Deck 22: Remedies for Breach of Sales Contracts

Question 1

Because all goods are fungible, specific performance is not available under the UCC.

Answer 1

False

Question 2

If the seller has justifiably withheld delivery of the goods because of the buyer's breach, the buyer may recover any money or goods he has delivered to the seller over and above the agreed amount of liquidated damages.

Answer 2

True

Question 3

If the parties agree on a reasonable amount of damages that will be paid to the injured party, this amount is known as _____.

A) liquidated damages
B) unconscionable damages
C) penal damages
D) unenforceable damages

Answer 3

A

Question 4

If the seller delivers defective goods to the buyer, the buyer can recover the value of the goods as warranted minus the value of the goods received.

Question 5

What is the basic objective of the Code remedies for breach of contract?

A) To help the injured person recover consequential damages arising from the breach of contract.
B) To put in place a mechanism that allows for repeat performance of the contract on modified terms.
C) To help the injured person claim punitive damages arising from the breach of contract.
D) To put the injured person in the same position that he would have been in if the contract had been performed.

Question 6

Edna Boyle contracts with The Melonville Times to advertise her garage sale to be held this Saturday. The ad is to run in the Friday and Saturday morning edition. If the ad does not run on time, The Melonville Times agrees to pay Edna $50.00. This liquidated damages clause is most likely enforceable.

Question 7

Even if a buyer breaches a contract, the seller is accountable to the buyer for any profit that the seller makes on a resale.

Question 8

Specific performance requires that the seller is obligated to give the buyer the requisite goods covered by the contract.

Question 9

The buyer cannot recover any incidental damages.

Question 10

The UCC provides that a lawsuit for breach of a sales contract must be filed within a year after the breach occurs.

Question 11

Even if the buyer has misrepresented his solvency to the seller in writing within three months before the delivery of the goods, the 10-day limitation on the seller's right to reclaim the goods still applies.

Question 12

Bart agreed to deliver fruits worth $1,000 to a retail store. Bart and the store owner agree that if delivery is not made on time, Bart will pay the store some amount as liquidated damages, for the lost sales. Which of the following amounts would most likely be considered unconscionable if they settle for it?

A) $200
B) $5,000
C) $5
D) $400

Question 13

If the seller is in the process of manufacturing the goods when the buyer breaches the contract, one of the seller's options is to complete manufacture of the goods and then resell them so long as this minimizes the loss to the seller.

Question 14

Consequential damages do not include an injury to a person or property caused by a breach of warranty.

Question 15

Bart agreed to deliver fruits worth $1,000 to a retail store. Bart and the store owner agree that if delivery is not made on time, Bart will pay the store some amount as liquidated damages, for the lost sales. Which of the following amounts would most likely be considered penal if they settle for it?

A) $200
B) $25,000
C) $10
D) $650

Question 16

If the seller fails or refuses to deliver the goods called for in the contract, the buyer can purchase substitute goods and recover as damages from the seller.

Question 17

Under the UCC, a remedy limitation blocking recovery of personal injury caused by consumer goods is prima facie unconscionable.

Question 18

If the buyer and seller have agreed to the manner in which the resale is to be made, the courts will enforce the agreement unless it is found to be unconscionable.

Question 19

Which of the following is a condition necessary for an agreement for liquidated damages to be enforced?

A) If actual damages would be difficult to prove in the event of a breach of the contract
B) If the amount is large enough to be considered penal
C) If the amount is considered unconscionable
D) If there is no breach of the contract agreed upon by both parties

Question 20

The seller is obligated to resell the goods in cases where the buyer refuses to accept goods that conform to the contract.

Question 21

S agrees to sell B 10,000 widgets at a price of $1.00 per widget. After B breaches the contract, S resells the widgets for $1.10 per widget in a public sale. S also saved $200 in shipping costs. What amount does S owe B?

A) $1,200
B) $1,300
C) $1,000
D) Nothing

Question 22

If the buyer has misrepresented his solvency to the seller in writing within three months before the delivery of the goods:

A) the 10-day limitation on the seller's right to reclaim the goods does not apply.
B) the seller should actually repossess the goods within the 10-day period.
C) the seller's right to reclaim the goods is not subject to the rights of prior purchasers in the ordinary course of the buyer's business.
D) the seller's right to reclaim the goods is not subject to the rights of creditors with a perfected lien on the buyer's inventory.

