Deck 19: Formation and Terms of Sales Contracts

Question 1

A seller of goods can never pass "better title" to those goods than the title that she has.

Answer 1

False
Explanation: A seller can pass "better title" than he/she has in the case of a good faith purchaser.

Question 2

Parties to a sales contract should act in a commercially reasonable manner and in good faith.

Answer 2

True
Explanation: The Code requires that parties to sales contracts act in good faith and in a commercially reasonable manner.

Question 3

A department store sells a TV set to Wilson,who pays with a bad check.Wilson immediately sells the TV to Davis for $500.Davis knew nothing about how Wilson acquired the TV from the store.Davis has good title to the TV and will prevail against the store if it sues Davis for the TV or its value.

Answer 3

True
Explanation: Davis is the good faith purchaser in this case and has all rights to the TV.

Question 4

The law of sale of goods codified in the Article 2 of the UCC is modified to accommodate current practices of merchants.

Question 5

In exclusive dealing contracts under the UCC,sellers have an obligation to use their best efforts to supply the goods to the buyer.

Question 6

A bicycle manufacturer sells 100 bikes to Bill's Bike Shop.The contract says that Bill's may return any bike not sold within six months and be reimbursed for them.Bill's Bike Shop burns down one week after the delivery of the bikes,which are destroyed in the fire.Bill's bears the risk of loss for the 100 bikes.

Question 7

Article 2 of the UCC mandates that the parties to a sales contract state in specific and unambiguous language the exact terms of the contract.Otherwise,courts will declare the contract unenforceable.

Question 8

Article 2A of the UCC deals exclusively with leases of goods.

Question 9

Mei issues a purchase order to June for goods that cost $25,000.June agrees to provide the same but she does not sign the purchase order.Mei can file a suit for the breach of contract.

Question 10

When determining the risk of loss,it makes no difference whether the goods delivered by the seller conformed to the contract.

Question 11

At common law,the risk of loss for shipped goods falls upon the person or party who had "technical title" at the time the goods were damaged or destroyed.

Question 12

In mixed goods-services situations,courts determine whether the contract is for the sale of goods by determining whether the good or the service is the dominant part of the transaction.

Question 13

Lisa took her computer to ABC Computer Sales and Repair,Inc.ABC mistakenly sold her computer to Rafi.Lisa may successfully sue Rafi for return of the computer.

Question 14

Under the UCC,title passes to the buyer when the seller has physically delivered the goods.

Question 15

To qualify as a buyer in the ordinary course of business,the buyer must transact in good faith and without knowledge that the transaction may violate the ownership rights of a third party.

Question 16

Article 2 of the UCC only applies to transactions in goods.

Question 17

If the seller contracts to deliver goods to a certain destination and the contract says "Ex-ship," the seller bears the risk of loss until it delivers the goods to a shipper.

Question 18

A sale or return contract is a contract for goods that are primarily for buyer's use.

Question 19

The importance of the terms FOB and FAS in contracts for the sale of goods is that they obligate the buyer to pay immediately upon delivery of the goods.

Question 20

UCC 9-307 states that a buyer who purchases a good in a normal type transaction is a good faith purchaser and owns the good free and clear of previous security liens on goods.

Question 21

Which of the following is true of the Code's rules on title to goods?

A)Buyers may reject the goods and yet keep title to them.
B)Sellers are less important titleholders to the goods in a contract.
C)Parties cannot use a negotiable document of title for professional carriers.
D)Title passes to a buyer only when the seller performs his duties completely.

Question 22

If the UCC recognizes the fact that parties to sales contracts frequently omit terms from their agreements or state ambiguous terms,then the Code:

A)can fill in the blanks with reference to common trade practices.
B)has no power to fill in the blanks.
C)declares such a transaction as a void one.
D)penalizes both parties for such lacunae.

Question 23

Mayker,Inc.and Oylco contracted to have Oylco be the exclusive provider of Mayker's fuel oil for three months.The stated price was subject to increases of up to a total of 10% if the market price increased.The market price rose 25% and Mayker tripled its normal order.Oylco seeks to avoid performance.Oylco's best argument in support of its position is that:

A)There was no meeting of the minds.
B)The contract was unconscionable.
C)The quantity was not definite and certain enough.
D)Mayker ordered amounts of oil unreasonably greater than its normal requirements.

Question 24

Which of the following characterizes an output contract?

A)The buyer must accept whatever amount the seller produces,no matter how large.
B)The buyer must accept a reasonable amount from the seller,but no more.
C)The buyer must accept any amount that is reasonably proportionate to any stated estimate in the contract.
D)The buyer must accept a conscionable amount from the seller,but no more.

