the buyer will accept the tender if it includes a price allowance.

Answer 2

True

Question 3

If a buyer rightfully rejects nonconforming goods, he or she can resell them and retain the proceeds, without crediting the amount to the seller.

Answer 3

False

Question 4

A buyer will be deemed to have accepted delivered goods if, after a reasonable opportunity to inspect the goods, the buyer does not reject them.

Question 5

When the time for performance under a contract expires, the right to cure also expires.

Question 6

If a seller fails to deliver conforming goods, the measure of recovery in the buyer's suit for damages is the difference between the contract price and the market price at the place of delivery at the time the buyer learns of the breach.

Question 7

Commercial impracticability arises only when the parties-at the time the contract was made-had reason to foresee a certain event that could make performance "impracticable."

Question 8

If, before the time for contract performance, one party communicates an intent not to perform, the other party can only wait to see if the repudiating party will decide to perform.

Question 9

Under a shipment contract for the sale of a certain quantity of solar panels, the seller is required to deliver conforming goods at a particular destination.

Question 10

Any use of delivered goods by the buyer-even for the limited purpose of testing them-constitutes acceptance.

Question 11

If a seller fails to deliver the goods, the buyer can purchase other goods to substitute for those due under the contract, but cannot then sue for consequential damages.

Question 12

Under the UCC, because a contract for the sale of six freezers does not designate where the goods will be delivered, the place of delivery is the buyer's place of business.

Question 13

If a breach occurs when the seller still possesses identified goods, the seller must nevertheless deliver the goods to pursue a remedy.

Question 14

If contracting parties agree that defective goods will not be rejected if the seller or lessor can repair or replace them within a reasonable period of time, the perfect tender rule does not apply.

Question 15

Tender can occur at any hour-and in any manner-such as by a phone call to the buyer, allowing "fifteen minutes to pick up the goods."

Question 16

If a buyer wrongfully refuses to accept the goods, the seller can bring an action for damages equal to the difference between the contract and market prices at the time and place of tender.

Question 17

Under the UCC, good faith can never be disclaimed.

Question 18

The obligation of commercial reasonableness underlies every sales and lease contract.

Question 19

If a buyer wrongfully refuses to pay for goods, the seller can reclaim them and resell them, without crediting the sale proceeds to the buyer.

Question 20

Under the perfect tender rule, a buyer or lessee has the right to insist on goods that conform to their contract in every detail.

Question 21

To create an express warranty, a reasonable buyer must regard a seller's representation of fact-for example, on a product label-as part of the basis of the bargain.

Question 22

An implied warranty can arise as a result of a well-recognized trade custom that a court could infer the parties intended to apply to their contract.

Question 23

A buyer can revoke his or her acceptance if, despite assurances by the seller that the goods would conform, the buyer was aware of their nonconformity before acceptance.

Question 24

When the goods delivered are not as promised, the measure of recovery in the buyer's suit for damages is the difference between the value of the goods as accepted and the value if they had been delivered as warranted.

Question 25

A buyer can revoke his or her acceptance if it was predicated on a reasonable assumption that the goods' nonconformity would be cured, and the nonconformity was not cured.

Question 26

Elegant Carpets, Inc., agrees to sell a certain quantity of carpeting to Fantastic Floors stores under a shipment contract. Elegant Carpets must

A) allow Fantastic Floors to reject the goods for any reason.
B) deliver the carpeting to a particular destination.
C) inspect the carpeting before shipping it.
D) place the carpeting into the hands of Great States Trucking, a carrier.

Question 27

An express warranty arises when a seller or lessor indicates that the goods are the "best" of the kind of goods sold.

Question 28

Business Rents LLC and Cartage Trucking Inc. enter into a contract for a lease of ten hydraulic lifts. Under the perfect tender rule, Business Rents must ship or tender lifts to Cartage that, with regard to the contract specifications, conform

A) to the best of Business Rents' ability under the circumstances.
B) reasonably.
C) in every way.
D) substantially.

Question 29

In an action based on breach of implied warranty, a buyer must show that the warranty existed and its breach proximately caused the damage sustained.

Question 30

Pine Mills Inc. agrees to sell a certain quantity of plywood to Quality Lumber Company under a destination contract. Pine Mills must

A) allow Quality Lumber to reject the plywood for any reason.
B) deliver the plywood to a particular destination.
C) inspect the plywood before tendering its delivery.
D) place the plywood into the hands of Railway Transport, a carrier.

