Deck 24: Remedies for Breach of Sales and Lease Contracts

Question 1

Liquidated damages are identified after a contract breach occurs.

Answer 1

False

Question 2

Specific performance usually requires that the seller or lessor cover.

Answer 2

False

Question 3

A seller or lessor is allowed to sell goods to another buyer when the original buyer is in breach and the goods have not yet been delivered.

Answer 3

True

Question 4

Which of the following are damages identified before the breach occurs?

A) Nominal damages
B) Compensatory damages
C) Reliance damages
D) Liquidated damages
E) Consequential damages

Question 5

Which of the following was the result on appeal in Detroit Radiant Products Company v. BSH Home Appliances Corporation, the case in the text in which the plaintiff, a seller of gas-fired infrared heaters, sought to recover lost profits based on the defendants breach of contract?

A) The court awarded the plaintiff lost profits based on the fact that lost profits are the default measure of damages under Article 2 of the UCC.
B) The court awarded the plaintiff the difference between the contract price less the market price plus incidental damages based on the fact that such damages were the default measure of damages under Article 2 of the UCC.
C) The court awarded the plaintiff lost profits in addition to the difference between the contract price less the market price plus incidental damages based on the fact that all such damages were the default measure of damages under Article 2 of the UCC.
D) The court awarded the plaintiff the value of the unsellable inventory it had due to the defendant's breach and also lost profits because the default measure (the difference between the contract price less the market price plus incidental damages) did not make the plaintiff whole.
E) The court awarded the plaintiff lost profits and also the value of the unsellable inventory it had due to the defendant's breach because the default measure (lost profits) did not make the plaintiff whole.

Question 6

Which of the following is true regarding how the obligations of sellers/lessors and buyers/lessees are determined?

A) Obligations of parties are determined by the terms the parties outline in agreements, but not by custom or rules outlined by the UCC.
B) Obligations of parties are determined by the rules outlined by the UCC, but not by terms the parties outline in agreements or by custom.
C) Obligations of parties are determined by terms the parties outline in agreements and rules outlined by the Uniform Commercial Code, but not by custom.
D) Obligations of parties are determined by the rules outlined by the UCC and by custom, but not by terms the parties outline in agreements.
E) Obligations of parties are determined by the terms the parties outline in agreements, custom, and rules outlined by the UCC.

Question 7

Which of the following damages, if any, may a seller receive who sells goods to another buyer when the original buyer is in breach?

A) The difference between the resale price and the contract price, plus incidental damages and minus expenses saved.
B) The difference between the resale price and the contract price only.
C) The difference between the resale price and the contract price minus expenses without any allowance for incidental damages.
D) The difference between the resale price and the contract price, plus incidental damages, with no deduction for expenses saved.
E) Damages are not available because a seller has no rights to resell goods when the original buyer is in breach. The remedy is a suit for damages.

Question 8

The UCC does not allow a seller to cancel a contract if the buyer is in breach.

Question 9

The UCC adopts several common law principles.

Question 10

In transit means that the seller or lessor has delivered the goods to a carrier or bailee, but the carrier or bailee has not yet turned them over to the buyer.

Question 11

The term "cover" refers to buyers or lessees substituting goods for those due under a sales or lease agreement.

Question 12

Which of the following is true regarding remedies available to the seller without court action if the buyer fails to pay according to the terms of the agreement?

A) Sellers may cancel the contract, withhold delivery of goods, sell undelivered goods to another buyer, and put a lien on property of the buyer.
B) Sellers may cancel the contract and withhold delivery of goods; but sellers may not sell undelivered goods to another buyer nor may sellers may put a lien on property of the buyer.
C) Sellers may cancel the contract; but sellers may not withhold delivery of goods, sell undelivered goods to another buyer, or put a lien on property of the buyer.
D) Sellers may cancel the contract and put a lien on property of the buyer; but sellers may not withhold delivery of goods or sell undelivered goods to another buyer.
E) Sellers may cancel the contract, withhold delivery of goods, and sell the goods to another buyer; but sellers may not put a lien on any property of the buyer.

Question 13

Contract actions are created to enforce the intentions of the parties to the agreement, while tort law is primarily designed to vindicate social policy.

Question 14

The case of Hill v. Gateway, discussed in the text, ruled that in order to be effective, a contract must be verbally read to a consumer who purchases a computer over the telephone.

Question 15

Which of the following is true regarding the availability of liquidated damages in China?

