Deck 22: Performance and Breachapter of Sales and Lease Contracts

Question 1

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

Answer 1

True

Question 2

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."

Answer 2

False

Question 3

Tender can occur at any hour-for example, 2 A.M.-and in any manner-such as by a phone call to the buyer, allowing "fifteen minutes to pick up the goods."

Answer 3

False

Question 4

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 5

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 6

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

Question 7

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 8

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.

Question 9

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 10

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 11

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

Question 12

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

Question 13

Under the UCC, good faith can never be disclaimed.

Question 14

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

Question 15

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

Question 16

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 17

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 18

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

Question 19

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

Question 20

Under 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 21

In a sales contract, an agreed-on remedy is in addition to those provided in the UCC even if the parties expressly otherwise.

Question 22

Lumber Company agrees to sell a certain quantity of plywood to Metro Builders Inc. under a destination contract. Lumber must

A)allow the buyer 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 a carrier.

Question 23

To bring an action based on breach of warranty, a buyer or lessee has a certain limited period of time from the date of delivery to file suit.

Question 24

A letter of credit is independent of the underlying contract between a buyer and seller, requiring the issuer to ascertain whether the contractual conditions have been met.

Question 25

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 26

If Basic Pipe LLC and City Construction Inc. state in their contract that repair or replacement is the exclusive remedy, then it is-even if Basic is unable to repair a defect or replace a defective part.

Question 27

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

Question 28

The parties to a sales contract can vary their rights and obligations by agreement, but they cannot change the measure of damages.

Question 29

Under the United Nations Convention on Contracts for the International Sale of Goods, a buyer can avoid obligations under a contract only if the seller fails to deliver the goods.

Question 30

Under the United Nations Convention on Contracts for the International Sale of Goods, the measure of damages on a contract's breach normally includes foreseeable consequential damages.

Question 31

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 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 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 34

Fuel Connectors 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 35

Under the United Nations Convention on Contracts for the International Sale of Goods, a seller can avoid obligations under a contract only if the buyer fails to accept delivery of the goods.

Question 36

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 37

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

Question 38

Elegant Carpet Inc. agrees to sell a certain quantity of carpeting to Fabulous Floor stores under a shipment contract. Elegant must

A)allow Fabulous 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 a carrier.

Question 39

When a buyer or lessee is a consumer, any limitation of damages is per se unconscionable.

Question 40

An action for breach of contract under the UCC must be commenced within a certain period of time before the cause of action accrues.

Question 41

Builder Inc. and Concrete Supply Company enter into a contract for a sale of cement. Concrete delivers, but Builder 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 42

Real Stones Inc. and Sparkling Jewelry stores enter into a contract for a sale of gemstones. The seller fails to 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 43

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

A)demand an assurance 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 44

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 the buyer.
D)applies only to the seller.

Question 45

RV Company agrees to buy a certain quantity of vintage campers from Sales Inc. Their contract limits consequential damages for lost profits resulting from the use of the goods. This limit is not necessarily unconscionable because

A)the loss would be commercial in nature.
B)consequential damages cover only reasonable foreseeable losses.
C)lost profits are indirect losses.
D)the transaction is a sale, not a lease.

Question 46

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 47

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 48

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

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 49

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 50

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

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

Question 51

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 52

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 53

Fresh Grow Farm enters into a contract with Gourmand's Restaurant for a sale of a certain quantity of specified vegetables. After Fresh ships the produce but before Gourmand's receives it, the buyer declares bankruptcy. Fresh 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 54

Speedy Auto Parts orders two gross of tires from Tough Tread Inc. Ten of the 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 55

ABC Hardware Store orders one hundred power hand-drills from Drilling Tools Inc. When the hand-drills are delivered, they are all missing pieces. ABC rejects the shipment. To exercise a right to cure, Drilling 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 56

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 is unable to sell the rafts to another buyer. River 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 57

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 58

Loading Ramps Inc. contracts to sell sixteen loading ramps to Moving Service Inc. Loading ships the ramps, which Moving accepts but does not pay for. Loading 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.
D)require Moving to revoke its acceptance of the ramps.

