Deck 13: Sales Contracts: Formation, Title, and Risk of Loss

Question 1

Braxton has an oral contract to deliver 500 cases of green beans to Mary for $10,000. During a court hearing concerning the validity of the contract, Braxton admits that he sold Mary 100 cases of green beans. The contract is enforceable to only 100 cases of green beans.

Answer 1

True
Explanation: If the party against whom enforcement is sought admits in court that an oral contract for the sale of goods was made, the contract will be enforceable. The contract is not enforceable under this exception, however, beyond the quantity of goods admitted.

Question 2

Fish not yet caught by a commercial fisher are called future goods.

Answer 2

True
Explanation: Goods that are not yet in existence or under the control of people are called future goods. They include fish in the sea, minerals in the ground, goods not yet manufactured, and commodities futures.

Question 3

If a sale of goods contract offer is silent concerning the method of acceptance, it may be accepted in any reasonable manner, including shipment of goods.

Answer 3

True
Explanation: To establish a contract for the sale of goods, unless otherwise indicated by the offeror or the circumstances, the offeree may accept the offer in any manner and by any medium that is reasonable. Unless the buyer indicates otherwise, an order or other offer to buy goods for prompt shipment may be accepted by either a prompt shipment or a prompt promise to ship. Under this rule, the goods that are shipped may be either conforming or nonconforming goods.

Question 4

A bill of sale provides evidence of the transfer of personal property from one person to another.

Question 5

An oral contract for the sale of specially manufactured goods involving a price of $500 or more is not enforceable unless it is in writing.

Question 6

An automobile title certificate under the UCC has the legal status of a document of title.

Question 7

In a shipment contract, risk of loss does not pass from the seller to the buyer until the buyer receives the goods.

Question 8

In a contract with a merchant for which no delivery is required, risk of loss passes to the buyer when the buyer picks up the goods.

Question 9

Merchant A orally enters into a $1,000 contract with Merchant
B. Merchant A will be legally bound if Merchant B sends a written confirmation, even if Merchant A has not signed it.

Question 10

Title may pass as soon as goods are identified to the contract, but only after they are in possession of the seller.

Question 11

Under the UCC, a signature includes any symbol made with the intent to authenticate a writing.

Question 12

A gift is legally considered the same as a sale, since title passes in both a gift and a sale.

Question 13

Roberta receives a document of title for lumber she purchased. Even though she does not yet possess the lumber, the document transfers to her both title to the lumber and risk of loss for it.

Question 14

Jackson Furniture Co. states in writing that their offer to sell sofas to a hospital will be held open for 40 days. The written offer requires a consideration to be legally binding.

Question 15

The seller is said to have a security interest in shipped goods if the agreement between the buyer and seller allows the seller to retain title after the goods are shipped.

Question 16

Sellers always retain an insurable interest in the goods, even if they do not have title to them.

Question 17

Massive Equipment Company sends machinery on approval to Mountain Moving Company. While in possession of the machinery, but prior to acceptance, Mountain becomes insolvent. The machinery is subject to the claims of Mountain's creditors.

Question 18

In an auction with reserve, the auctioneer must accept the highest bid.

Question 19

The Convention on Contracts for the International Sale of Goods (CISG) requires a written contract for the sale of goods when the price exceeds $5,000.

Question 20

Buyers obtain an insurable interest even though they might later reject or return the goods to the seller.

Question 21

Joshua, a merchant, promises in a signed writing to Pedro, a consumer, to hold an offer to sell goods open for five months without Pedro giving consideration in exchange. However, Joshua sells the goods to another consumer and Pedro sues him for breach of contract. Which of the following is true of this case?

A) Joshua is not bound by the contract, since firm offers cannot exceed three months.
B) Since Joshua is a merchant and is bound by a firm offer made to Pedro, he has breached contract.
C) The UCC will not enforce this contract as a firm offer as both parties are not merchants.
D) Joshua is bound by this offer only if a five month offer is customary for this type of good.

Question 22

It is important to identify a ____________ contract because it includes both goods and services. If the sale of goods dominates the contract, then it will be governed by ____________; however, if services dominates the contract, then it will be governed by ____________.

A) blended; CISG; common law
B) blended; common law; UCC Article 2
C) hybrid; UCC Article 2; common law
D) hybrid; common law; Restatement of Contracts

Question 23

____________ is a method of commercial dealing that is commonly used in a particular field or industry.

A) Usage of trade
B) Contract for sale
C) Good faith
D) Firm offer

Question 24

If both parties are merchants, the UCC modifies the common law "____________" rule, by allowing ____________ terms to become a part of the contract, unless they ____________ change it.