A) Liquidated damages are not available in China.
B) Through judicial mandate, China adopted the U.S. standard for awards of liquidated damages.
C) Liquidated damages are available under the People's Republic of China Contract Law legislation, but only in amounts of up to 20% of the actual damages incurred by the breaching party.
D) Liquidated damages are available under the People's Republic of China Contract Law legislation, but Chinese judicial interpretation of the law limits liquidated damages to no more than 10 percent above the actual damages incurred by the nonbreaching party.
E) Liquidated damages are available under the People's Republic of China Contract Law legislation, but Chinese judicial interpretation of the law limits liquidated damages to no more than 30 percent above the actual damages incurred by the nonbreaching party.

Question 16

If a buyer accepts nonconforming goods, the buyer may not also seek damages.

Question 17

What type of remedy does the UCC give buyers and lessees when the other party has breached a contract?

A) The benefit of the bargain
B) Any amounts of money lost plus 10%
C) Any amounts of money lost plus 15%
D) Any amounts of money lost plus 20%
E) Any amounts of money lost plus 25%

Question 18

Which of the following is true regarding the right of a lessor to seek incidental damages in the event of a breach by a lessee of goods?

A) A lessor may seek incidental damages only if the lessee agreed in writing to pay them.
B) A lessor may seek incidental damages only if the lessee agreed orally or in writing to pay them.
C) A lessor may seek incidental damages only if the damages are in an amount over $500.
D) A lessor may seek incidental damages only if the damages are in an amount over $1,000.
E) A lessor may seek incidental damages.

Question 19

Which of the following is true regarding a liquidated damages provision?

A) A provision for liquidated damages is illegal.
B) A provision for liquidated damages is void because of public policy.
C) A provision for liquidated damages is voidable because of public policy.
D) A provision for liquidated damages is enforceable so long as it is not punitive in nature.
E) A provision for liquidated damages will be enforced regardless of whether it is punitive in nature.

Question 20

What is the basic premise of contract law?

A) To effectuate the expectations of the parties to an agreement
B) To promote commerce
C) To promote economic growth
D) To promote interstate commerce
E) To encourage a free-market society and greater financial security for the parties

Question 21

Which of the following usually requires that the seller or lessor deliver the particular goods identified in the contract?

A) Absolute order
B) Absolute performance
C) Specific performance
D) Specific order
E) True performance

Question 22

What does the UCC provide regarding liquidated damages if the parties do not agree to them?

A) That the nonbreaching seller may claim against a breaching buyer 20 percent of the purchase price or $500, whichever is less, as liquidated damages.
B) That the nonbreaching seller may claim against a breaching buyer 20 percent of the purchase price or $500, whichever is more, as liquidated damages.
C) That the nonbreaching seller may claim against a breaching buyer 30 percent of the purchase price or $1,000, whichever is less, as liquidated damages.
D) That the nonbreaching seller may claim against a breaching buyer 30 percent of the purchase price or $1,000, whichever is more, as liquidated damages.
E) Nothing because liquidated damages are unavailable under the UCC unless the parties have expressly agreed to them.

Question 23

Under the UCC buyers and lessees may recover goods identified in the contract if the seller or lessor becomes insolvent within ______ after receiving the first payment due under the agreement.

A) 5 days
B) 10 days
C) 15 days
D) 30 days
E) 60 days

Question 24

Assuming proper proof, which of the following represents damages a buyer or lessee may recover in the event of a breach?

A) Incidental damages but not consequential damages or remedial damages
B) Consequential damages but not incidental damages or remedial damages
C) Remedial damages but not consequential damages or incidental damages
D) Incidental damages and consequential damages, but not remedial damages
E) Incidental damages, consequential damages, and remedial damages

Question 25

Which of the following is the preferred remedy for nonbreaching sellers when buyers fail to pay and pick up goods?

A) Suit for incidental damages
B) Cover
C) Liquidated damages
D) Resale
E) Suit for consequential damages

Question 26

Which of the following is true regarding when the UCC allows buyers and lessees to seek the remedy of specific performance?

A) The UCC only allows buyers and lessees to seek the remedy of specific performance when goods are unique.
B) The UCC only allows buyers and lessees to seek the remedy of specific performance when a remedy at law is inadequate.
C) The UCC only allows buyers and lessees to seek the remedy of specific performance when goods are worth more than $500.
D) The UCC allows buyers and lessees to seek the remedy of specific performance when goods are unique, when a remedy at law is inadequate, or when goods are worth more than $500.
E) The UCC allows buyers and lessees to seek the remedy of specific performance when goods are unique or when a remedy at law is inadequate, but not because the goods are worth more than $500.

Question 27

Which of the following was the result in Almetals Inc., v. Wickeder Westfalenstahl, GMBH, the case in the text involving the sale of a specialty metal in which the plaintiff sued the defendant for breach of contract seeking specific performance?