Question 59

Alpha Packaging Company agrees to buy goods from Boxes Inc. Their contract limits Alpha's remedies to repair or replacement of defective parts. Alpha can pursue other remedies

A)for any breach.
B)for indirect losses that were not reasonably foreseeable.
C)if a defective part cannot be repaired or replaced.
D)under no circumstances.

Question 60

On July 10, Best Pet Supply Store orders fifty small dog collars from Collars Inc. to be delivered by July 15. On July 13, Collars delivers fifty large dog collars. Best rejects the shipment. 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 61

Snee, a consumer, agrees to buy an exercise machine from Treadmills Inc. Their contract excludes consequential damages for personal injuries resulting from the use of the device. This exclusion is

A)presumably unconscionable.
B)not unconscionable because any loss would be commercial in nature.
C)reasonably foreseeable and therefore meets its essential purpose.
D)permissible because the buyer can pursue other remedies.

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

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 64

The use of a letter of credit in a transaction for the international sale of goods greatly reduces costs in the deal because the issuer

A)must determine whether the contract conditions have been satisfied.
B)does not inquire into whether the contract conditions have been met.
C)pays only against the facts reflected in documents presented by the beneficiary.
D)has the obligation to police the underlying contract.

Question 65

Granos de Café S.A., a Columbian company, and Hot Drinks Inc., a U.S. firm, contract for a sale of coffee beans. Granos does not deliver. Under the United Nations Convention for the International Sale of Goods, Hot 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 market prices in the contracting parties' places of business.

Question 66

Merchant Mart accepts a shipment of nonconforming goods from Nabob Inc. Under the applicable statute of limitations, with respect to pursuing a remedy against the seller for the shipment, the buyer

A)must warrant that the goods will be returned.
B)is limited to a certain amount of damages.
C)is barred from seeking damages.
D)has a reasonable time to notify the seller of the breach.

Question 67

Under the United Nations Convention for the International Sale of Goods, the measure of damages for a breach of an international sales contract normally is the difference between

A)the contract price and the market price of the goods.
B)compensatory damages and foreseeable consequential damages.
C)the value of the currencies of the contracting parties' respective markets.
D)the costs of assurance and cooperation.

Question 68

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 69

Bull & Cow Corporation, a U.S. firm, and Carne Ltd., an Italian company, contract for a sale of beef. Under a letter of credit issued by Fiscal Bank to facilitate the deal, Carne promises to

A)reimburse the bank for the amount paid to the seller.
B)ascertain whether the seller delivers as contracted.
C)transmit information and expedite payment.
D)pay the seller when the bank has complied with the terms of the letter.

Question 70

Watercraft Inc., a U.S. firm, files a suit in a U.S. court against Xia Ltd., a Chinese company, seeking specific performance. Under the United Nations Convention for the International Sale of Goods, the court is most likely to grant this remedy if

A)no remedy at law is available and the goods at issue are unique.
B)specific performance is a commonly granted remedy in China.
C)the measure of damages would be undercut by currency differences.
D)the parties' deal was a simple letter-of-credit transaction.

Question 71

In a letter-of-credit transaction, Unum Inc., a U.S. firm, delivers a bill of lading to Verity Bank to prove that a contracted-for shipment was made to Wallaby Ltd., an Australian company. Verity must pay Unum

A)before policing the underlying contract.
B)after verifying the facts that the bill of lading purports to reflect.
C)against the bill of lading, without more.
D)coincident with the buyer's assurance of its receipt of the goods.

Question 72

Durable Goods Inc., a U.S. firm, and Économique S.A., a French company, contract for an international sale of goods with the use of a letter of credit issued by Finance Corporation. In this transaction, the letter protects

A)primarily the issuer.
B)both the buyer and the seller.
C)only any third parties, such as advising and paying banks.
D)chiefly the account party.