Deck 16: Breach and Remedies in a Sales Transaction

Question 1

Liquidated damages are damages that the parties expressly define in the contract and agree will compensate the nonbreaching party.

Answer 1

True

Question 2

Liquidated damages clauses will not be enforced if the amount is unreasonably high and works as a penalty.

Answer 2

True

Question 3

When a buyer rejects nonconforming goods and purchases the appropriate goods from a different seller, the buyer is said to be covering.

Answer 3

True

Question 4

The opportunities to obtain relief are called remedies, judicial actions, which can be monetary or equitable, taken by courts that are intended to compensate an injured party in a civil lawsuit.

Question 5

The buyer's primary obligation to pay is triggered when the seller creates a contract for conforming goods.

Question 6

Any deviation from what was agreed upon will trigger what is known as a breach of __________.

A) promise
B) contract
C) cash flow
D) All of the choices are correct.

Question 7

The UCC is grounded in the principle that the law should encourage the completion of business transactions, it also defines what constitutes nonperformance, known as a __________, and provides relief for parties who acted in good faith and sustained damages through no fault of their own.

A) foul
B) mistake
C) breach
D) misrepresentation

Question 8

What are the opportunities to obtain relief in breach of contract situations?

A) Remedies
B) Judicial actions
C) Potential damages
D) All of the choices are correct.

Question 9

What types of remedies are available during a breach of contract?

A) money damages
B) restitutionary damages
C) equitable damages
D) All of the choices are correct.

Question 10

A __________ primary duty is to deliver conforming goods to the buyer as stipulated in the contract. Conforming goods are goods that match what was bargained for in the agreement.

A) buyer's
B) seller's
C) leaser's
D) third party's

Question 11

The seller may breach the contract if he delivers nonconforming goods or goods that are not of the type described in the __________.

A) verbal assertions
B) contract
C) past promises
D) None of the choices are correct.

Question 12

The UCC treats a __________ as a breach even if performance is due.

A) rescission
B) reformation
C) future promise
D) repudiation

Question 13

When there is a __________, the seller does not retain any ties to the goods.

A) Sale
B) Buy-in
C) Rental
D) Transfer

Question 14

Upon the buyer's breach, the __________ has various options to pursue remedies that depend to some extent on whether the buyer has rejected the goods or accepted them.

A) vendor
B) seller
C) third party
D) None of the choices are correct.

Question 15

The UCC allows the seller more than one remedy as long as each remedy is __________ to help the seller recover damages.

A) available
B) necessary
C) practical
D) All of the choices are correct.

Question 16

Southeastern Supplies (SS) is a manufacturer and supplier of office equipment. SS contracts to sell University of Florida (UF), a local university, 5,000 UF Gator mousepads at $10 per mousepad for delivery on August 1 and payment of $100,000 due upon delivery. SS gets word from a viable source that UF has had trouble paying its suppliers. SS may ask UF for:

A) immediate transfer of title
B) advanced payment
C) reasonable assurances
D) adequate written assurances

Question 17

Southeastern Supplies (SS) is a manufacturer and supplier of office equipment. SS contracts to sell University of Florida (UF), a local university, 5,000 UF Gator mousepads at $10 per mousepad for delivery on August 1 and payment of $100,000 due upon delivery. On July 19, UF receives 5,000 Florida State University mousepads. SS has the right to:

A) cancel the contract
B) cure and ship conforming goods
C) All of the choices are correct.
D) None of the choices are correct.

Question 18

Southeastern Supplies (SS) is a manufacturer and supplier of office equipment. SS contracts to sell University of Florida (UF), a local university, 5,000 UF Gator mousepads at $10 per mousepad for delivery on August 1 and payment of $100,000 due upon delivery. SS gets word from a viable source that UF has had trouble paying its suppliers. If UF repudiates before August 1 (e.g., by failing to assure SS it has the capacity to pay or by failing to pay upon delivery), UF will __________ of the contract.

A) be in nonconformity
B) be in breach
C) be in conformity
D) None of the choices are correct.

Question 19

Southeastern Supplies (SS) is a manufacturer and supplier of office equipment. SS contracts to sell University of Florida (UF), a local university, 5,000 UF Gator mousepads at $10 per mousepad for delivery on August 1 and payment of $100,000 due upon delivery. If UF breaches before accepting the goods, SS has the following options for remedies:

A) Stop or interrupt the delivery of the goods
B) Cancel the contract
C) Be discharged of its performance obligations
D) All of the choices are correct.

Question 20

Southeastern Supplies (SS) is a manufacturer and supplier of office equipment. SS contracts to sell University of Florida (UF), a local university, 5,000 UF Gator mousepads at $10 per mousepad for delivery on August 1 and payment of $100,000 due upon delivery. If UF breaches before accepting the goods, SS has the following options for remedies:

A) Resell the goods at fair market value to another party
B) Return the goods to the supplier
C) Sue for the purchase price if a resale is unsuccessful or not feasible due to the unique nature of the goods
D) Resell the goods at fair market value to another party and sue for the purchase price if a resale is unsuccessful or not feasible due to the unique nature of the goods

Question 21

A seller may also incur __________ damages at any point due to the buyer's breach. These damages include expenses related to holding goods that were wrongfully rejected, shipping, and advertising for resale.

A) punitive
B) incidental
C) archaic
D) None of the choices are correct.