A) hybrid contract; additional; materially
B) course of dealing; additional; materially
C) plain view; different; slightly
D) mirror image; additional; materially

Question 25

MeatPackers, Inc. bought a new kind of refrigeration system from Coolit, Corp. for storage of its meats. As part of the contract, Coolit delivered the refrigeration system to the MeatPackers plant, installed it, set its temperature, and then monitored it for several hours to make sure it worked. Before they left, Coolit's technicians handed MeatPackers a bill of sale. Absent any other terms or conditions, MeatPackers, Inc. received title to Coolit's refrigeration system when:

A) Coolit delivered the system to the Meatpacker plant.
B) MeatPacker paid for the Coolit system prior to delivery.
C) Coolit delivered, installed, and tested the system.
D) Coolit handed MeatPacker the bill of sale.

Question 26

Which of the following is true of a firm offer?

A) It occurs when parties intend to be bound by a contract, but fail to mention the price.
B) It occurs when a seller agrees to sell all it can produce to a particular buyer.
C) It occurs when a merchant promises to hold an offer open without any consideration.
D) It occurs when a buyer agrees to buy all its requirements from a particular seller.

Question 27

Which of the following is true of destination contracts?

A) It requires a seller to turn the goods over to a carrier for delivery to the buyer.
B) Both title and risk of loss pass to the buyer when goods are given to the carrier.
C) Title and risk of loss pass to the buyer once the seller tenders goods at a place as per the contract.
D) The seller bears no responsibility for seeing that the goods reach their destination.

Question 28

Which of the following is true regarding Convention on Contracts for the International Sale of Goods (CISG)?

A) The CISG governs only the formation of a sales contract and the rights and duties that arise from it.
B) The CISG is concerned with the validity of a contract that would be governed by other laws.
C) The CISG applies to the liability of the seller for death or personal injury caused by the goods to any person.
D) The CISG applies to auctions sales, sales of stocks, securities, negotiable instruments or money.

Question 29

Which of the following is considered to be future goods?

A) Office furniture
B) Stocks
C) Fish in the sea
D) Gasoline at a gas station

Question 30

A(n) ____________ can make a(n) ____________ because it deals in ____________ in the ordinary course of business or has knowledge or skills peculiar to those goods.

A) obligor; gift; specially manufactured goods
B) merchant; firm offer; goods of the kinds sold
C) merchant; open price contract; goods of the kinds sold
D) seller; firm offer; goods of the kind sold

Question 31

Under the ____________, an electronic signature is defined as "an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record."

A) E-Sign Act
B) UETA
C) UCC
D) CSIG

Question 32

The Emmett School (ESD) district contracts with the GoldenFarms Dairy for "all of the milk" GoldenFarms can produce during ESD's current school year. The contract specifies a price, but no exact quantity of milk to be purchased is set in the contract. This contract is a(n):

A) invalid contract because no quantity is set.
B) valid requirements contract.
C) valid output contract.
D) invalid contract because consideration is missing.

Question 33

____________ goods are those that are in accordance with the obligations under the contract.

A) Future
B) Nonconforming
C) Tangible
D) Conforming

Question 34

In what respect is a bailment legally different from a sale?

A) Title does not transfer in a bailment.
B) Title transfers in a bailment, but no price is involved.
C) In both, there is a transfer of title, but in a bailment the title reverts to the bailor at the end of the bailment.
D) In a sale, the title transfer includes all rights of ownership, but in a bailment, the title transfer includes limited rights of ownership.

Question 35

In an ____________, after the auctioneer calls for bids on an article or lot, that article or lot cannot be withdrawn unless no bid is made within a reasonable time.

A) auction with reserve
B) enforced auction
C) auction without reserve
D) entitled auction

Question 36

Starbucks Coffee contracts with Juan Valdez coffee farms to purchase "all the coffee beans Starbucks needs for the next twelve months." The parties have a(n) ____________ contract.

A) enforceable; open price
B) enforceable; requirements
C) unenforceable; output
D) unenforceable; firm offer

Question 37

If a person obtains property as a result of another's fraud, misrepresentation, mutual mistake, undue influence, or duress, the person is said to hold only:

A) voidable rights.
B) contract rights.
C) insured rights.
D) valid rights.

Question 38

A(n) ____________ includes any symbol, made with the intent to authenticate a writing.

A) seal
B) informal note
C) mark
D) signature

Question 39

When goods are sent f.o.b. shipment, the title and risk of loss pass to the:

A) carrier at the point of origin.
B) buyer at the point of origin.
C) buyer at the destination.
D) buyer when he/she accepts the goods.