A) That specific performance was unavailable because real estate was not involved.
B) That specific performance was unavailable because a foreign defendant was involved and jurisdiction for specific performance was, therefore, lacking.
C) That specific performance was unavailable because the goods at issue were scarce.
D) That specific performance was unavailable because a requirements contract was involved.
E) That specific performance was the appropriate remedy because the goods at issue were unique with no known alternative sources of supply.

Question 28

Under UCC 2-702(2), under which of the following circumstances may a seller reclaim goods when a buyer is in possession of goods and is in breach?

A) When the seller discovers the buyer is insolvent
B) When the buyer is at least 5 days late on a payment
C) When the buyer is at least 10 days late on a payment
D) When the buyer has received at least 10 days prior notification of reclamation
E) When the buyer has received at least 30 days prior notification of reclamation

Question 29

Which of the following may a buyer/lessee do when the seller/lessor delivers nonconforming goods?

A) Reject the goods only
B) Obtain cover only
C) Cancel the contract only
D) Reject the goods, and then obtain cover or cancel the contract
E) Reject the goods and obtain cover, but the buyer may not cancel the contract

Question 30

Assuming a buyer that is solvent has breached a contract by not paying for goods that are in transit, which of the following may occur?

A) The carrier may stop delivery on the entire shipment.
B) The carrier may stop delivery only if the quantity shipped is a large shipment such as a carload or truckload.
C) The carrier may stop delivery only if a signed writing exists by which the buyer agreed to the remedy of stopping shipment.
D) The carrier may stop delivery only if ordered to do so by the bankruptcy judge.
E) The carrier may not stop delivery under any circumstances.

Question 31

Which of the following is the right of a buyer and lessee to substitute goods for those due under a sales or lease agreement?

A) Swap
B) Rearrange
C) Cover
D) Shift
E) Reallocate

Question 32

Which of the following is true regarding buyers or lessees who want to accept nonconforming goods and then seek monetary damages?

A) Buyers and lessees are allowed to do so in order to receive the benefit of the bargain, but they must give the seller/lessor reasonable notice of the defect.
B) Buyers and lessees are allowed to do so in order to receive the benefit of the bargain, and there is no requirement that they give the seller/lessor prior notice of the defect.
C) Buyers may do so in order to receive the benefit of the bargain so long as reasonable notice of the defect is given, but lessees may not.
D) Lessors may do so in order to receive the benefit of the bargain so long as reasonable notice of the defect is given, but sellers may not.
E) Buyers and lessees may do so only if the seller/lessor agrees to the retention of the nonconforming goods and does not request their return.

Question 33

Regarding the "Case Opener," what did the court rule regarding the liability of Abbott Industries following its supply of 1.2 million tubes of bad eye medication to Altana, a customer, for resale?

A) That Abbott industries was liable for the cost of the recall and destruction of the defective medication, for the costs of employee overtime, and for lost future sales because Altana was unable to meet its contractual obligations.
B) That Abbott industries was liable for the cost of the recall and destruction of the defective medication, for the costs of employee overtime, and for lost future sales even though Altana was able to meet its contractual obligations.
C) That Abbott industries was liable for the cost of the recall and destruction of the defective medication and for the costs of employee overtime, but not for lost future sales because Altana was able to meet its contractual obligations.
D) That Altana was only entitled to receive cover, meaning substitution for the defective medication.
E) That Altana was unable to recover anything because business people take a risk that some shipments will be bad.

Question 34

Which of the following is true regarding revocation of accepted nonconforming goods?

A) Once goods have been accepted, they may not be rejected.
B) A buyer has an absolute right within 10 days after delivery in which to revoke acceptance of nonconforming goods.
C) A buyer has an absolute right within 48 hours after delivery in which to revoke acceptance of nonconforming goods.
D) A buyer has an absolute right within 30 days after delivery in which to revoke acceptance of nonconforming goods.
E) While there is no set time limit, the UCC sometimes allows a buyer to revoke acceptance of nonconforming goods.

Question 35

Under UCC 2A-525(2) when may a lessor reclaim goods when a lessee in possession of the goods is in breach?

A) When the lessor discovers the lessee is insolvent
B) When the lessee fails to make payments according to the lease terms
C) When the lessee has received at least 10 days prior notification of reclamation
D) When the lessor discovers a significant reduction in the lessee's credit score
E) When the lessor can establish a valid contract for actual purchase of the goods

Question 36

What does the UCC provide regarding the availability of punitive damages?

