Deck 19: Formation and Terms of Sales Contracts

Question 1

In Exclusive Dealing Contracts, sellers have an obligation to use their best efforts to supply the goods to the buyers.

Answer 1

True

Question 2

When determining the risk of loss, it makes no difference whether the goods delivered by the seller conform to the contract or not.

Answer 2

False

Question 3

Parties to sale contracts should not necessarily act in a commercially reasonable manner and good faith.

Answer 3

False

Question 4

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.

Question 5

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

Question 6

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 7

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 8

Article 2 of the UCC determines the rights of the seller, the buyer, and third parties irrespective of who has title at any given moment.

Question 9

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 10

Mei issues purchase order to June for goods which costs $ 25,000. June agrees to provide the same but she doesn't sign the purchase order. Mei can file a suit for the breach of contract.

Question 11

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 12

In general, the UCC Sales Article applies to the sale of:

A) goods only if the seller is a merchant and the buyer is not.
B) goods only if the seller and buyer are both merchants.
C) consumer goods by a non-merchant.
D) real estate by a merchant for $500 or more.

Question 13

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

Question 14

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 15

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 16

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 he will be reimbursed for them. Bill's Bike Shop burns down in 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 17

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 18

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 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

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 21

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 22

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 the good faith purchaser in this deal.
B) Pinnacle can get the DVD from Jason.
C) Sean has voidable title to the DVD.
D) Jason needs to pay Sean as well as Pinnacle.

Question 23

Ryan enters into a contract with Dave, the neighborhood grocer, to supply fresh vegetable 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 24

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 25

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 26

If the Uniform Commercial Code recognizes the fact that the parties to sales contract 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 27

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 sometimes 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 28

Which of the following characterizes an output contact?

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 29

To satisfy the UCC Statute of Frauds, a written agreement for the sale of goods must:

A) contain payment terms.
B) be signed by both buyer and seller.
C) indicate that a contract for sale has been made.
D) refer to the time and place of delivery.

Question 30

Baker and Able signed a contract which required Able to purchase 600 books from Baker at 90¢ per book. Subsequently, Able, in good faith, requested that the price of the books be reduced to 80¢. 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 31

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 32

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 3 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 4^th 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 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 and installs a new battery in a car.
C) A hairstylist uses a crème rinse in styling a client's hair.
D) A contractor builds a house for a landowner.

Question 34

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 35

Toby and Roy are car dealers; Toby makes a deal with Roy to sell a 1978 Buick. However, they failed to reach any agreement regarding the price of the car and decided to leave the matter to a future date 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 36

Joe went to a music store; misrepresenting himself as James to the store attendant. He buys a plasma television 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 in such cases?

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

Question 37

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 title holders 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 38

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 39

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 40

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 obligation with respect to physical delivery of the goods.
D) the buyer pays the purchase price.

Question 41

Tony enters into a contract with Joseph to supply his entire output of guava of each season from his orchid at the then current market price. The guava is to be used by Joseph for making jams. However, the contract didn't contain any clause as to when it can be terminated. Tony gave a one-year notice period to Joseph prior to termination of the contract. Joseph intentionally didn't do any arrangements for himself to acquire guavas from elsewhere. When Tony expressed his inability to supply Joseph the guava after one year, Joseph sued Tony for breach of contract. Whether or not the approach of Joseph is justified?

Question 42

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 between the parties.
C) One who has title to the goods.
D) One who has possession of the goods.

Question 43

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 44

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 45

Isaac contracts to sell Boyd all of his requirements of coal. In the past, Boyd has required between 1000 and 1500 tons of coal per year, but the contract contains no estimate of Boyd's needs. In 1998, Boyd's needs increase dramatically, and it demands 10,000 tons of coal from Isaac. Is Isaac obligated to sell Boyd this amount?

Question 46

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 "FAS [point of origin]"

Question 47

A music store lets Laura take a guitar home with her so that Laura might test how it plays. After playing the guitar for a day, Laura puts it on a sofa and forgets about it. Two weeks later, the guitar is damaged due to fire. Who must bear the risk of loss for the damage to the guitar?

Question 48

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 remains with Deck until Cey takes possession of the parts.
C) If the parts were conforming, risk of loss does not pass to Deck until a reasonable period of time after they are 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 49

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 50

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

Question 51

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 52

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 53

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 54

Press Publishers sold 100 copies of a new hardback book entitled "Business Law" to Boardwalk Books. The contract between Press Publisher and Boardwalk Books provides, in relevant part, that Boardwalk may return to Press any unused copies of the book within six months. During the six-month period, Boardwalk sold only five copies of these books. However, twenty copies were damaged from sitting on the bookshelf for six months and having customers rip pages and spill coffee on them. Boardwalk wants to return all ninety-five copies to Press. Discuss.

Question 55

An exception to the general rule 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 56

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 57

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 58

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 had 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 59

What is the UCC approach to the risk of loss of goods during transportation?

Question 60

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.