Deck 24: Remedies for Breach of Sales and Lease Contracts

Question 1

Tort law is primarily designed to vindicate social policy, while contract actions are created to enforce the intentions of the parties to the agreement.

Answer 1

True

Question 2

The term "cover" refers to buyers' or lessees' substitution of goods for those due under a sales or lease agreement.

Answer 2

True

Question 3

How are the obligations of sellers/lessors and buyers/lessees are determined?

A) The obligations of the parties are determined by the terms the parties outline in agreements, but not by custom or rules outlined by the UCC.
B) The obligations of the parties are determined by the rules outlined by the UCC, but not by terms the parties outline in agreements or by custom.
C) The obligations of the parties are determined by terms the parties outline in agreements and rules outlined by the Uniform Commercial Code, but not by custom.
D) The obligations of the parties are determined by the rules outlined by the UCC and by custom, but not by terms the parties outline in agreements.
E) The obligations of the parties are determined by the terms the parties outline in agreements, custom, and rules outlined by the UCC.

Answer 3

E

Question 4

Specific performance usually requires that the seller or lessor cover.

Question 5

The ultimate goal of contractual remedies is the possibility or probability that a system providing compensation to punish the breaching party and award punitive damages.

Question 6

To effectuate the expectations of the parties to an agreement is the ________

A) basic premise of contract law.
B) reason behind contract law, to promote commerce
C) reason behind contract law, to promote economic growth
D) reason behind contract law, to promote interstate commerce
E) reason behind contract law, to encourage a free-market society and greater financial security for the parties

Question 7

The UCC is new legal principles established by Congress and does not include common law.

Question 8

In the text case, Detroit Radiant Products Company v. BSH Home Appliances Corporation, the plaintiff, a seller of gas-fired infrared heaters, sought to recover lost profits based on the defendant's breach of contract. Which of the following was the result on appeal?

A) The court awarded the plaintiff lost profits based on the fact that lost profits are the default measure of damages under Article 2 of the UCC.
B) The court awarded the plaintiff the difference between the contract price less the market price plus incidental damages based on the fact that such damages were the default measure of damages under Article 2 of the UCC.
C) The court awarded the plaintiff lost profits in addition to the difference between the contract price less the market price plus incidental damages based on the fact that all such damages were the default measure of damages under Article 2 of the UCC.
D) The court awarded the plaintiff the value of the unsellable inventory it had due to the defendant's breach and also lost profits because the default measure (the difference between the contract price less the market price plus incidental damages) did not make the plaintiff whole.
E) The court awarded the plaintiff lost profits and also the value of the unsellable inventory it had due to the defendant's breach because the default measure (lost profits) did not make the plaintiff whole.

Question 9

If the seller or lessor has delivered goods to a carrier or bailee, but the carrier or bailee has not yet turned the goods over to the buyer, the goods are said to be "in transit."

Question 10

A buyer can never revoke acceptance of nonconforming goods.

Question 11

Which statement is true regarding the availability of liquidated damages in China?

A) Liquidated damages are not available in China.
B) Through judicial mandate, China adopted the U.S. standard for the award of liquidated damages.
C) Liquidated damages are available under the People's Republic of China Contract Law legislation, but only in amounts of up to 20% of the actual damages incurred by the breaching party.
D) Liquidated damages are available under the People's Republic of China Contract Law legislation, but Chinese judicial interpretation of the law limits liquidated damages to no more than 10 percent above the actual damages incurred by the nonbreaching party.
E) Liquidated damages are available under the People's Republic of China Contract Law legislation, but Chinese judicial interpretation of the law limits liquidated damages to no more than 30 percent above the actual damages incurred by the nonbreaching party.

Question 12

A buyer may seek damages even if the buyer has accepted nonconforming goods.

Question 13

If the buyer is in breach, the UCC does not allow a seller to cancel a contract.

Question 14

The ruling in the text case, Hill v. Gateway, stated that in order for a contract to be effective, it must be verbally read to any consumer purchasing a computer over the telephone.

Question 15

The UCC outlaws a statute of limitations for bringing a lawsuit arising under a breach of contract for a sale of goods.

Question 16

Cancelling a contract is a remedy of first resort from the UCC's perspective.

Question 17

A seller or lessor is allowed to sell goods to another buyer when the original buyer is in breach but has to wait sixty days before they can do so.

Question 18

The UCC give buyers and lessees the ability to ________?

A) keep the proceeds as the benefit of the bargain, but cannot cancel the contract.
B) cancel the contract and to seek remedies that give them the benefit of the bargain.
C) rescind the contract and seek punitive damages.
D) refuse the goods immediately and sue for punitive damages.
E) receive the benefit of the bargain plus 25% of the expected profits.

Question 19

If the seller cancels a contract if a buyer is in breach, the seller cannot pursue remedies available under the UCC.

Question 20

Liquidated damages are identified before a contract breach occurs.

Question 21

How does the basic premise of contract law differ from tort law?

A) Contract actions are intended to allow the government to impose penalties for failure to follow contracts; tort law is intended to allow private individuals to impose penalties on each other for failure to fulfill a bargain.
B) Tort actions are intended to allow the government to impose penalties; contract law is intended to allow private individuals to impose penalties on each other for failure to fulfill a bargain.
C) Contract actions are created to enforce the intentions of parties to an agreement; tort law is primarily designed to vindicate social policy
D) Tort actions are created to enforce the intentions of parties to an agreement; contract law is primarily designed to vindicate social policy
E) Tort law and contract law have the same basic premise

Question 22

Henry and Xavier are merchants under the UCC and are determining what should be included in their liquidated damages clauses. Xavier wants to include punitive damages as part of their contract. What is the UCC rule regarding punitive damages?