A) That the nonbreaching seller may claim against a breaching buyer who is guilty of malice 20 percent of the purchase price or $500, whichever is less, as punitive damages.
B) That the nonbreaching seller may claim against a breaching buyer who is guilty of malice 20 percent of the purchase price or $500, whichever is more, as punitive damages.
C) That the nonbreaching seller may claim against a breaching buyer who is guilty of malice 30 percent of the purchase price or $1,000, whichever is less, as punitive damages.
D) That the nonbreaching seller may claim against a breaching buyer who is guilty of malice 30 percent of the purchase price or $1,000, whichever is more, as punitive damages.
E) Nothing other than in its voiding of liquidated damages that are punitive in nature.

Question 37

Which of the following includes lost profits so long as those damages are not too speculative?

A) Punitive damages
B) Consequential damages
C) Remedial damages
D) Nominal damages
E) Control damages

Question 38

Which of the following is true of lemon laws in Canada?

A) They are generally the same as lemon laws in the U.S.
B) They allow for replacement of defective parts but not a new car unless the plaintiff agrees to pay the difference between the amount received for the used car when sold and the amount charged for the new car.
C) They guarantee a buyer of a lemon a new car.
D) They guarantee the buyer of a lemon a return of all consideration.
E) Canada does not have a lemon law such as is known in the U.S. Instead, an arbitration program is run through which a buyer may lodge complaints.

Question 39

Assuming a buyer that is insolvent has breached a contract by not paying for goods that are in transit, which of the following may occur?

A) The carrier may stop delivery on the entire shipment.
B) The carrier may stop delivery only if the quantity shipped is a large shipment such as a carload or truckload.
C) The carrier may stop delivery only if a signed writing exists by which the buyer agreed to the remedy of stopping shipment.
D) The carrier may stop delivery only if ordered to do so by the bankruptcy judge.
E) The carrier may not stop delivery under any circumstances.

Question 40

Which of the following provide remedies to buyers of defective cars?

A) Apple laws
B) Lemon laws
C) Clunker laws
D) Roadside laws
E) Peach laws

Question 41

"Missed Payments." Robin, who loved water sports and relaxing in hot tubs, purchased a hot tub on an installment plan and was to pay the seller monthly. Her last payment was made on January 2, 2008. After several attempts at collection, the seller brought a lawsuit against her for sums remaining on the account on January 3, 2013. Robin defended on the basis that the statute of limitations had run. The seller claimed, however, that adequate time remained because the UCC applies a flexible statute of limitations; and, at any rate, sellers have at least five years in which to sue. Robin also arranged to purchase a personal watercraft. By contract with the seller, Robin was to pay an initial deposit within 10 days of the sale at which point she could take possession of the watercraft making monthly payments thereafter. Recognizing that a personal watercraft would not allow her to invite all her friends on lake trips, a couple of days after purchasing the personal watercraft, Robin purchased a pontoon boat. Because the seller of the pontoon boat demanded cash, Robin paid the total sales price prior to delivery. Unfortunately, when the pontoon boat was delivered, Robin found that it had a less powerful motor than the seller represented. Robin notified the seller of the problem, but the seller claimed to have no obligation to remedy the problem. Although recognizing that she paid too much for it, Robin decided that since lake season was underway, she would keep the pontoon boat. Because Robin paid full price for the pontoon boat, she was unable to pay within 10 days the deposit on the personal watercraft. The seller refused to deliver the watercraft, and sold it to another customer. Robin informed the seller that the refusal to deliver the watercraft was wrongful and that she was going to exercise her right to cover.



-Which of the following is true regarding Robin's rights, if any, as to the personal watercraft?

A) She has no right to cover although she may sue for damages because, while the UCC allows for installment sales, deposits are not required in the installment sale situation.
B) She has a right to cover only because she is a consumer, not a merchant.
C) She has a right to cover only if she pays the initial watercraft seller any amount by which the cost of the watercraft used for cover was lower than the cost of the initial watercraft.
D) She has no right to cover only because she is a consumer, not a merchant.
E) She has no right to cover, and the merchant was not required to deliver the personal watercraft.