Question 25

If a buyer and seller of goods fail to specify in their contract when title is to pass,the UCC's "gap filler" provision provides that title will pass when:

A)the goods are sent to the buyer's home.
B)the contract is formed.
C)the seller completes his or her obligation with respect to physical delivery of the goods.
D)the buyer pays the purchase price.

Question 26

Under Article 2 of the UCC,why does it matter whether a party to a contract is a merchant?

A)It is the test for applying Article 2 of the UCC.
B)Merchants are treated differently than other parties.
C)All contracts in which one or both parties are merchants are handled under Article 2A of the UCC.
D)Article 2 does not concern itself with cases regarding the transactions of goods.

Question 27

Toby and Roy are car dealers.Toby makes a deal with Roy to sell a 1978 Buick.However,they failed to reach any agreement as to the price of the car and decided to leave the matter to be decided once Toby delivers the car.Which of the following is true about this deal?

A)According to the Code,a reasonable price will be put on delivery.
B)According to the common law,this contract is definite and legal.
C)According to the common law,Roy can sue Toby.
D)According to the Code,it is an illegal contract due to absence of intent.

Question 28

Frank,a business law professor who has never sold a car before;sells his 1995 Honda Civic to Wanda.This sale is governed by:

A)the common law of contracts.
B)Article 2 of the UCC.
C)Article 2A of the UCC.
D)section 208 of Restatement (SeconD)of Contracts.

Question 29

If a buyer rejects tender of the goods,title to those goods:

A)will automatically be revested in the seller.
B)will stay with him until he makes the payment.
C)will remain undecided until the parties reach an agreement.
D)belongs to neither of the parties.

Question 30

In a "mixed" contract for the sale of both goods and services,the court will apply the contract rules of the UCC or of the common law,depending on whether:

A)the contract price of the goods portion of the contract is $500 or more.
B)the contract is in writing.
C)the predominant purpose of the contract is goods or services.
D)the parties are both merchants.

Question 31

Which of the following is true of price terms in a contract?

A)A fixed price term is essential for a binding sales contract.
B)Price terms cannot be determined at a future date.
C)No contract is created if price terms are not agreed on.
D)A contract is void if price terms are omitted.

Question 32

Which section of the UCC defines what a merchant is?

A)2-104(1)
B)2-302
C)2-305(2)
D)2-306

Question 33

Which of the following is most likely to be considered a sale of goods to which the UCC applies?

A)A dentist places a crown over a patient's tooth.
B)A gas station sells a new battery for a car.
C)A hairstylist uses a crème rinse in styling a client's hair.
D)A spinal readjustment from a chiropractor.

Question 34

If the delivery term of the contract is ________,the place at which the goods originate,the seller is obligated to deliver to the carrier goods that conform to the contract and are properly prepared for shipment to the buyer,and the seller must make a reasonable contract for transportation of the goods on behalf of the buyer.

A)CFR
B)FOB
C)CIF
D)DAF

Question 35

Brizon,a toy company,enters into a five-year agreement with Toys Paradise (TP),a toy shoppe.The agreement states that Brizon is to provide all the toys required by the distinguished shop at a fixed rate.During the first three years of the contract,Brizon uses its excess capacity to meet-up with the anticipated requirements and delivers between 1.25-1.5 million toys to TP.However,in the fourth year of the agreement,TP wants Brizon to deliver approximately twice as many toys,so that the toys can be used at other outlets owned by TP.In such a case:

A)Brizon may be sued by TP if it does not comply.
B)Brizon need not provide the required amount of toys.
C)Brizon has to provide the required amount of toys by putting extra charges.
D)Brizon can claim that the contract was always void.

Question 36

In determining the quantity of goods to be produced or taken pursuant to an output or needs contract,the rule of ________ applies.

A)good faith
B)demand
C)supply
D)performance

Question 37

Ryan enters into a contract with Dave,the neighborhood grocer,to supply fresh vegetables daily.After four months,the grocery store expands its business considerably and attracts customers from the neighboring areas as well.As a result,Dave demands that Ryan triple his supply as he cannot keep up with the demand.Which of the following will apply in determining the amount that can be supplied in such circumstances?

A)Rule of reasonable price
B)Rule of requirements
C)Rule of needs
D)Rule of good faith

Question 38

Baker and Able signed a contract,which required Able to purchase 600 books from Baker at Baker's wholesale cost at the time of delivery.Under the circumstances,the oral agreement is:

A)unenforceable,because Able failed to give consideration,but proof of it will be otherwise admissible into evidence.
B)unenforceable,due to the statute of frauds,and proof of it will be inadmissible into evidence.
C)enforceable,but it is not a valid agreement.
D)enforceable,and proof of it will be admissible into evidence.