Question 23

S agrees to sell B 10,000 widgets at a price of $1.00 per widget. After B breaches the contract, S resells the widgets for $0.90 per widget. However, this costs S an additional $100 in sales commissions. S saved $200 in shipping costs as the new customer was located closer to its factory. What amount can S recover from B?

A) $900
B) $100
C) $1,100
D) $1,000

Question 24

Ace Computers (AC) is a manufacturer. It entered into a contract with a retailer, Reliable Computer (RC) for the sale of 100 new XYZ model computers at $1,000 each, for delivery in 6 months. AC would thus make a profit of $50,000. Six months later however, the XYZ model has become almost obsolete; its market price is only $100 at that time. RC refuses to accept or pay for those computers. If AC sues, how much should it be entitled to in damages? (Ignore any incidental expenses or cost savings to AC.)

A) Nothing; when the XYZ model became almost obsolete, this excused RC from the contract.
B) $50,000, the profit AC would have made had RC not breached the contract.
C) $90,000, the difference between market price and contract price.
D) $140,000, the lost profit plus the difference between market price and contract price.

Question 25

Which of the following is true about the seller's right to reclaim goods from an insolvent buyer?

A) This right is superior to the rights of a good faith purchaser for value of the goods.
B) The seller must make a demand for the goods within ten days of their receipt by the buyer.
C) The seller must physically repossess the goods within ten days of their receipt by the buyer.
D) The buyer must have misrepresented his solvency to the seller in writing within three months before delivery of the goods.

Question 26

Which of the following is a common way in which a buyer may breach a contract?

A) By wrongfully returning goods
B) By agreeing to an extension of the credit period
C) By delivering a faulty product
D) By refusing to accept goods which are obviously damaged

Question 27

"Tool For You" (TFY) is a company that sells power tools to consumers. The sales contract of TFY states that TFY will not be liable for any consequential damages that the consumer suffers as a result of using power tools purchased from them. Harry purchased a table saw from TFY for use in his hobby of woodworking. Harry was injured when the saw blade flew off. He wants to sue TFY but is not sure whether the contract provision limiting consequential damages will be enforced and seeks your opinion. Will he succeed?

A) No, because this was a sale of a potentially dangerous product.
B) No, because Harry is a consumer.
C) Yes, because Harry agreed to this provision in the contract of sale.
D) Yes, because the UCC allows parties to agree to limitations on damages.

Question 28

Liability for consequential damages resulting from a breach of contract may also be limited or excluded by agreement. Will this limitation or exclusion be always enforced?

A) Yes, it will always be enforced.
B) No, it will not be enforced if it would be unconscionable.
C) Yes, if both parties agreed to it in the contract.
D) Yes, it will be enforced in case of injury caused to a person by consumer goods.

Question 29

If the seller has justifiably withheld delivery of the goods because of the buyer's breach, the buyer may:

A) not recover any money nor goods he has delivered to the seller.
B) not recover the goods.
C) recover only goods which he has not delivered.
D) recover any money or goods he has delivered to the seller over and above the agreed amount of liquidated damages.

Question 30

When would the amount of liquidated damages agreed to by both parties in a contract be considered unconscionable?

A) If the amount is reasonable
B) If the amount of losses was easy to estimate while drafting the contract
C) If the amount were too small compared to the possible losses
D) If the amount were too big to be considered penal

Question 31

If the seller discovers that the buyer is insolvent, he has:

A) no right to stop the delivery of any goods that he has shipped to the buyer.
B) the right to stop the delivery of any goods that he has shipped to the buyer.
C) the right to ask the buyer to pay double compensation.
D) no right to do anything against the buyer.

Question 32

S agrees to sell B 10,000 widgets at a price of $1.00 per widget. After B breaches the contract, S resells the widgets for $0.90 per widget. This costs S an additional $100 in sales commissions. What amount can S recover from B?

A) Nothing
B) $100
C) $1,100
D) $1,000

Question 33

In case of resale of goods arising out of a breach of contract, if the seller sets aside goods intended for the contract or completes the manufacture of such goods, he is:

A) not obligated to try to resell the goods to someone else.
B) obligated to try to resell the goods to someone else.
C) obligated to enter into future contracts with the buyer.
D) obliged to destroy the goods.