Question 42

"Missed Payments." Robin, who loved water sports and relaxing in hot tubs, purchased a hot tub on an installment plan and was to pay the seller monthly. Her last payment was made on January 2, 2008. After several attempts at collection, the seller brought a lawsuit against her for sums remaining on the account on January 3, 2013. Robin defended on the basis that the statute of limitations had run. The seller claimed, however, that adequate time remained because the UCC applies a flexible statute of limitations; and, at any rate, sellers have at least five years in which to sue. Robin also arranged to purchase a personal watercraft. By contract with the seller, Robin was to pay an initial deposit within 10 days of the sale at which point she could take possession of the watercraft making monthly payments thereafter. Recognizing that a personal watercraft would not allow her to invite all her friends on lake trips, a couple of days after purchasing the personal watercraft, Robin purchased a pontoon boat. Because the seller of the pontoon boat demanded cash, Robin paid the total sales price prior to delivery. Unfortunately, when the pontoon boat was delivered, Robin found that it had a less powerful motor than the seller represented. Robin notified the seller of the problem, but the seller claimed to have no obligation to remedy the problem. Although recognizing that she paid too much for it, Robin decided that since lake season was underway, she would keep the pontoon boat. Because Robin paid full price for the pontoon boat, she was unable to pay within 10 days the deposit on the personal watercraft. The seller refused to deliver the watercraft, and sold it to another customer. Robin informed the seller that the refusal to deliver the watercraft was wrongful and that she was going to exercise her right to cover.



-Which of the following is true regarding Robin's options in regard to the pontoon boat?

A) She has no options in regard to recovery from the seller because she retained the pontoon boat knowing that the seller refused to grant relief.
B) She has only 90 days in which to return the pontoon boat and seek either specific performance or monetary damages to give her the benefit of the bargain.
C) She has only one year in which to return the pontoon boat and seek specific performance, but she cannot sue for damages.
D) She has only one year in which to return the pontoon boat and seek monetary damages to give her the benefit of the bargain, but she may not seek specific performance.
E) She may keep the pontoon boat and seek monetary damages to give her the benefit of the bargain.

Question 43

Under which of the following circumstances will a court refuse to uphold modifications or limitations to remedies agreed upon by the parties?

A) When they seem to give one side a benefit.
B) When one party is a corporation.
C) When neither party is a corporation.
D) When one side was not represented by an attorney.
E) When the remedies fail in their essential purpose.

Question 44

What does the UCC say regarding a limitation of consequential damages for injury to the person in the case of consumer goods?

A) A limitation of consequential damages for injury to the person is acceptable so long as both parties are represented by an attorney.
B) A limitation of consequential damages for injury to the person is acceptable so long as any consumer was represented by an attorney.
C) A limitation of consequential damages for injury to the person is prima facie unconscionable.
D) A limitation of consequential damages for injury to the person is analyzed in the same way as a limitation of consequential damages where the loss is commercial.
E) A limitation of consequential damages for injury to the person is acceptable so long as the injuries are not life threatening.

Question 45

"Missed Payments." Robin, who loved water sports and relaxing in hot tubs, purchased a hot tub on an installment plan and was to pay the seller monthly. Her last payment was made on January 2, 2008. After several attempts at collection, the seller brought a lawsuit against her for sums remaining on the account on January 3, 2013. Robin defended on the basis that the statute of limitations had run. The seller claimed, however, that adequate time remained because the UCC applies a flexible statute of limitations; and, at any rate, sellers have at least five years in which to sue. Robin also arranged to purchase a personal watercraft. By contract with the seller, Robin was to pay an initial deposit within 10 days of the sale at which point she could take possession of the watercraft making monthly payments thereafter. Recognizing that a personal watercraft would not allow her to invite all her friends on lake trips, a couple of days after purchasing the personal watercraft, Robin purchased a pontoon boat. Because the seller of the pontoon boat demanded cash, Robin paid the total sales price prior to delivery. Unfortunately, when the pontoon boat was delivered, Robin found that it had a less powerful motor than the seller represented. Robin notified the seller of the problem, but the seller claimed to have no obligation to remedy the problem. Although recognizing that she paid too much for it, Robin decided that since lake season was underway, she would keep the pontoon boat. Because Robin paid full price for the pontoon boat, she was unable to pay within 10 days the deposit on the personal watercraft. The seller refused to deliver the watercraft, and sold it to another customer. Robin informed the seller that the refusal to deliver the watercraft was wrongful and that she was going to exercise her right to cover.



-Which of the following is true regarding any right to "cover" in regard to a buyer's rights under the UCC?

A) The UCC does not recognize any concept called a right to cover.
B) The UCC recognizes that sellers have a right to cover and find substitute buyers in the event of a breach of contract.
C) The UCC recognizes the right of cover in regard to the right of sellers to cover transactions involving installment sales with financing statements.
D) The UCC recognizes the right of buyers to cover, or substitute, goods for those due under a sales agreement.
E) The UCC recognizes the right of sellers to resell goods to other buyers in order to cover contractual obligations.

Question 46

What was the result on appeal in Figgie International Inc., v. Destileria Serralles Inc, the case in the text involving a dispute over bottle-labeling equipment that did not perform as expected and whether usage of trade limited the buyer's remedy to repair, replacement, or return?