Question 39

Which section of the UCC will govern the supplying of a missing price in a commercial transaction?

A)2-306
B)2-305
C)2-307
D)2-401

Question 40

Which Article of the UCC specifically addresses and governs leases of goods?

A)Article 3
B)Article 2
C)Article 2A
D)Article 4

Question 41

A seller who has a ________ has the power to pass good title to a good faith purchaser for value.

A)good faith title
B)voidable title
C)lease title
D)lease deed

Question 42

Cey Corp.entered into a contract to sell parts to Deck,Ltd.The contract provided that the goods would be shipped "FOB Cey's warehouse." Cey shipped parts different from those specified in the contract.Deck rejected the parts.A few hours after Deck informed Cey that the parts were rejected,they were destroyed by fire in Deck's warehouse.Cey believed that the parts were conforming to the contract.Which of the following statements is correct?

A)Regardless of whether the parts were conforming,Deck will bear the loss because the contract was a shipment contract.
B)If the parts were nonconforming,Deck had the right to reject them,but the risk of loss remained with Deck until Cey took possession of the parts.
C)If the parts were conforming,risk of loss did not pass to Deck until a reasonable period of time after the parts were delivered to Deck.
D)If the parts were nonconforming,Cey will bear the risk of loss,even though the contract was a shipment contract.

Question 43

Which of the following terms in a contract for the sale of goods requires the seller to insure the goods?

A)FOB
B)FAS
C)CIF
D)C & F

Question 44

Joe went to a music store and misrepresented himself as James to the store attendant.He buys a plasma television set on credit,charging it to James's account.He then sells that set to Mike.Mike buys the set in good faith.Which of the following is true?

A)The music store can recover the TV from Mike.
B)James can recover the TV from Mike.
C)Mike will be held liable by the court for possessing a stolen item.
D)Mike will hold a good title;hence no harm can be caused to him.

Question 45

Pulse Corp.maintained a warehouse where it stored its manufactured goods.Pulse received an order from Star.Shortly after Pulse identified the goods to be shipped to Star and before moving them to the loading dock,a fire destroyed the warehouse and its contents.With respect to the goods,which of the following statements is correct?

A)Pulse has title but no insurable interest.
B)Star has title and an insurable interest.
C)Pulse has title and an insurable interest.
D)Star has title but no insurable interest.

Question 46

The Benson Bearing Company sells Textron,Inc.a quantity of baseball bats that were stored in an independent warehouse at the time of the sale.The contract says that Textron is to pick up the bats at the warehouse.The risk of loss passes to Textron:

A)at the time of the contract.
B)at the time it receives a negotiable warehouse receipt for the bats.
C)at the time it pays for the bats.
D)at the time it picks up the bats.

Question 47

If goods have been delivered to a buyer pursuant to a sale or return contract,the:

A)buyer may use the goods but not resell them.
B)seller is liable for the expenses incurred by the buyer in returning the goods to the seller.
C)title to the goods remains with the seller.
D)risk of loss for the goods passed to the buyer.

Question 48

Stone,a merchant seller in Seattle,contracted with Rose,a merchant buyer in Rochester,for the sale of goods to be shipped by truck.The terms of the contract were "F.O.B.Seattle." Stone delivered the goods to the carrier.After leaving Seattle,the truck containing the goods was never seen again.Stone has demanded payment for the goods,and Rose has refused.If Stone sues,the outcome will be:

A)Rose will win because Rose did not receive the goods.
B)Rose will win because under the UCC,this was a shipment contract.
C)Stone will win because Stone was not at fault in causing the loss.
D)Stone will win because under the UCC,this was a shipment contract.

Question 49

An exception to the general rule on buyer receiving better title than seller is that if goods are entrusted to a merchant who deals in goods of that kind,the merchant has:

A)the power to keep rights to the goods,even if the goods are sold to a buyer.
B)the power to transfer all rights of the entruster to a buyer in the ordinary course of business.
C)no power to sell the goods without the physical presence of the entruster.
D)the power to deprive the entruster from any benefit so caused by the transaction.

Question 50

Which section of the UCC states that title passes to the buyer when seller has completed physical delivery of the goods?

A)2-401
B)2-305
C)2-307
D)2-201

Question 51

For which of the following sale contracts does title and risk of loss remain with the seller until the buyer accepts the goods?