A) That the nonbreaching seller may claim against a breaching buyer who is guilty of malice 20 percent of the purchase price or $500, whichever is less, as punitive damages.
B) That the nonbreaching seller may claim against a breaching buyer who is guilty of malice 20 percent of the purchase price or $500, whichever is more, as punitive damages.
C) That the nonbreaching seller may claim against a breaching buyer who is guilty of malice 30 percent of the purchase price or $1,000, whichever is less, as punitive damages.
D) That the nonbreaching seller may claim against a breaching buyer who is guilty of malice 30 percent of the purchase price or $1,000, whichever is more, as punitive damages.
E) The UCC does not address punitive damages, other than voiding liquidated damages that are punitive in nature.

Question 23

Fred's Fireplaces enters into a contract with Miguel's Patio Supply in which Miguel's agrees to purchase 20 fireplaces. Miguel fails to pay and Fred's Fireplaces sells the fireplaces to Phillips Outdoor Store instead. However, Phillips Outdoor Store pays $500 less than Miguel had agreed to pay. What rights does Fred have?

A) None because he chose to sell the goods.
B) None because he did not notify Miguel before selling the fireplaces to someone else.
C) None because Miguel did not agree to allow him to sell the fireplaces to Phillip.
D) He can sue Miguel for the entire amount Miguel was supposed to pay for the fireplaces.
E) He can sue Miguel for $500, the difference between the resale price and the contract price.

Question 24

What if a liquidated damage clause is punitive in nature?

A) The UCC allows punitive liquidated damage clauses but common law does not.
B) The UCC allows punitive liquidated damages as long as the parties negotiated in good faith to include a liquidated damages clause.
C) The UCC allows punitive liquidated damages only in contracts for sale, but not lease contracts.
D) The UCC allows punitive liquidated damages if there were lost profits.
E) Courts will not enforce the liquidated damage clause if it is punitive in nature.

Question 25

What statute of limitations applies to claims under the UCC seeking damages for personal injury sustained as a result of a breach of warranty?

A) The four-year statute of limitations under the UCC
B) The two-year statute of limitations under the UCC
C) The three year statute of limitations under tort law
D) Either the tort or UCC statute of limitations, whichever is longer
E) There is no statute of limitations for these cases

Question 26

The ________ requires a suit be brought within four years from the date of the cause of action.

A) parol evidence rule
B) common law
C) federal law
D) limitations of law
E) statute of limitations

Question 27

Yolinda breaches her contract with Phillip. Phillip sues Yolinda. What is the ultimate goal of contractual remedies?

A) To deter parties from breaching their contracts.
B) To compensate breach victims.
C) To enforce social order.
D) To punish parties from breaching contracts
E) To provide a private system of justice

Question 28

Which of the following statements is true concerning cancellation of a contract?

A) Cancelling a contract is a seller's only remedy if a buyer or lessee is in breach .
B) Canceling a contract is a remedy of last resort from the UCC's perspective.
C) If a seller cancels a contract, he may not pursue any other remedies available under the UCC.
D) Cancelling a contract is never permitted under the UCC.
E) No notice is required to cancel a contract.

Question 29

Fred's Fireplaces enters into a contract with Miguel's Patio Supply in which Miguel's agrees to purchase 20 fireplaces. Miguel fails to pay and Fred's Fireplaces cancels the contract. Fred's does not notify Miguel. Did Fred's Fireplaces act appropriately?

A) No because cancelling a contract is never appropriate.
B) No because filing a lawsuit is required before cancelling a contract.
C) No because a contract can be cancelled in the event of breach only if the contract is for at least 50 units of goods.
D) No, because the UCC requires sellers to notify buyers of a cancellation if the seller cancels the contract due to a breach.
E) Yes, because a seller always has a right to cancel a contract before performance is due.

Question 30

Which of the following is true of remedies provided by the UCC?

A) The remedies must be narrowly administered to ensure justice.
B) The remedies must be liberally administered to put the aggrieved party in as good a position as if the other party had fully performed
C) The remedies must be liberally administered to put the aggrieved party in a better position than he would have been in had performance occurred.
D) The remedies must be liberally administered to punish the wrongdoing party
E) The UCC does not provide remedies

Question 31

If the buyer fails to pay according to the terms of the agreement, which of the following remedies is available to the seller without court action?

A) Sellers may cancel the contract as their only remedy.
B) sellers may cancel the contract and withhold delivery of goods; but sellers may not sell undelivered goods to another buyer or sue for damages.
C) Sellers may cancel the contract; but sellers may not withhold delivery of goods or sell undelivered goods to another buyer.
D) Sellers withhold delivery of goods or sell undelivered goods to another buyer but cannot cancel the contract.
E) Sellers may cancel the contract, withhold delivery of goods, or sell the goods to another buyer.

Question 32

Greenlee and Monica identify in their contract an amount of damages that will be paid before a breach occurs. These types of damages are known as ________.

A) Nominal damages
B) Compensatory damages
C) Reliance damages
D) Liquidated damages
E) Consequential damages

Question 33

If the parties do not agree to liquidated damages, does the UCC provide for them?