Question 31

Nature's Eggs, Inc. agrees to supply Omelet Express with five hundred eggs. Nature's Eggs can reasonably ask Omelet Express to pick up the eggs at

A) no specific time-only a buyer can set the time.
B) any reasonable hour.
C) no time-as a seller, Nature's Eggs must deliver the goods.
D) any hour.

Question 32

The parties to a sales contract can limit or exclude consequential damages for any commercial loss-such as a business's lost profits or property damage.

Question 33

A merchant who is in the business of selling certain goods makes an implied warranty of merchantability every time she sells any type of merchandise.

Question 34

If a contract states that repair or replacement is the exclusive remedy, then it is, even if repair or replacement is not possible.

Question 35

If a creditor repossesses goods from a buyer who bought the goods knowing they were subject to a prior claim, the buyer can recover from the seller for breach of warranty.

Question 36

Fuel Connector Products, Inc., agrees to sell Go-Flo, Inc., a certain quantity of hose couplings and fittings, but the contract does not specify a place of delivery. Go-Flo is expected to pick up the goods. The place of delivery is

A) Fuel Connector's place of business.
B) Go-Flo's place of business.
C) the current location of the hose couplings and fittings.
D) a warehouse midway between the parties' places of business.

Question 37

A bar of soap is unmerchantable if stepping on it would cause its user to slip and fall.

Question 38

Express and implied warranties do not displace each other because more than one warranty can cover the same goods in the same transaction.

Question 39

Warranties of title arise automatically in most sales contracts and a thief breaches the warranty by selling stolen goods.

Question 40

A buyer is required to cover and a failure to do so will bar the buyer from using any other remedies available under the UCC.

Question 41

On July 10, Bob's Pet Supply Store orders fifty small dog collars from Canine Collars, Inc. to be delivered by July 15. On July 13, Canine Collars tenders fifty large dog collars. Bob's rejects the shipment. Canine Collars has

A) no right to cure.
B) until July 15 to cure.
C) until the end of the business day on July 13 to cure.
D) unlimited time to cure.

Question 42

Text & Talk Corporation sells phones. Under most circumstances, Text & Talk will be presumed to have warranted that its title to the goods is

A) the same as the manufacturer's.
B) none of the choices-a warranty of title is not presumed.
C) good and valid.
D) the best that money can buy.

Question 43

Fiesta LLC contracts to buy 1,000 balloons from Gas Bags Inc. for $1 per item. When the market price decreases to 50 cents per balloon, Fiesta refuses to go through with the deal. Gas Bags can recover

A) $1,500.
B) $1,000.
C) $500.
D) $0.

Question 44

Field Farm enters into a contract with Gourmet Restaurant for a sale of a certain quantity of specified vegetables. After Field ships the produce but before Gourmet receives it, the buyer declares bankruptcy. Field can stop delivery of the goods in transit

A) only if the quantity is at least 50 percent of the contract amount.
B) only if the quantity is in a single "unit."
C) only if the quantity is at least a truckload.
D) regardless of the quantity.

Question 45

Steel Buildings, Inc., agrees to sell four portable garages to Truck Service Center. Five days later, Truck Service refuses delivery and cancels the contract. Steel is entitled to

A) force Truck Service to accept the garages.
B) recover any damages from Truck Service but not resell the garages.
C) resell the garages and recover any damages from Truck Service.
D) resell the garages but not recover any damages from Truck Service.

Question 46

Chair Company contracts to deliver a dozen suites of dining room tables and chairs to Furniture Store on May 1. On April 15, Chair tells Furniture that delivery will be delayed until June 1. Furniture may

A) await performance, sue Chair, or suspend its own performance.
B) only await Chair's performance for a commercially reasonable time.
C) only sue Chair for breach of contract.
D) only suspend its own performance.

Question 47

Precise Parts, Inc., and Quality Auto stores enter into a contract for a sale of auto parts that meet certain specifications. Precise Parts ships goods that do not comply. Quality Auto

A) cannot reject the entire shipment.
B) can reject the entire shipment.
C) must accept the entire shipment.
D) must reject the entire shipment.

Question 48

River Gear Company and Scenic Trips, Inc., enter into a contract on August 1 for the sale of fifty inflatable river rafts. Scenic cancels the contract ten days later. River Gear is unable to sell the rafts to another buyer. River Gear can

A) force the buyer to accept the rafts and pay for them.
B) recover the contract price but must hold the rafts for the buyer.
C) recover the contract price and keep the rafts.
D) recover the contract price but must destroy the rafts.