A)A sale on approval
B)A sale or return
C)A bulk sale
D)A sale labeled as "FAS"

Question 52

Maple Interiors,located in Boston,contracted to sell and ship sofas to Peach Furniture,located in Atlanta.The contract stated that the goods were to be shipped "F.O.B.Boston,via XYZ railroad." Maple delivered the sofas to XYZ railroad.They were shipped from Boston but never seen again.Both Peach and Maple assumed that the other party had the risk of loss,so neither had obtained insurance.Who must bear this loss?

A)Peach must bear the loss because the risk passed to it after the sofas were placed on the loading dock at Maple's warehouse.
B)Peach must bear the loss because the risk passed to it after the sofas were delivered to XYZ railroad.
C)Maple must bear the loss because the goods were never tendered to Peach.
D)Maple must bear the loss because in any sale by a merchant,risk does not pass until the actual delivery of the goods to the buyer.

Question 53

Goods are being sold by Anne in Seattle and shipped by ABC Railroad to Brian in Portland,Oregon.In this situation,the term "FOB Seattle" means that the risk of loss passes from the seller to the buyer when:

A)the goods are identified in Seattle.
B)the goods are placed at the seller's warehouse loading dock in Seattle.
C)the goods are delivered to ABC Railroad in Seattle.
D)the goods leave the city limits of Seattle.

Question 54

Which of the following is most important in determining who bears the risk of loss in a sale of goods contract?

A)The shipping terms
B)The agreement of the parties
C)One who has title to the goods
D)One who has possession of the goods

Question 55

The common law placed the risk of loss on ________ at the time of the loss.

A)the party which was the seller
B)the party which was the buyer
C)the party that had technical title
D)the party which was the carrier

Question 56

Abe took his bicycle to a bicycle shop for repair.By mistake,a sales clerk sold Abe's bike to Leon.This was a sale in the ordinary course of business;neither the clerk nor Leon was aware that the bike belonged to Abe.Can Abe recover his bike from Leon?

A)Yes,because title was never transferred to the bike shop.
B)Yes,because Abe never agreed to sell his bike.
C)No,because Abe entrusted his bike to the bike shop.
D)No,because all sales by a merchant transfer clear title to a good-faith buyer.

Question 57

Megan has purchased two tickets for a lucky draw at the local supermarket,which are with the store's cashier.Tracy,her friend,who knows about this,convinces the cashier that she is Megan and takes the tickets.She then goes and sells the tickets to Anya,who has no knowledge of the case.Which of the following statements is true?

A)Megan has the right to recover the tickets from Anya.
B)Tracy cannot be charged with fraud since she sold the tickets to Anya.
C)The cashier has the voidable title on the tickets.
D)Anya is a good faith purchaser.

Question 58

The only difference between C & F and CIF shipping contracts is:

A)C & F shipping contracts do not require the seller to insure the goods
B)CIF shipping contracts do not require the seller to insure the goods
C)CIF shipping contracts do not include the cost of shipping
D)C & F shipping contracts do not include the cost of shipping

Question 59

Sean goes to Pinnacle Corp. ,convinces the store manager that he is their loyal online customer Ryan and purchases a DVD credited to Ryan's account.He then sells the DVD to Jason for a higher price.When Ryan finds out,he wants the DVD back from Jason.Which of the following is true of the case?

A)Ryan is a good faith purchaser.
B)Pinnacle can get the DVD from Jason.
C)Sean has voidable title to the DVD.
D)Jason needs to pay Sean and Pinnacle.

Question 60

Which of the following factors is most important in deciding who bears the risk of loss between merchants when goods are destroyed during shipment?

A)The agreement of the parties
B)Whether the goods were perishable
C)Who has title at the time of the loss.
D)The terms of applicable insurance policies

Question 61

Larry agrees to sell Janet his lawnmower for $70.Janet writes Larry a check for the full amount,which bounces when Larry presents it to his bank for deposit.Which of the following statements is true?

A)Janet has a voidable title in the lawnmower.
B)Janet is a good-faith purchaser.
C)Janet has a void title in the lawnmower.
D)Janet is a buyer in the ordinary course of business.

Question 62

In Zaretsky v.William Goldberg Diamond Corp. ,the case in the text,the court held that:

A)Khan was not a merchant because he did not regularly sell diamonds or other high-end jewelry.
B)Khan was not a merchant because,although he did often sell jewelry,he never sold diamonds.
C)Khan was a merchant because of his consignment activity with WGDC.
D)Khan was a merchant because his own testimony demonstrated he regularly sold jewelry.

Question 63

In a case where a merchant mistakenly sells a good that was entrusted to it,under what theory can the entruster sue for damages?