Question 22

If a buyer accepts conforming goods delivered by the seller and simply does not pay for them as required in the contract, what is most likely to happen? The seller can:

A) abandon the contract
B) resale the goods
C) sue for the purchase price
D) All of the choices are correct.

Question 23

The UCC allows the buyer to pursue __________ as long as each remedy is necessary to help the buyer recover damages.

A) no remedies
B) more than one remedy
C) cancellation of the contract
D) None of the choices are correct.

Question 24

In an installment contract each lot must be accepted and paid for __________.

A) at the time of contracting
B) in full
C) separately
D) in 60 days

Question 25

A buyer can accept one installment without giving up the right to reject any additional installments that are nonconforming which is an exception to:

A) common law
B) the parol evidence rule
C) tort law
D) the perfect tender rule

Question 26

In an installment contract, the buyer may __________ an installment only if the nonconformity substantially impairs the value of that installment and the nonconformity cannot be cured.

A) reject
B) repay
C) repossess
D) None of the choices are correct.

Question 27

If a buyer subsequently accepts a nonconforming installment of the goods and does not notify the seller that she is canceling the contract, the UCC provides that the seller may assume the contract to be __________.

A) repudiated
B) revoked
C) reinstated
D) rejected

Question 28

T.T. Inc creates and sells hats. The Local Ironworkers 452 have contracted with T.T. Inc to purchase 150,000 hats for $15,000 with a delivery date of July 1. Local Ironworkers 452 paid a $5,000 deposit upon signing the contract, with the remaining $10,000 balance due when the hats are delivered. In the contract, Local Ironworkers 452 specified that "time is of the essence due to a local union campaign." What must Local Ironworkers 452 do at this time:

A) provide adequate facilities/place to receive the hats
B) allow T.T. Inc. to cure before the delivery deadline if the hats are nonconforming
C) pay the remaining $10,000 balance if the hats are conforming and delivered on or before July 1
D) All of the choices are correct.

Question 29

T.T. Inc. creates and sells hats. The Local Ironworkers 452 have contracted with T.T. Inc to purchase 150,000 hats for $15,000 with a delivery date of July 1. Local Ironworkers 452 paid a $5,000 deposit upon signing the contract, with the remaining $10,000 balance due when the hats are delivered. In the contract, Local Ironworkers 452 specified that "time is of the essence due to a local union campaign." Local Ironworkers 452 has reason to believe from another local chapter that there was an issue in the hats arriving a day after an important rally. What is/are Local Ironworkers 452's option(s)?

A) request verbal assurances
B) cancel the contract
C) request written assurances
D) None of the choices are correct.

Question 30

T.T. Inc. creates and sells hats. The Local Ironworkers 452 have contracted with T.T. Inc to purchase 150,000 hats for $15,000 with a delivery date of July 1. Local Ironworkers 452 paid a $5,000 deposit upon signing the contract, with the remaining $10,000 balance due when the hats are delivered. In the contract, Local Ironworkers 452 specified that "time is of the essence due to a local union campaign." Local Ironworkers 452 has reason to believe from another local chapter that there was an issue in the hats arriving a day after an important rally. After requesting reassurances, T.T. Inc. fails to respond within 35 days. What may happen to T.T. Inc. if they fail to deliver the hats timely?

A) the contract is repudiated
B) recovery of contractual damages
C) the contract is in breach
D) All of the choices are correct.

Question 31

The UCC provides the buyer with an option to take immediate steps by canceling the contract and purchasing substitute goods from another vendor, known as the right to __________, to continue business operations and minimize losses.

A) cover
B) create
C) cancel
D) divide

Question 32

A contractual remedy in which the court orders a party to actually perform its promise as closely as possible, because monetary damages are somehow inadequate to fix the harm is known as:

A) an express warranty
B) a temporary injunction
C) an implied warranty
D) specific performance

Question 33

A buyer may incur incidental and __________ damages at any point due to the seller's breach.

A) consequential
B) conforming
C) punitive
D) None of the choices are correct.

Question 34

__________ damages are damages that the parties expressly define in the contract and agree will compensate the nonbreaching party.

A) Partial
B) Goodwill
C) Compensatory
D) Liquidated

Question 35

The parties __________ add a liquidated damages provision to define and limit the amount of monetary damages in the event of a breach.

A) must
B) should
C) may
D) None of the choices are correct.

Question 36

Liquidated damages clauses __________ be enforced if the amount is unreasonably high and functions as a penalty.

A) may
B) will not
C) will
D) can

Question 37

Liquidated damages that are unreasonably low will not be enforced __________.

A) as a matter of law
B) as a matter of fact
C) as despicable
D) as unconscionable

Question 38

There are four critical dates that impact the rights and duties of the buyer or seller and the availability of remedies to either of them. These dates establish four general time periods that impact the duties, rights, and remedies available to the buyer or the seller. Explain in detail below what they are and what they mean.

Question 39

T.T. Inc. creates and sells hats. The Local Ironworkers 452 have contracted with T.T. Inc to purchase 150,000 hats for $15,000 with a delivery date of July 1. Local Ironworkers 452 paid a $5,000 deposit upon signing the contract, with the remaining $10,000 balance due when the hats are delivered. In the contract, Local Ironworkers 452 specified that "time is of the essence due to a local union campaign." Local Ironworkers 452 has reason to believe from another local chapter that there was an issue in the hats arriving a day after an important rally. After requesting reassurances, T.T. Inc. fails to respond within 35 days. T.T. Inc. has also not been taking recent orders in the area. What are the options available at this time to Local Ironworkers 452?