A) Yes, the non-breaching seller may claim against a breaching buyer 20 percent of the purchase price or $500, whichever is less, as liquidated damages.
B) Yes, the non-breaching seller may claim against a breaching buyer 20 percent of the purchase price or $500, whichever is more, as liquidated damages.
C) Yes, the non-breaching seller may claim against a breaching buyer 30 percent of the purchase price or $1,000, whichever is less, as liquidated damages.
D) Yes, the non-breaching seller may claim against a breaching buyer 30 percent of the purchase price or $1,000, whichever is more, as liquidated damages.
E) No, because liquidated damages are unavailable under the UCC unless the parties have expressly agreed to them.

Question 34

Fred's Fireplaces enters into a contract with Miguel's Patio Supply in which Miguel's agrees to purchase 20 fireplaces. Miguel fails to pay and Fred's Fireplaces withholds delivery. Did Fred's Fireplaces act appropriately?

A) No because withholding delivery is never appropriate.
B) No because filing a lawsuit is required before withholding delivery.
C) No because withholding delivery is appropriate in the event of breach only if the contract is for at least 50 units of goods.
D) No, because the UCC requires sellers to notify buyers within 100 days of withholding an order in the event of a breach.
E) Yes, because the UCC allows a seller to withhold delivery when a buyer breaches the contract.

Question 35

Patty, a buyer, breaches her contract with Joanna. Joanna resells the goods to Shaun after Patty breaches the contract, who gets to keep any profits made on the resale?

A) Joanna.
B) Patty.
C) Joanna and Patty split the profits.
D) It depends on the contract.
E) The UCC prohibits making profits on resold goods after a breach of contract.

Question 36

Fred's Fireplaces enters into a contract with Miguel's Patio Supply in which Miguel's agrees to purchase 20 fireplaces. Miguel fails to pay and Fred's Fireplaces sells the fireplaces to Phillips Outdoor Store instead. Did Fred's Fireplaces act appropriately?

A) No because selling goods to another buyer is never appropriate.
B) No because filing a lawsuit is required before selling goods to another buyer.
C) No because selling goods to another buyer is appropriate in the event of breach only if the contract is for at least 50 units of goods.
D) No, because the UCC requires sellers to notify buyers within 100 days of selling goods to another buyer in the event of a breach.
E) Yes, because the UCC allows a seller to sell the goods to someone else if the buyer breaches the contract before the seller has delivered the goods.

Question 37

When may a lessor seek incidental damages in the event of a breach by a lessee of goods?

A) A lessor may seek incidental damages only if the lessee agreed in writing to pay them.
B) A lessor may seek incidental damages only if the lessee agreed orally or in writing to pay them.
C) A lessor may seek incidental damages only if the damages are in an amount over $500.
D) A lessor may seek incidental damages only if the damages are in an amount over $1,000.
E) A lessor may seek incidental damages whenever the lease is breached.

Question 38

Which statement is true regarding a liquidated damages clause?

A) A provision for liquidated damages is illegal.
B) A provision for liquidated damages is void because of public policy.
C) A provision for liquidated damages is voidable because of public policy.
D) A provision for liquidated damages is enforceable so long as it is not punitive in nature.
E) A provision for liquidated damages will be enforced regardless of whether it is punitive in nature.

Question 39

A seller who sells goods to another buyer after the original buyer breaches the contract, may receive which of the following damages?

A) The difference between the resale price and the contract price, plus incidental damages and minus expenses saved.
B) The difference between the resale price and the contract price only.
C) The difference between the resale price and the contract price minus expenses without any allowance for incidental damages.
D) The difference between the resale price and the contract price, plus incidental damages, with no deduction for expenses saved.
E) Damages are not available because a seller has no rights to resell goods when the original buyer is in breach. The remedy is a suit for damages.

Question 40

What was the result in the text case involving the sale of a specialty metal, Almetals Inc., v. Wickeder Westfalenstahl, GMBH, the plaintiff sued the defendant for breach of contract seeking specific performance.

A) Specific performance was unavailable because real estate was not involved.
B) Specific performance was unavailable because a foreign defendant was involved and jurisdiction for specific performance was, therefore, lacking.
C) Specific performance was unavailable because the goods at issue were scarce.
D) Specific performance was unavailable because a requirements contract was involved.
E) Specific performance was the appropriate remedy because the goods at issue were unique with no known alternative sources of supply.

Question 41

________ refers to the right of a buyer and lessee to substitute goods for those due under a sales or lease agreement.

A) Switch
B) Reallocate
C) Shift
D) Cover
E) Realign

Question 42

Miguel, a buyer becomes insolvent and has breached his contract by not paying for goods that are in transit. Which of the following statements is true?

A) The carrier may stop delivery on the entire shipment.
B) The carrier may stop delivery only if the quantity shipped is a large shipment such as a carload or truckload and can easily be stopped.
C) The carrier may stop delivery only if a signed writing exists by which the buyer agreed to the remedy of stopping shipment in a liquidated damages clause.
D) The carrier may stop delivery only if ordered to do so by the bankruptcy judge.
E) The carrier may not stop delivery under any circumstances.

Question 43

When a lessee in possession of the goods is in breach, when may a lessor reclaim goods according to UCC 2A-525(2)?

A) When the lessor discovers the lessee is insolvent
B) When the lessee fails to make payments according to the lease terms
C) When the lessee has received at least 10 days prior notification of reclamation
D) When the lessor discovers a significant reduction in the lessee's credit score
E) When the lessor can establish a valid contract for actual purchase of the goods

Question 44

Which of the following statements is true regarding revocation of accepted nonconforming goods?

A) Once goods have been accepted, they may not be rejected.
B) A buyer has an absolute right within 10 days after delivery in which to revoke acceptance of nonconforming goods.
C) A buyer has an absolute right within 48 hours after delivery in which to revoke acceptance of nonconforming goods.
D) A buyer has an absolute right within 30 days after delivery in which to revoke acceptance of nonconforming goods.
E) While there is no set time limit, the UCC sometimes allows a buyer to revoke acceptance of nonconforming goods.