A)Trespass to chattels
B)Conversion
C)Theft
D)Breach of contract

Question 64

In a ________ contract,the goods are delivered to the buyer primarily for the buyer's use.

A)delivery
B)sale on approval
C)sale or return
D)supply of goods

Question 65

Which of the following is not an exception to the general rule that a buyer cannot get better title to goods than his seller had?

A)A person who has a voidable title to goods can pass good title to a bona fide purchaser for value.
B)A person who buys goods that he has reason to know are stolen.
C)A person who buys goods in the regular course of a retailer's business takes free of any interests in the goods that the retailer has given to others.
D)A person who bus goods in the ordinary course of a dealer's business takes free of any claim of a person who entrusted those goods to the dealer.

Question 66

Which of the following statements about sale on approval is false?

A)The buyer's creditors cannot reach goods held on approval.
B)The return of the goods is at the seller's risk and expense.
C)Title to the goods does not pass to the buyer until the buyer accepts.
D)Any use of the goods constitutes acceptance.

Question 67

In a ________ contract,the goods are delivered to the buyer primarily for resale with the understanding that the buyer has the right to return them.

A)sales
B)buy and sell
C)sale or return
D)supply of goods

Question 68

Which section of the UCC addresses sale or return contracts and sale on approval contracts?

A)2-201
B)2-305
C)2-326
D)2-405

Question 69

Auto Mart sells new and used vehicles and finances its inventory through ABC Bank.Finn purchases a new car from Auto Mart and receives good title free and clear of ABC's security interest.Which of the following is false?

A)Finn receives this protection to promote confidence in commercial transactions.
B)ABC is more interested in the proceeds from the sale rather than the inventory.
C)Finn is liable to ABC because ABC has superior title.
D)Finn is a buyer in the ordinary course of business.

Question 70

Which of the following does the UCC define as "honesty in fact in the conduct or transaction concerned?"

A)Good faith
B)Value
C)Bona fide
D)Pure

Question 71

Which of the following refers to the transfer of ownership to tangible personal property in exchange for money,other goods,or the performance of services.

A)Bailment
B)Sale of goods
C)Lease
D)Easement

Question 72

Under the UCC,________ means that a buyer has given any consideration sufficient to support a simple contract.

A)bona fide
B)pure
C)good faith
D)value

Question 73

Which of the following is a transfer of the right to possess and use goods belonging to another?

A)Bailment
B)Lease
C)Deed
D)Easement

Question 74

In the case in the text,Janke v.Brooks,the court concluded that:

A)the UCC did not apply because the contract was primarily for services.
B)the UCC did not apply because Janke did not buy the car from Brooks.
C)the UCC did apply because the services rendered were incidental.
D)the UCC did apply because the cost of the parts was more than the services.

Question 75

The Code requires that parties to sales contracts act in good faith and:

A)put their agreement in writing.
B)as a reasonable prudent person would.
C)in a commercially reasonable manner.
D)balance the interests of each other.

Question 76

Which of the following regarding merchants and the UCC is false?

A)The UCC defines merchant on a case-by-case basis.
B)A person is a merchant if he employs an agent,even if the agent does not have special knowledge and does not regularly deal in the kind of goods being sold.
C)A person is a merchant if he regularly deals in the kind of goods being sold.
D)A person is a merchant if he purports to have special knowledge about the goods.

Question 77

When a contract contains a(n)________ clause,the courts have the right to refuse to enforce the unconscionable clause or contract.

A)arbitrary
B)unreasonable
C)unfair
D)discriminatory

Question 78

Which of the following statements regarding when a person with voidable title sells a good to a good-faith purchase is false?

A)Good-faith purchasers can do nothing to avoid injury.
B)The rightful owners of goods have the opportunity to protect themselves.
C)The rightful owners of goods bear the burden of collecting from fraudulent buyers.
D)A seller who has a voidable title cannot pass good title to a good-faith purchaser.

Question 79

Which of the following is the reason why the UCC distinguishes between merchants and nonmerchants?

A)Nonmerchants can protect themselves better than merchants.
B)Compared to nonmerchants,merchants are typically insured and can bear the cost of liability.
C)Merchants tend to have more bargaining power and can take advantage of buyers.
D)Buyers tend to place more reliance on professional sellers because they are generally more knowledgeable and better able to protect themselves than nonprofessionals.

Question 80

A ________ takes goods free of any security interest in the goods that their seller may have given to a third party.

A)good-faith purchaser
B)bona fide purchaser
C)buyer in the ordinary course of business
D)purchaser for value