Question 34

Which of the following is not one of the seller's remedies, once the buyer breaches a contract for the sale of goods?

A) Canceling the contract
B) Recovering the profit the seller would have made on the sale
C) Recovering the goods' purchase price
D) Recovering the profit on the sale and the purchase price of goods rejected

Question 35

Russ purchases a new television set from Trista's TVs. The television set carries a four-year express warranty. It was purchased on November 1, 2002 and delivered on November 3, 2002. On February 3, 2007, after four years and three months of service, the set collapsed due to a defect covered by the warranty. Russ had discovered this defect on November 5, 2002 when he turned the television set on for the first time. When did the Code's statute of limitations begin to run?

A) November 1, 2002
B) November 3, 2002
C) November 5, 2002
D) February 3, 2007

Question 36

Ace Computers (AC) is a manufacturer. It entered into a contract with a retailer, Reliable Computer (RC) for the sale of 100 new XYZ model computers at $1,000 each, for delivery in 6 months. AC would thus make a profit of $50,000. Six months later however, the XYZ model has become almost relatively obsolete; its market price is only $600 at that time. RC refuses to accept or pay for those computers. If AC sues, how much should it be entitled to in damages? (Ignore any incidental expenses or cost savings to AC.)

A) Nothing; when the XYZ model became almost obsolete, this excused RC from the contract.
B) $50,000, the profit AC would have made had RC not breached the contract.
C) $40,000, the difference between market price and contract price.
D) $90,000, the lost profit plus the difference between market price and contract price.

Question 37

Any attempt to limit consequential damages for injury caused to a person by consumer goods is considered prima facie _____.

A) unconscionable
B) reasonable
C) punitive
D) penal

Question 38

The statute of limitation provision of the UCC holds that for contracts for the sale of goods (in the absence of contractual agreement to the contrary), the period of time within which a lawsuit must be commenced is:

A) one year.
B) two years.
C) three years.
D) four years.

Question 39

Which of the following is not a common way in which a seller can breach contracts?

A) Indicating that he does not intend to fulfill the obligations under the contract
B) Delivering goods that do not conform to the contract
C) Agreeing to extended credit periods depending on the buyer's credit record
D) Failing to make delivery of the goods

Question 40

Which of the following is true of the period during which parties can file a lawsuit for breach of a sales contract?

A) They parties can extend it for a period longer than six years after the breach occurs.
B) The parties to a contract may shorten this period to one year after the breach occurs.
C) The parties are free to determine the period during which the lawsuit can be filed.
D) The lawsuit must be filed within two years after the breach occurs.

Question 41

Explain the concept of buyer's right to cover.

Question 42

Wonder Widgets agrees to sell Bill Buyer 10,000 of its "Grade A" widgets at a price of $3.00 per widget. After Wonder breaches the contract by failing to deliver, Bill buys substitute widgets at a price of $3.20 per widget. Bill also incurs $200 in reasonable expenses associated with the purchase. Bill then sues Wonder for $2,200. What, if anything, can Bill actually recover?

A) Nothing.
B) $200.
C) $2,000.
D) $2,200.

Question 43

A buyer claiming lost profits caused by the seller's breach of contract is claiming for _____.

A) incidental damages
B) unconscionable damages
C) penalties
D) consequential damages

Question 44

On May 1, S sells B 100 widgets on credit at a price of $1 per widget. S did so based on an April 10 letter from B asserting B's solvency. On May 7, S learns that B was insolvent when it received the widgets on May 1. On May 13, S demands the return of the goods from
B. Is B obligated to return the goods to S?
Yes. Although S did not demand the goods within ten days of their receipt, as required by UCC section 2-702(2), this requirement does not apply in cases where the buyer has made a written misrepresentation of solvency within three months of the goods' delivery.

Question 45

Joe agreed on April 1 to sell and deliver 1,000 bushels of wheat to a grain elevator on June1 for $10 per bushel. He then refused to deliver on June 1 because the market price was then $15 per bushel. How much can the grain elevator recover in damages from Joe?

A) Nothing
B) $5,000
C) $1,000
D) $1,500

Question 46

Ralf breaches a contract with Smith for making 1,000 sport goggles. Smith decided to resell them to diminish his losses. Luckily, he got a huge market for that and collected a huge profit. The amount was far more than the contracted price with Ralf. However, now Ralf is demanding the share from profit. Will Ralf succeed?