Question 45

Assuming proper proof, which of the following represents damages a buyer or lessee may recover in the event of a breach?

A) Incidental damages but not consequential damages or remedial damages
B) Consequential damages but not incidental damages or remedial damages
C) Remedial damages but not consequential damages or incidental damages
D) Incidental damages and consequential damages, but not remedial damages
E) Incidental damages, consequential damages, and remedial damages

Question 46

Which of the following is NOT something the buyer must do in obtaining cover?

A) Demonstrate good faith in obtaining the substitute goods.
B) Pay a reasonable amount for the substitute goods
C) Ensure the goods are identical to the original goods
D) Act without unreasonable delay in purchasing the substitute goods
E) Purchase goods that are reasonable substitutes

Question 47

________ include lost profits so long as those damages are not too speculative in nature.

A) Punitive damages
B) Nominal damages
C) Remedial damages
D) Consequential damages
E) Compensatory damages

Question 48

The UCC allows for buyers and lessees to recover goods identified in the contract if the seller or lessor becomes insolvent within ________ after receiving the first payment due under the agreement.

A) 7 days
B) 15 days
C) 30 days
D) 10 days
E) 60 days

Question 49

Which of the following may a buyer/lessee do if the seller/lessor delivers nonconforming goods?

A) Reject the goods and obtain cover only
B) Obtain cover only
C) Reject the goods and cancel the contract only
D) Reject the goods, and then obtain cover or cancel the contract
E) Reject the goods and obtain cover, but the buyer may not cancel the contract

Question 50

Carolyn, a lessee in possession of a leased piece of equipment, fails to make payments on the equipment as required. What remedy does Raul, the lessor, have under the UCC 2A-525(2)?

A) The right to put a lien on the lessee.
B) The right to sue the lessee under federal law.
C) The right to bring a tort action
D) The right to reclaim the goods
E) No remedy is provided and common law contract remedies will suffice.

Question 51

________ usually requires that the seller or lessor deliver the particular goods identified in the contract.

A) Nominal performance
B) Absolute performance
C) Specific performance
D) Diligent performance
E) True performance

Question 52

Fred's Fireplaces enters into a contract with Miguel's Patio Supply in which Miguel's agrees to purchase 20 fireplaces. This is considered a small order. Miguel, who is still running a business and who is still solvent, fails to pay for the fireplaces. Fred's Fireplaces stops delivery as the fireplaces are on the way to Miguel. Did Fred's Fireplaces act appropriately?

A) No because stopping delivery of goods in transit is permitted when the buyer is solvent only if the quantity shipped is large.
B) No because filing a lawsuit is required before stopping delivery of goods in transit.
C) No because stopping delivery of goods in transit is appropriate in the event of breach only if the contract is for at least 50 units of goods.
D) No, because the UCC requires sellers to notify buyers within 100 days of stopping delivery of goods in transit in the event of a breach.
E) Yes, a seller may stop delivery any time.

Question 53

Fred's Fireplaces enters into a contract with Miguel's Patio Supply in which Miguel's agrees to purchase 20 fireplaces. The fireplaces are delivered, but a day after delivery, Fred discovers Miguel is insolvent. Fred reclaims the fireplaces. Did Fred's Fireplaces act appropriately?

A) No because reclaiming the goods is permitted only if the quantity shipped is a large shipment.
B) No because filing a lawsuit is required before reclaiming the goods.
C) No because reclaiming the goods is appropriate in the event of breach only if the contract is for at least 50 units of goods.
D) No, because the UCC requires sellers to notify buyers within 100 days of reclaiming the goods in the event of a breach.
E) Yes, the UCC permits a seller to reclaim goods from an insolvent buyer.

Question 54

Abel is a seller of rare sports cards. Yolanda asks Abel to find her a Babe Ruth rookie baseball card and agrees to pay him a $1,000 finders fee above the price of the card. Abel finds a card that Josef has for sale and enters into a contract with Josef to buy the card. Josef is supposed to send it by Tuesday because Yolanda is leaving the country on Thursday. Josef never sends the card, and Yolanda tells Abel to forget it because she is leaving the country. If Abel sues Josef for $1,000 in damages, is he likely to win?

A) No because Josef did not breach the contract.
B) No because the damages are too speculative.
C) No because you can never obtain compensation for lost profits in contract cases
D) Yes, because the $1,000 is an appropriate amount of punitive damages.
E) Yes, because the $1,000 is a consequential damage of breach.

Question 55

Which circumstance may a seller reclaim goods when a buyer is in possession of goods and is in breach under UCC 2-702(2),

A) A seller cannot reclaim goods ever.
B) As soon as the buyer is late on a payment.
C) Within 48 hours of the buyer being late on their payment.
D) When the buyer is at least 10 days late on a payment
E) When the seller discovers the buyer is insolvent.

Question 56

Fred's Fireplaces enters into a contract with Miguel's Patio Supply in which Miguel's agrees to purchase 20 fireplaces. Fred does not deliver the fireplaces,so Miguel purchases fireplace from Joe's Chimney's instead. Joe's charges significantly above market rate, but Miguel pays anyway because Miguel intends to sue Fred for the difference. Did Miguel act appropriately?