Question 49

Bayou Boats, Inc., contracts for the sale of seven swamp boats to Eventide Fishing Tours. Bayou repudiates the contract. Eventide's recovery is measured at the time

A) Bayou advertised the goods.
B) Eventide ordered the goods.
C) Eventide learned of the breach.
D) Bayou knew that it would repudiate the contract.

Question 50

H2O Company contracts to sell pumps, tanks, and water storage systems to In-Flo Irrigation, Inc. Before the goods are delivered, In-Flo indicates that it will not be able to pay. H2O can

A) force In-Flo to accept and pay for the goods.
B) require In-Flo to find a buyer for the goods.
C) resell the goods and recover any damages from In-Flo.
D) do nothing.

Question 51

Pavers Inc. contracts to buy some heavy equipment from Earthmovers, Inc. Before either party performs, Earthmovers sells its assets to Excavation Corporation. On learning of the sale, Pavers is concerned about its contract with Earthmovers. Pavers should

A) demand assurances of performance from the seller.
B) consider the contract repudiated and sue the seller for breach.
C) buy the equipment from a different firm and bill the seller for the price.
D) buy the equipment from a different firm and bill Excavation for the price.

Question 52

Speedy Auto Parts orders two gross of tires from Tough Tread, Inc. Ten tires are delivered in a damaged condition. Speedy

A) cannot reject the entire shipment.
B) must pay for all of the tires at the contract price.
C) may accept the shipment with a reduction in price.
D) must reject the entire shipment.

Question 53

Refined Mills orders "Grade A" oats from Sweet Farms to grind and sell to Town Grocery. Sweet ships "Grade B" grain, which Refined accepts. To recover damages for the nonconformity, Refined must give notice of the breach within a reasonable time to

A) Sweet.
B) Town.
C) no one.
D) the appropriate state government agency.

Question 54

ABC Hardware Store orders one hundred power hand-drills from Best Tools Inc. When the hand-drills are delivered, they are all missing pieces. ABC rejects the shipment. To exercise a right to cure, Best Tools must

A) promptly notify ABC of the intent to cure.
B) pay a cure fee.
C) pick up the nonconforming tools before the end of the business day.
D) enter into a new contract with ABC.

Question 55

Minerals Ltd. contracts to provide several manufacturers with tin. When a cartel of tin-producing countries suddenly embargoes future shipments of tin to Minerals so that it cannot fulfill its contracts, the distributor

A) can substitute some other material for the tin.
B) is excused from the performance of its contracts.
C) is liable for breach of contract.
D) must obtain tin in any way to meet the needs of its customers.

Question 56

Beef Burgers, Inc. contracts to buy five hundred head of cattle from Cattle Ranch. Before the seller delivers, an outbreak of disease causes a quarantine of the ranch. In this circumstance, the perfect tender rule

A) applies to both parties.
B) no longer applies.
C) applies only to Beef Burgers.
D) applies only to Cattle Ranch.

Question 57

Loading Ramps Inc. contracts to sell sixteen loading ramps to Moving Service Inc. Loading Ramps ships the ramps, which Moving Service accepts but does not pay for. Loading Ramps can

A) sue to recover the purchase price plus incidental damages.
B) sue to recover the purchase price minus incidental damages.
C) resell the ramps to any buyer willing to repossess them from Moving Service.
D) require Moving Service to revoke its acceptance of the ramps.

Question 58

Builders Inc. and Concrete Supply Company enter into a contract for a sale of cement. Concrete delivers, but Builders does not pay. Concrete can recover as damages

A) any profit lost minus any loss avoided.
B) whatever amount Concrete wishes to claim.
C) the purchase price plus incidental damages.
D) the market price at the place at which Concrete delivered the goods.

Question 59

Rancho Stables orders ten saddles from Saddles, Inc. The sales contract states that if the tack is defective, Rancho will allow Saddles to repair or replace it instead of rejecting the shipment. When the gear arrives, it is defective. In this case, the perfect tender rule

A) does not apply.
B) applies to both parties.
C) applies only to Saddles.
D) applies only to Rancho.

Question 60

Real Stones, Inc., and Sparkling Jewelry Stores enter into a contract for a sale of gemstones. Real Stones does not deliver. Sparkling can recover as damages the difference between

A) any loss avoided and any profit gained.
B) the actual price and the hoped-for price.
C) the contract price and the market price.
D) the current prices in the contracting parties' places of business.

Question 61

Riverside Mill and Standard Contractors enter into a contract for a sale of lumber. The mill knows the purpose for which the buyer will use the goods. Under the UCC, an implied warranty of fitness of a particular purpose arises if

A) the buyer is relying on the seller to select suitable goods.
B) the buyer asks for it.
C) the seller is a merchant who deals in goods of the kind sold.
D) the seller knows that the product is fit for any purpose.