A) The court ruled that the remedy of repair, replacement, or a refund failed of its essential purpose and that the buyer was therefore not limited to that remedy.
B) The court ruled that the remedy of repair, replacement, or a refund did not fail of its essential purpose, and the remedy was enforced.
C) The remedy of repair, replacement, or a refund was found unconscionable and not enforced.
D) The remedy of repair, replacement, or a refund was found unconscionable but enforced anyway.
E) The remedy of repair, replacement, or a refund was not enforced because usage of trade may not supplement a contract.

Question 47

"Fixture Mishap." Trudy owns a hardware shop that also sells expensive bathroom fixtures. Theresa, a whiz with tools, purchased for $400 some expensive powder room fixtures for her bathroom. Trudy had only one set of the fixtures Theresa wanted. Although Theresa noticed a slight discoloration on one of the faucets, she went ahead with the contract because Trudy indicated that she would remedy the situation should the problem become worse. Because they were friends and attended the same church, Trudy gave Theresa 90 days in which to pay. A month later and before she paid for the fixtures, Theresa called Trudy and told her that the fixtures were corroding, the discoloration had worsened, and the fixtures looked terrible. Trudy told her that she would get replacements, but six months later they had not arrived. Trudy told Theresa that they were on back order. At that point, Theresa purchased fixtures elsewhere for $500 and informed Trudy that she could pick up the corroded fixtures at her front door. Trudy picked up the fixtures. They were obviously defective, but Trudy was able to resell them for $100. Trudy told Theresa that she would have gladly provided fixtures that would not corrode if she had only a bit more time, that Theresa should have given her a chance to do so, and that as far as Trudy is concerned, Theresa owes $300.

-Is Trudy likely correct in that she owes Theresa no obligation?

A) Yes, Trudy is correct but only because a consumer transaction with a nonmerchant is involved.
B) Yes, but only because the fixtures were incorporated into real property.
C) Yes, because that is the only remedy she must provide under any circumstances.
D) Yes, but only because the fixtures had not yet been paid for by the buyer.
E) No, because Theresa had the right to revoke acceptance and cover.

Question 48

"Refused Furniture." Selina arranges to sell furniture from her furniture store to Roland for $3,000. Roland was supposed to give Selina a $500 deposit on February 1 and pay the remainder in monthly installments. Selina was to deliver the furniture by February 7. Roland did not pay Selina as promised on February 1. He asked her to wait until March 1, but she refused. She told him that the contract was canceled, and she refused to deliver the furniture at all. Selina was able to sell the furniture for only $2,500 because of a downturn in the economy. Roland told Selina that she had no right to withhold or sell his furniture and that he was suing. Selina also incurred $100 in additional amounts in advertising costs to advertise the furniture that Roland initially purchased. Selina saved $40 in delivery costs because she did not have to deliver the furniture to Roland. The subsequent purchaser picked up her own furniture.



-Which of the following is true regarding any right of Selina to recover the additional advertising fees she incurred from Roland?

A) She is entitled to recover the damages only if she can show that Roland agreed to pay such damages in his contract with her.
B) She is not entitled to recover the damages because she had no right to resell the furniture.
C) She is entitled to recover the damages only if she can show that Roland has a history of breaching contracts of sale.
D) She cannot recover the damages because consumer goods are involved.
E) Selina will be able to recover the damages so long as they were reasonably incurred because of Roland's breach.

Question 49

"Refused Furniture." Selina arranges to sell furniture from her furniture store to Roland for $3,000. Roland was supposed to give Selina a $500 deposit on February 1 and pay the remainder in monthly installments. Selina was to deliver the furniture by February 7. Roland did not pay Selina as promised on February 1. He asked her to wait until March 1, but she refused. She told him that the contract was canceled, and she refused to deliver the furniture at all. Selina was able to sell the furniture for only $2,500 because of a downturn in the economy. Roland told Selina that she had no right to withhold or sell his furniture and that he was suing. Selina also incurred $100 in additional amounts in advertising costs to advertise the furniture that Roland initially purchased. Selina saved $40 in delivery costs because she did not have to deliver the furniture to Roland. The subsequent purchaser picked up her own furniture.



-Which of the following is true regarding whether Selina had a right to cancel the contract?

A) Roland was in breach giving Selina the right to cancel the contract.
B) Roland was only in partial breach, and Selina had not right to cancel the contract.
C) Roland was in breach, but Selina had no right to cancel the contract because Roland had the right to cover.
D) Roland was in breach, but Selina had no right to cancel the contract because a consumer transaction was involved.
E) Roland was in breach, but Selina had no right to cancel the contract because Roland was available for service of process.