A) No because obtaining substitute goods is permitted only if the quantity shipped is large.
B) No because Miguel did not act in good faith and he overpaid for the goods.
C) No because obtaining substitute goods in the event of breach is appropriate only if the contract is for at least 50 units of goods.
D) No, because the UCC requires buyers to notify sellers before obtaining substitute goods.
E) Yes, because a buyer can always cover, even at an unreasonable price.

Question 57

Fred's Fireplaces enters into a contract with Miguel's Patio Supply in which Miguel's agrees to purchase 20 fireplaces. Miguel fails to pay and Fred's Fireplaces, upon discovering that Miguel is insolvent, stops delivery as the fireplaces are on the way to Miguel. Did Fred's Fireplaces act appropriately?

A) No because stopping delivery of goods in transit is never appropriate .
B) No because filing a lawsuit is required before stopping delivery of goods in transit.
C) No because stopping delivery of goods in transit is appropriate in the event of breach only if the contract is for at least 50 units of goods.
D) No, because the UCC requires sellers to notify buyers within 100 days of stopping delivery of goods in transit in the event of a breach.
E) Yes, because the UCC allows a seller to stop delivery of goods that are in transit.

Question 58

What is the preferred remedy for non-breaching buyers or lessees under the UCC?

A) Cover
B) Mutual breach
C) Rescission
D) Repudiation
E) Tort litigation

Question 59

Henrietta is a solvent buyer but breaches her contract by not paying for goods that are in transit. At this point, which of the following is true?

A) The carrier may stop delivery on the entire shipment but must notify the seller.
B) The carrier may stop delivery only if the quantity shipped is a large shipment such as a carload or truckload.
C) The carrier may stop delivery only if a signed writing exists by which the buyer agreed to the remedy of stopping shipment.
D) The carrier may stop delivery only if ordered to do so by a judge.
E) The carrier may not stop delivery under any circumstances at all.

Question 60

When does the UCC allow buyers and lessees to seek the remedy of specific performance?

A) The UCC only allows buyers and lessees to seek the remedy of specific performance when goods are unique.
B) The UCC only allows buyers and lessees to seek the remedy of specific performance when a remedy at law is inadequate.
C) The UCC only allows buyers and lessees to seek the remedy of specific performance when goods are worth more than $500.
D) The UCC allows buyers and lessees to seek the remedy of specific performance when goods are unique, when a remedy at law is inadequate, or when goods are worth more than $500.
E) The UCC allows buyers and lessees to seek the remedy of specific performance when goods are unique or when a remedy at law is inadequate.

Question 61

[Missed Payments] Blake, who loved water sports and relaxing in hot tubs, purchased a hot tub on an installment plan and was to pay the seller monthly. Her last payment was made on January 2, 2011. After several failed attempts at collection, the seller brought a lawsuit against Blake for sums remaining on the account on January 3, 2016. Blake defended on the basis that the statute of limitations had expired on the claim. The seller argued, however, that adequate time remained because the UCC applies a flexible statute of limitations; and, at any rate, sellers have at least five years in which to sue. Blake also arranged to purchase a personal watercraft. According to the terms of his contract with the seller, Blake was to pay an initial deposit within 10 days of the sale, at which point she could take possession of the watercraft and make monthly payments thereafter. A couple of days after purchasing the personal watercraft, Blake realized that a personal watercraft would not allow her to invite all her friends on lake trips and purchased a pontoon boat instead. Because the seller of the pontoon boat demanded cash, Blake paid the total sales price prior to delivery. Unfortunately, when the pontoon boat was delivered, Blake found that it had a less powerful motor than the seller represented. Blake notified the seller of the problem, but the seller claimed to have no obligation to remedy the problem. Although she knew that she paid too much for it, Blake decided that since lake season was underway, she would keep the pontoon boat. Because Blake paid full price for the pontoon boat, she was unable to pay within 10 days the deposit on the personal watercraft. The seller refused to deliver the watercraft, and sold it to another customer. Blake informed the seller that the refusal to deliver the watercraft was wrongful and that she was going to exercise her right to cover.
Does a buyer have a right to "cover" under the UCC?

A) The UCC does not recognize any concept called a right to "cover."
B) The UCC recognizes that sellers have a right to cover and find substitute sellers in the event of a breach of contract to fulfill their obligations.
C) The UCC recognizes the right of cover in regard to the right of buyers to cover transactions involving installment sales with financing statements.
D) The UCC recognizes the right of buyers to cover, or substitute, goods for those due under a sales agreement.
E) The UCC recognizes the right of sellers to resell goods to other buyers in order to cover contractual obligations but only after 30 days.

Question 62

In the event of equipment malfunction, what does the UCC provide in terms of a limitation on consequential damages allowing for repair, replace, or refund?

A) That consequential damages may be limited or excluded unless the limitation or exclusion benefits one party over the other.
B) That consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable.
C) That consequential damages may be limited but not excluded entirely.
D) That consequential damages may be limited or excluded entirely unless any type of breach of warranty is involved in which case consequential damages may be limited but not excluded.
E) That consequential damages may be limited or excluded entirely unless any type of breach of warranty is involved in which case consequential damages may be neither limited nor excluded.