Question 62

Colby contracts in writing to sell his Dodge-brand pick-up truck to Efrem for $10,500. Colby agrees to deliver the truck on Friday, and Efrem promises to pay the $10,500 on the following Monday. On Thursday, Efrem tells Colby that he changed his mind and will not buy the truck. Over the weekend, Efrem changes his mind again and tenders $10,500 to Colby on Monday. Colby has not sold the truck to another party but refuses the tender and refuses to deliver. Efrem claims that Colby has breached their contract. Colby contends that Efrem's repudiation released him from his duty to perform under the contract. Who is correct, and why?

Question 63

Coal Mine Company buys an excavator from Dig Equipment Inc. Coal Mine is unaware that Equity Credit Company holds a lien against the excavator. If Equity repossesses the goods, Coal Mine can recover for breach of warranty from

A) Dig.
B) none of the parties.
C) the maker of the excavator.
D) Equity.

Question 64

Cruisin' Autos, Inc., sells cars to consumers. To avoid liability for oral express warranties, each sales agreement should note that a car is sold

A) as is.
B) in perfect condition.
C) subject to warranties included in the written contract only.
D) with no known defects.

Question 65

Brass Instruments, Inc., sells seventy-six trombones to Community Band. To avoid liability for most implied warranties, Brass should state in writing that the trombones are sold

A) as is.
B) by a merchant.
C) in perfect condition.
D) with no known defects.

Question 66

Ski Shop sells a pair of skis to Tami. When Tami uses the skis, they snap in two. The cause is something that Ski Shop did not know about and could not have discovered. This is a breach of

A) the implied duty of inspection.
B) the implied warranty of merchantability.
C) an express warranty.
D) none of the choices.

Question 67

Eliza buys a new motorcycle from Fast Bikes, Inc. The most important factor in determining whether an express warranty is created is whether

A) Eliza expresses to Fast Bikes what she wants warranted.
B) Eliza's desire for the cycle becomes part of her motivation to deal.
C) Fast Bikes expresses to Eliza what it expects of its customers.
D) Fast Bikes' promise becomes part of the basis of the bargain.

Question 68

Signal Sets Company contracts to deliver one hundred television sets to a new retail customer, Tuner Electronics Warehouse, on May 1, with payment to be made on delivery. Signal tenders delivery in its own truck. Tuner's manager notices that some of the cartons have scrape marks. Tuner's owner phones Signal's office and asks whether the sets might have been damaged as they were being loaded. Signal assures Tuner that the sets are in perfect condition. Tuner tenders Signal a check, which Signal refuses, claiming that the first delivery to new customers is always for cash. Tuner promises to pay the cash within two days. Signal leaves the sets with Tuner, which stores them in its facility pending its "Grand Opening Sale" on May 15. Two days later, Tuner's stocker opens some of the cartons and discovers that a number of the sets are damaged beyond ordinary repair. Signal claims Tuner has accepted the sets and is in breach by not paying on delivery. Will Signal succeed on these claims? Explain.

Question 69

Trucks & Trailers, Inc. (T&T), and United Express Service enter into a contract for a lease of trucks. T&T is a merchant who deals in goods of the kind leased. Under the UCC, an implied warranty of merchantability arises

A) automatically.
B) only if the lessee asks for it.
C) only if the lessor expresses such a warranty.
D) only in conjunction with sales, not lease, contracts.

Question 70

Home Redo, Inc., and Ivy enter into a contract for a sale of cabinets and countertops. Home Redo, a merchant who deals in goods of the kind sold, notes that its goods come with an implied warranty of merchantability. Under the UCC, this means that the goods are reasonably

A) fit for the buyer's particular purpose.
B) fit for the ordinary purpose for which such goods are used.
C) suitable for resale at an acceptable price.
D) the best quality that money can buy.

Question 71

Pipe Company includes in its contracts a provision that reads, in large red letters, "There are no warranties that extend beyond the description on the face hereof." This disclaimer negates

A) the implied warranty of fitness for a particular purpose.
B) the implied warranty of merchantability.
C) the implied warranty of title.
D) none of the choices.

Question 72

Blake, a salesperson for Custom Commercial Kitchens Inc., shows Dylan, a buyer for Eatery Inc., display items in Custom's showroom, stating that any purchased equipment will match the display. This statement is

A) an express warranty.
B) an implied warranty.
C) none of the choices.
D) puffery.