Question 40

Which of the following is true of oral contracts for the sale of goods of $500 or more?

A) All oral contracts are unenforceable unless they are for the sale of goods of $500 or more.
B) An oral contract is not enforceable, unless a written confirmation is received and signed by one party, and sent to the other for approval.
C) An oral contract by a merchant is enforceable if a written confirmation is received by another merchant who does not object to within 10 days.
D) An admission in court about the terms of the contract does not negate the general rule.

Question 41

Downtown Construction Co. obtained possession on April 1 of a bulldozer from Bulldozer Sales Co. to use in Downtown's business with a right to return the bulldozer no later than June 1 with no obligation other than to pay for the fuel the bulldozer used. Downtown is owned by Alice who allows her fifteen-year-old son, Bob, to operate the bulldozer on May 1 on a Downtown job. Bob is inexperienced and wrecks the bulldozer. Explain who has the risk of loss.

Question 42

Lucky Used Cars, using their contracts form, agree to sell Alvin a truck for $5,000. The contract provides that it may not be modified-except by a signed writing. After entering into the contract, Lucky and Alvin orally agree that Lucky will include new floor mats and a bed liner for an extra $100. At the time of delivery, Lucky refuses to provide the new floor mats and bed liner unless Alvin pays an extra $250. Discuss the enforceability of the oral agreement Lucky and Alvin had.

Question 43

Seth was the highest bidder for an antique chest at an auction sale. There was nothing to indicate whether the auction was with or without reserve. The auctioneer withdrew the chest from the auction without accepting Seth's bid because the bid was too low. Is the auctioneer legally entitled to withdraw the chest from the sale? Explain.

Question 44

Sun Supply Co. offered to sell Apartment Management Inc. air conditioner filters at $15 per case in a signed writing that stated the price was good for sixty days. Apartment Management discovered that other sellers charge $20 per case for identical air conditioner filters, but before it can accept Sun Supply's offer, Sun Supply withdrew the offer after only 30 days, stating that changed market conditions had forced it to charge more. Discuss the case.

Question 45

Mike and Jane contract to purchase and sell $1,000,000 worth of computer chips to be manufactured in Japan and shipped to San Francisco. The contract is silent about the method of delivery. Mike asserts that delivery is by ship, which is customary in the computer chip industry, but Jane insists that delivery is by air, which is what a previous contract between Mike and Jane provided. Explain how a court will resolve this dispute.

Question 46

Ralph, of Miami, Florida, ordered "100 red widgets" from Maria's business located in Seattle, Washington. Shipment was f.o.b. Seattle via Red Freight Co. By mistake Maria sent "100 green doodads" to Ralph. The shipment was destroyed when the Red Freight truck was involved in a traffic accident in Oklahoma City. Ralph had insurance coverage that includes "items purchased that are in transit." Explain whether Ralph or Maria has the risk of loss.

Question 47

Warren left his watch to be cleaned at a jewelry store. By mistake, a clerk sold the watch to Foley. Foley did not know that the watch rightfully belonged to Warren. Analyze the case.

Question 48

Which of the following is true of insurable interest?

A) Sellers can retain the insurable interest to goods as long as they have the title to them.
B) Buyers cannot place insurance on goods.
C) Buyers cannot obtain an insurable interest if they might later reject the goods.
D) Buyers can obtain insurable interest on goods that are not mentioned in the contract.

Question 49

Big Choppers orally contracts with Jane to make a custom motorcycle for Jane for $30,000. When completed, Jane refuses to accept the motorcycle or pay for it. Discuss the validity of the oral contract.

Question 50

A document of title allows the person who possesses it to:

A) receive the goods named in the document.
B) conclusively prove ownership of the goods named in the document.
C) receive the goods named in the document free of any creditor claims.
D) conclusively prove that the goods are free of defects.

Question 51

On Saturday, Hussein purchases a sofa from Big Box Furniture Inc. who agrees to deliver the sofa without charge to Hussein at 3 p.m. the following Monday. Hussein forgets about the delivery and is not home at 3 p.m. on Monday when the Big Box delivery truck arrives. The delivery truck takes the sofa back to the Big Box store where it is destroyed in a fire that occurs at 9 p.m. Monday. Discuss the risk of loss in this case.

Question 52

Samantha was looking for a certain shade of thread to complete her needlework on a tablecloth. At a local shop, however, she was unable to decide which of the five selected shades would be the closest match to the cloth. The shop owner allows Samantha to take the selected shades home and decide which one she would want to have. This is an example of which of the following?

A) Destination contract
B) Sale on approval
C) Sale on acceptation
D) Approval contract