Question 63

[Missed Payments] Blake, who loved water sports and relaxing in hot tubs, purchased a hot tub on an installment plan and was to pay the seller monthly. Her last payment was made on January 2, 2011. After several failed attempts at collection, the seller brought a lawsuit against Blake for sums remaining on the account on January 3, 2016. Blake defended on the basis that the statute of limitations had expired on the claim. The seller argued, however, that adequate time remained because the UCC applies a flexible statute of limitations; and, at any rate, sellers have at least five years in which to sue. Blake also arranged to purchase a personal watercraft. According to the terms of his contract with the seller, Blake was to pay an initial deposit within 10 days of the sale, at which point she could take possession of the watercraft and make monthly payments thereafter. A couple of days after purchasing the personal watercraft, Blake realized that a personal watercraft would not allow her to invite all her friends on lake trips and purchased a pontoon boat instead. Because the seller of the pontoon boat demanded cash, Blake paid the total sales price prior to delivery. Unfortunately, when the pontoon boat was delivered, Blake found that it had a less powerful motor than the seller represented. Blake notified the seller of the problem, but the seller claimed to have no obligation to remedy the problem. Although she knew that she paid too much for it, Blake decided that since lake season was underway, she would keep the pontoon boat. Because Blake paid full price for the pontoon boat, she was unable to pay within 10 days the deposit on the personal watercraft. The seller refused to deliver the watercraft, and sold it to another customer. Blake informed the seller that the refusal to deliver the watercraft was wrongful and that she was going to exercise her right to cover.
Which of the following is true regarding the hot tub seller's right to recover funds from Blake?

A) The seller will likely be able to proceed because the UCC has a flexible statute of limitations that takes into account whether the seller attempted to collect or lulled the plaintiff into believing collection efforts would not be made.
B) The seller will be able to proceed because the UCC statute of limitations in this case would not expire for five years once a cause of action accrued.
C) The seller will not be able to proceed because the UCC statute of limitations in this case expired three years after the cause of action accrued.
D) The seller will not be able to proceed because the UCC statute of limitations in this case expired four years after the cause of action accrued.
E) The seller will not be able to proceed because the UCC statute of limitations in this case expired two years after the cause of action accrued.

Question 64

Matt, who owned an appliance store, contracted with Stella to supply all the new equipment for Stella's new restaurant. Stella wanted all the equipment by October 15th in order to get the restaurant started in time for the holidays. Matt and Stella entered into an agreement by which Matt would pay Stella $300 per day for every day he was late in providing the appliances. Which of the following is a true statement regarding the section of the agreement involving the late charges?

A) It is known as a liquidated damages provision which will be enforced by a court so long as it is not so far out of reasonable range as to be punitive in nature.
B) It is known as a penalty provision which will be enforced by a court so long as the plaintiff can establish proof of compensatory damages in at least the amount of recovery requested.
C) It is known as a punitive damages provision which will be enforced by a court only if wrongdoing or fraud on the part of the defendant can be established.
D) It is known as a consequential damages provision which will be enforced by a court only if incidental damages can be established.
E) It is known as an invalid provision which will not be enforced.

Question 65

A non-breaching seller, Jasmin is seeking a remedy because her buyer Hussain fails to pay and pick up goods. What remedy does she have?

A) A suit for incidental damages
B) Resale
C) Liquidated damages
D) Cover
E) A suit for consequential damages

Question 66

What was the result on appeal in Figgie International Inc., v. Destileria Serralles Inc., the case in the text involving a dispute over bottle-labeling equipment that did not perform as expected and whether usage of trade limited the buyer's remedy to repair, replacement, or return?

A) The court ruled that the remedy of repair, replacement, or a refund failed of its essential purpose and that the buyer was therefore not limited to that remedy.
B) The court ruled that the remedy of repair, replacement, or a refund did not fail of its essential purpose, and the remedy was enforced.
C) The remedy of repair, replacement, or a refund was found unconscionable and not enforced.
D) The remedy of repair, replacement, or a refund was found unconscionable but enforced anyway.
E) The remedy of repair, replacement, or a refund was not enforced because usage of trade may not supplement a contract.

Question 67

Which of the following is true regarding whether usage of trade may impose a remedy in the event of a breach?

A) Usage of trade may not impose a remedy in the event of a breach.
B) Usage of trade may impose a remedy in the event of a breach but it may not impose an exclusive remedy.
C) Usage of trade may impose an exclusive remedy in the event of a breach.
D) Usage of trade may impose an exclusive remedy in the event of a breach only if both sides are represented by an attorney.
E) Usage of trade may impose an exclusive remedy in the event of a breach only if a contract signed by both parties specifically provides as such.

Question 68

When will a court refuse to uphold modifications or limitations to remedies agreed upon by the parties in a contract?

A) When the modifications or limitations seem to give one side a benefit.
B) When one party to the agreement is a corporation.
C) When neither party to the agreement is a corporation.
D) When one party was not represented by an attorney.
E) When the remedies agreed upon fail in their essential purpose.

Question 69

[Refused Furniture] Maya arranged to sell furniture from her furniture store to Luke for $3,000. Luke was required to give Maya a $500 deposit on February 1 and pay the remainder in monthly installments. Maya was to deliver the furniture by February 7. Luke did not pay Maya the deposit as promised on February 1. He asked her to wait until March 1, but she refused. She told him that the contract was canceled, and she refused to deliver the furniture at all. Due to a downturn in the economy, Maya was able to sell the furniture for only $2,500. Luke told Maya that she had no right to withhold or sell his furniture to another buyer, and that he was going to file suit. Maya also incurred $100 in additional advertising costs to advertise the furniture that Luke initially purchased. Maya saved $40 in delivery costs because she did not have to deliver the furniture to Luke and the subsequent purchaser picked up her own furniture.
Which of the following statements is true regarding whether Maya had a right to cancel the contract?

A) Luke was in breach giving Maya the right to cancel the contract.
B) Luke was only in partial breach, and Maya had no right to cancel the contract.
C) Luke was in breach, but Maya had no right to cancel the contract because Luke had the right to cover.
D) Luke was in breach, but Maya had no right to cancel the contract because a consumer transaction was involved.
E) Luke was in breach, but Maya had no right to cancel the contract because Luke was available for service of process.