Question 50

Sam, who owned an appliance store, contracted with Sharon to supply all the new equipment for Sharon's new restaurant. Sharon wanted all the equipment by October 15^th so that she could get the restaurant started and obtain holiday business. Sam and Sharon entered into an agreement by which Sharon would pay Sam $300 per day for every day he was late in providing the appliances. Which of the following is true regarding the section of the agreement involving the late charges?

A) It is known as a liquidated damages provision which will be enforced by a court so long as it is not so far out of reasonable range as to be punitive in nature.
B) It is known as a penalty provision which will be enforced by a court so long as the plaintiff can establish proof of compensatory damages in at least the amount of recovery requested.
C) It is known as a punitive damages provision which will be enforced by a court only if wrongdoing or fraud on the part of the defendant can be established.
D) It is known as a consequential damages provision which will be enforced by a court only if incidental damages can be established.
E) It is known as an invalid provision which will not be enforced.

Question 51

What does the UCC say regarding a limitation of consequential damages for commercial losses?

A) A limitation of consequential damages for commercial losses is acceptable so long as both parties are represented by an attorney.
B) A limitation of consequential damages for commercial losses is acceptable so long as any consumer was represented by an attorney.
C) A limitation of consequential damages for commercial losses is prima facie unconscionable.
D) A limitation of consequential damages for commercial losses is analyzed in the same way as a limitation of consequential damages for personal injury.
E) A limitation of consequential damages for commercial losses is not prima facie unconscionable.

Question 52

Which of the following is true regarding whether usage of trade may impose a remedy in the event of a breach?

A) Usage of trade may not impose a remedy in the event of a breach.
B) Usage of trade may impose a remedy in the event of a breach but it may not impose an exclusive remedy.
C) Usage of trade may impose an exclusive remedy in the event of a breach.
D) Usage of trade may impose an exclusive remedy in the event of a breach only if both sides are represented by an attorney.
E) Usage of trade may impose an exclusive remedy in the event of a breach only if a contract signed by both parties specifically provides as such.

Question 53

"Fixture Mishap." Trudy owns a hardware shop that also sells expensive bathroom fixtures. Theresa, a whiz with tools, purchased for $400 some expensive powder room fixtures for her bathroom. Trudy had only one set of the fixtures Theresa wanted. Although Theresa noticed a slight discoloration on one of the faucets, she went ahead with the contract because Trudy indicated that she would remedy the situation should the problem become worse. Because they were friends and attended the same church, Trudy gave Theresa 90 days in which to pay. A month later and before she paid for the fixtures, Theresa called Trudy and told her that the fixtures were corroding, the discoloration had worsened, and the fixtures looked terrible. Trudy told her that she would get replacements, but six months later they had not arrived. Trudy told Theresa that they were on back order. At that point, Theresa purchased fixtures elsewhere for $500 and informed Trudy that she could pick up the corroded fixtures at her front door. Trudy picked up the fixtures. They were obviously defective, but Trudy was able to resell them for $100. Trudy told Theresa that she would have gladly provided fixtures that would not corrode if she had only a bit more time, that Theresa should have given her a chance to do so, and that as far as Trudy is concerned, Theresa owes $300.

-Which of the following most accurately describes the action taken by Theresa?

A) Theresa breached the contract
B) Theresa revoked acceptance and covered
C) Theresa canceled the contract and exchanged
D) Theresa substantially performed
E) Theresa engaged in a trade modification

Question 54

What does the UCC provide regarding a limitation on consequential damages allowing for repair, replace, or refund in the event of equipment malfunction?

A) That consequential damages may be limited or excluded unless the limitation or exclusion benefits one party over the other.
B) That consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable.
C) That consequential damages may be limited but not excluded entirely.
D) That consequential damages may be limited or excluded entirely unless any type of breach of warranty is involved in which case consequential damages may be limited but not excluded.
E) That consequential damages may be limited or excluded entirely unless any type of breach of warranty is involved in which case consequential damages may be neither limited nor excluded.

Question 55

"Refused Furniture." Selina arranges to sell furniture from her furniture store to Roland for $3,000. Roland was supposed to give Selina a $500 deposit on February 1 and pay the remainder in monthly installments. Selina was to deliver the furniture by February 7. Roland did not pay Selina as promised on February 1. He asked her to wait until March 1, but she refused. She told him that the contract was canceled, and she refused to deliver the furniture at all. Selina was able to sell the furniture for only $2,500 because of a downturn in the economy. Roland told Selina that she had no right to withhold or sell his furniture and that he was suing. Selina also incurred $100 in additional amounts in advertising costs to advertise the furniture that Roland initially purchased. Selina saved $40 in delivery costs because she did not have to deliver the furniture to Roland. The subsequent purchaser picked up her own furniture.