Question 47

If a seller fails to deliver goods called for in the contract, the buyer may purchase substitute goods and recover as damages the difference between the contract price and the cost of the substituted goods. This is known as:

A) cover.
B) action for the price.
C) specific performance.
D) incidental damages.

Question 48

In which of the following transactions is the buyer most unlikely to be entitled to specific performance of the contract?

A) A contract for purchasing a historical artifact
B) A contract for purchasing 10,000 tons of wheat
C) A contract for purchasing a Rembrandt painting
D) A contract for purchasing a 1910 Ford

Question 49

On May 1, S sells goods to
B. B immediately resells the goods to C, who buys in good faith and pays cash. On May 2, S learns that B was insolvent when it accepted the goods. On May 3, therefore, S demands return of the goods from
B. B says: "Sorry about that, but I sold them to
C. A seller's recovery rights under section 2-702(2) are inferior to the rights of a good faith purchase for value, and C evidently qualifies as such a purchaser.
C." Can S recover the goods from C?
No, S cannot recover the goods from

Question 50

A buyer is entitled to the remedy of specific performance when:

A) the contract is between merchants.
B) the contract is for unique goods.
C) the contract is for goods where the price is $500 or more.
D) the contract requires delivery in installments.

Question 51

_____ include any reasonable expenses or charges that the buyer has to pay in obtaining substitute goods in case of a breach of contract on the part of the seller.

A) Incidental damages
B) Unconscionable damages
C) Penalties
D) Consequential damages

Question 52

In which of the following transactions is the buyer most likely to be entitled to specific performance of the contract?

A) A contract for purchasing a tanker of crude oil
B) A contract for purchasing 1,000 tons of wheat
C) A contract for purchasing 100,000 light bulbs
D) A contract for purchasing a Picasso painting

Question 53

On May 1, 1999, S contracts to sell B a toaster that it warrants for five years. On May 5, 1999, S delivers the toaster to
B. The toaster self-destructs on April 30, 2000, but B does not discover this until May 3, 2000. However, B does not sue S until May of 2003. Has B sued within the time period permitted by UCC statute of limitations? Why or why not?
Yes, B has complied with UCC statute of limitations. In cases where the warranty covers future performance of the goods, the statute begins to run on the day the buyer should have discovered the defect. B obviously sued within four years of this date.

Question 54

In the eventuality of nondelivery by the seller, which of the following would be reduced from the amount of damages claimed from the seller?

A) The difference between the contract price of the goods and their market price at the time he learns of the seller's breach
B) Incidental damages
C) Expenses saved
D) Consequential damages

Question 55

Wonder Widgets agrees to sell Bill Buyer 10,000 of its "Grade A" widgets at a price of $3.00 per widget. After Wonder breaches the contract by failing to deliver, Bill buys substitute widgets at a price of $3.20 per widget. For this purchase, Bill incurs $200 in reasonable expenses and saves $100 in shipping expenses. Bill then sues Wonder for $2,200. What, if anything, can Bill actually recover?

A) Nothing.
B) $200.
C) $2,100.
D) $2,200.

Question 56

Sue delivers defective widgets to Boz. The widgets were not as warranted. In seeking to recover damages from Sue, Boz:

A) does not have to give Sue notice of the defect.
B) must give up since he accepted the goods.
C) would never be entitled to consequential or incidental damages.
D) may recover the difference between the value of the goods received and the value of the goods would have had if they had been as warranted.

Question 57

Which of the following means that the buyer can require the seller to give the buyer the exact goods covered by the contract?

A) Specific performance
B) Trade usage
C) Implicit guarantee
D) Trade warranty

Question 58

Which of the following is an example of a consequential damage?

A) Expense that a buyer incurs in receiving and inspecting goods shipped by the seller that do not conform to those called for in the contract.
B) Charge that the buyer has to pay in obtaining substitute goods.
C) An injury to a person caused by a breach of warranty.
D) Expense that a buyer incurs in storing nonconforming goods shipped by the seller.

Question 59

_____ include expenses that the buyer incurs in receiving, inspecting, transporting, and storing goods shipped by the seller that do not conform to those called for in the contract.

A) Unconscionable damages
B) Incidental damages
C) Penalties
D) Consequential damages