Question 70

In the case that opened the chapter, Abbott Industries supplied 1.2 million tubes of bad eye medication to Altana, a customer, for resale. What did the court rule regarding the liability of Abbott Industries?

A) That Abbott industries was liable for the cost of the recall and destruction of the defective medication, for the costs of employee overtime, and for lost future sales because Altana was unable to meet its contractual obligations.
B) That Abbott industries was liable for the cost of the recall and destruction of the defective medication, for the costs of employee overtime, and for lost future sales even though Altana was able to meet its contractual obligations.
C) That Abbott industries was liable for the cost of the recall and destruction of the defective medication and for the costs of employee overtime, but not for lost future sales because Altana was able to meet its contractual obligations.
D) That Altana was only entitled to receive cover, meaning substitution for the defective medication.
E) That Altana was unable to recover anything because business people take a risk that some shipments will be bad.

Question 71

[Refused Furniture] Maya arranged to sell furniture from her furniture store to Luke for $3,000. Luke was required to give Maya a $500 deposit on February 1 and pay the remainder in monthly installments. Maya was to deliver the furniture by February 7. Luke did not pay Maya the deposit as promised on February 1. He asked her to wait until March 1, but she refused. She told him that the contract was canceled, and she refused to deliver the furniture at all. Due to a downturn in the economy, Maya was able to sell the furniture for only $2,500. Luke told Maya that she had no right to withhold or sell his furniture to another buyer, and that he was going to file suit. Maya also incurred $100 in additional advertising costs to advertise the furniture that Luke initially purchased. Maya saved $40 in delivery costs because she did not have to deliver the furniture to Luke and the subsequent purchaser picked up her own furniture.
Which of the following statements is true regarding Luke's claim that Maya had no right to sell the furniture he initially purchased?

A) Luke is correct. Maya had no right to sell the furniture, but she retained the right to sue him for any deficiency.
B) Luke is correct but only because of the special UCC exception for consumer goods.
C) Luke is incorrect. Maya had a right to resell the furniture.
D) Luke is incorrect but only if Maya can prove that she had no reason to believe that he was a credit risk prior to signing the contract of sale.
E) Luke is correct because of federal consumer protection laws.

Question 72

Greg is seeking a remedy as a buyer of a defective car that CarsGarlore sold him. What remedy does he have?

A) Lemon laws
B) Lender laws
C) Clunker laws
D) Roadside laws
E) Protector laws

Question 73

[Missed Payments] Blake, who loved water sports and relaxing in hot tubs, purchased a hot tub on an installment plan and was to pay the seller monthly. Her last payment was made on January 2, 2011. After several failed attempts at collection, the seller brought a lawsuit against Blake for sums remaining on the account on January 3, 2016. Blake defended on the basis that the statute of limitations had expired on the claim. The seller argued, however, that adequate time remained because the UCC applies a flexible statute of limitations; and, at any rate, sellers have at least five years in which to sue. Blake also arranged to purchase a personal watercraft. According to the terms of his contract with the seller, Blake was to pay an initial deposit within 10 days of the sale, at which point she could take possession of the watercraft and make monthly payments thereafter. A couple of days after purchasing the personal watercraft, Blake realized that a personal watercraft would not allow her to invite all her friends on lake trips and purchased a pontoon boat instead. Because the seller of the pontoon boat demanded cash, Blake paid the total sales price prior to delivery. Unfortunately, when the pontoon boat was delivered, Blake found that it had a less powerful motor than the seller represented. Blake notified the seller of the problem, but the seller claimed to have no obligation to remedy the problem. Although she knew that she paid too much for it, Blake decided that since lake season was underway, she would keep the pontoon boat. Because Blake paid full price for the pontoon boat, she was unable to pay within 10 days the deposit on the personal watercraft. The seller refused to deliver the watercraft, and sold it to another customer. Blake informed the seller that the refusal to deliver the watercraft was wrongful and that she was going to exercise her right to cover.
Which of the following is true regarding Blake's rights, if any, as to the personal watercraft?

A) She has no right to cover although she may sue for damages because, while the UCC allows for installment sales, deposits are not required in the installment sale situation.
B) She has a right to cover only because she is a consumer, not a merchant.
C) She has a right to cover only if she pays the initial watercraft seller any amount by which the cost of the watercraft used for cover was lower than the cost of the initial watercraft.
D) She has no right to cover only because she is a consumer, not a merchant.
E) She has no right to cover, and the merchant was not required to deliver the personal watercraft.

Question 74

When buyers or lessees want to accept nonconforming goods and then seek monetary damages, which of the following is true?

A) Buyers and lessees are allowed to do so in order to receive the benefit of the bargain, but they must give the seller/lessor reasonable notice of the defect.
B) Buyers and lessees are allowed to do so in order to receive the benefit of the bargain, and there is no requirement that they give the seller/lessor prior notice of the defect.
C) Buyers may do so in order to receive the benefit of the bargain so long as reasonable notice of the defect is given, but lessees may not.
D) Lessors may do so in order to receive the benefit of the bargain so long as reasonable notice of the defect is given, but sellers may not.
E) Buyers and lessees may do so only if the seller/lessor agrees to the retention of the nonconforming goods and does not request their return.

Question 75

What does the UCC say regarding a limitation of consequential damages for injury to the person in the case of consumer goods?

A) A limitation of consequential damages for injury to the person is acceptable so long as both parties are represented by an attorney.
B) A limitation of consequential damages for injury to the person is acceptable so long as any consumer was represented by an attorney.
C) A limitation of consequential damages for injury to the person is prima facie unconscionable.
D) A limitation of consequential damages for injury to the person is analyzed in the same way as a limitation of consequential damages where the loss is commercial.
E) A limitation of consequential damages for injury to the person is acceptable so long as the injuries are not life threatening.

Question 76

What does the UCC say regarding a limitation of consequential damages for commercial losses?

A) A limitation of consequential damages for commercial losses is acceptable so long as both parties are represented by an attorney.
B) A limitation of consequential damages for commercial losses is acceptable so long as any consumer was represented by an attorney.
C) A limitation of consequential damages for commercial losses is prima facie unconscionable.
D) A limitation of consequential damages for commercial losses is analyzed in the same way as a limitation of consequential damages for personal injury.
E) A limitation of consequential damages for commercial losses is not prima facie unconscionable.

Question 77

What are the rights of the parties under the UCC to provide for remedies in addition to those provided by the UCC?

A) Parties to a commercial sales agreement may provide for remedies in addition to those provided by the UCC.
B) Parties to a commercial sales agreement may not provide for remedies in addition to those provided by the UCC.
C) Parties to a commercial sales agreement may provide for remedies in addition to those provided by the UCC only if both sides are represented by an attorney.
D) Parties to a commercial sales agreement may provide for remedies in addition to those provided by the UCC only if both parties are merchants.
E) Parties to a commercial sales agreement may provide for remedies in addition to those provided by the UCC only in transactions involving over $10,000 in value.

Question 78

[Missed Payments] Blake, who loved water sports and relaxing in hot tubs, purchased a hot tub on an installment plan and was to pay the seller monthly. Her last payment was made on January 2, 2011. After several failed attempts at collection, the seller brought a lawsuit against Blake for sums remaining on the account on January 3, 2016. Blake defended on the basis that the statute of limitations had expired on the claim. The seller argued, however, that adequate time remained because the UCC applies a flexible statute of limitations; and, at any rate, sellers have at least five years in which to sue. Blake also arranged to purchase a personal watercraft. According to the terms of his contract with the seller, Blake was to pay an initial deposit within 10 days of the sale, at which point she could take possession of the watercraft and make monthly payments thereafter. A couple of days after purchasing the personal watercraft, Blake realized that a personal watercraft would not allow her to invite all her friends on lake trips and purchased a pontoon boat instead. Because the seller of the pontoon boat demanded cash, Blake paid the total sales price prior to delivery. Unfortunately, when the pontoon boat was delivered, Blake found that it had a less powerful motor than the seller represented. Blake notified the seller of the problem, but the seller claimed to have no obligation to remedy the problem. Although she knew that she paid too much for it, Blake decided that since lake season was underway, she would keep the pontoon boat. Because Blake paid full price for the pontoon boat, she was unable to pay within 10 days the deposit on the personal watercraft. The seller refused to deliver the watercraft, and sold it to another customer. Blake informed the seller that the refusal to deliver the watercraft was wrongful and that she was going to exercise her right to cover.
Which of the following is true regarding Blake's options in regard to the pontoon boat?

A) She has no options in regard to recovery from the seller because she retained the pontoon boat knowing that the seller refused to grant relief.
B) She has only 90 days in which to return the pontoon boat and seek either specific performance or monetary damages to give her the benefit of the bargain.
C) She has only one year in which to return the pontoon boat and seek specific performance, but she cannot sue for damages.
D) She has only one year in which to return the pontoon boat and seek monetary damages to give her the benefit of the bargain, but she may not seek specific performance.
E) She may keep the pontoon boat and seek monetary damages to give her the benefit of the bargain.

Question 79

How do lemon laws in Canada compare to lemon laws in the U.S.?

A) They are generally the same as lemon laws in the U.S.
B) They allow for replacement of defective parts but do not provide for a new car unless the plaintiff agrees to pay the difference between the amount received for the used car when sold and the amount charged for the new car.
C) They guarantee a buyer of a lemon car a new car and allow for punitive damages.
D) They guarantee the buyer of a lemon a return of all consideration an allow punitive damages.
E) Canada does not have a lemon law such as we have in the U.S.

Question 80

[Refused Furniture] Maya arranged to sell furniture from her furniture store to Luke for $3,000. Luke was required to give Maya a $500 deposit on February 1 and pay the remainder in monthly installments. Maya was to deliver the furniture by February 7. Luke did not pay Maya the deposit as promised on February 1. He asked her to wait until March 1, but she refused. She told him that the contract was canceled, and she refused to deliver the furniture at all. Due to a downturn in the economy, Maya was able to sell the furniture for only $2,500. Luke told Maya that she had no right to withhold or sell his furniture to another buyer, and that he was going to file suit. Maya also incurred $100 in additional advertising costs to advertise the furniture that Luke initially purchased. Maya saved $40 in delivery costs because she did not have to deliver the furniture to Luke and the subsequent purchaser picked up her own furniture.
Which of the following statements is true regarding Luke's claim that Maya had no right to withhold his furniture?

A) Luke is correct. Maya was required to deliver the furniture, but she retained the right to sue him for any deficiency.
B) Luke is correct but only because of the special UCC exception for consumer goods.
C) Luke is incorrect. Maya had a right to withhold the furniture.
D) Luke is incorrect but only if Maya can prove that she had no reason to believe that he was a credit risk prior to signing the contract of sale.
E) Luke is correct because of federal consumer protection laws.