-Which of the following is true regarding any deduction in damages to which Roland is entitled?

A) Roland is not entitled to any deduction because he was the breaching party.
B) Roland is entitled to a deduction for the delivery expenses only if he can show that Selina agreed in writing to deduct those in the event of a breach.
C) Roland is entitled to a deduction for the delivery expenses only if he can establish that Selina either knew or should have known that he would be unable to pay for the furniture.
D) Roland is entitled to a deduction for the delivery expenses because that was a savings to Selina.
E) Roland is entitled to a deduction for the delivery expenses because Selina breached the contract by not delivering the furniture to him and then pursuing an action for damages.

Question 56

What are the rights of the parties under the UCC to provide for remedies in addition to those provided by the UCC?

A) Parties to a commercial sales agreement may provide for remedies in addition to those provided by the UCC.
B) Parties to a commercial sales agreement may not provide for remedies in addition to those provided by the UCC.
C) Parties to a commercial sales agreement may provide for remedies in addition to those provided by the UCC only if both sides are represented by an attorney.
D) Parties to a commercial sales agreement may provide for remedies in addition to those provided by the UCC only if both parties are merchants.
E) Parties to a commercial sales agreement may provide for remedies in addition to those provided by the UCC only in transactions involving over $10,000 in value.

Question 57

"Missed Payments." Robin, who loved water sports and relaxing in hot tubs, purchased a hot tub on an installment plan and was to pay the seller monthly. Her last payment was made on January 2, 2008. After several attempts at collection, the seller brought a lawsuit against her for sums remaining on the account on January 3, 2013. Robin defended on the basis that the statute of limitations had run. The seller claimed, however, that adequate time remained because the UCC applies a flexible statute of limitations; and, at any rate, sellers have at least five years in which to sue. Robin also arranged to purchase a personal watercraft. By contract with the seller, Robin was to pay an initial deposit within 10 days of the sale at which point she could take possession of the watercraft making monthly payments thereafter. Recognizing that a personal watercraft would not allow her to invite all her friends on lake trips, a couple of days after purchasing the personal watercraft, Robin purchased a pontoon boat. Because the seller of the pontoon boat demanded cash, Robin paid the total sales price prior to delivery. Unfortunately, when the pontoon boat was delivered, Robin found that it had a less powerful motor than the seller represented. Robin notified the seller of the problem, but the seller claimed to have no obligation to remedy the problem. Although recognizing that she paid too much for it, Robin decided that since lake season was underway, she would keep the pontoon boat. Because Robin paid full price for the pontoon boat, she was unable to pay within 10 days the deposit on the personal watercraft. The seller refused to deliver the watercraft, and sold it to another customer. Robin informed the seller that the refusal to deliver the watercraft was wrongful and that she was going to exercise her right to cover.



-Which of the following is true regarding the hot tub seller's right to recover funds from Robin?

A) The seller will likely be able to proceed because the UCC has a flexible statute of limitations that takes into account whether the seller attempted to collect or lulled the plaintiff into believing collection efforts would not be made.
B) The seller will be able to proceed because the UCC statute of limitations in this case would not expire for five years once a cause of action accrued.
C) The seller will not be able to proceed because the UCC statute of limitations in this case expired three years after the cause of action accrued.
D) The seller will not be able to proceed because the UCC statute of limitations in this case expired four years after the cause of action accrued.
E) The seller will not be able to proceed because the UCC statute of limitations in this case expired two years after the cause of action accrued.

Question 58

"Refused Furniture." Selina arranges to sell furniture from her furniture store to Roland for $3,000. Roland was supposed to give Selina a $500 deposit on February 1 and pay the remainder in monthly installments. Selina was to deliver the furniture by February 7. Roland did not pay Selina as promised on February 1. He asked her to wait until March 1, but she refused. She told him that the contract was canceled, and she refused to deliver the furniture at all. Selina was able to sell the furniture for only $2,500 because of a downturn in the economy. Roland told Selina that she had no right to withhold or sell his furniture and that he was suing. Selina also incurred $100 in additional amounts in advertising costs to advertise the furniture that Roland initially purchased. Selina saved $40 in delivery costs because she did not have to deliver the furniture to Roland. The subsequent purchaser picked up her own furniture.


-Which of the following is true regarding Roland's claim that Selina had no right to sell the furniture he initially purchased?

A) Roland is correct. Selina had no right to sell the furniture, but she retained the right to sue him for any deficiency.
B) Roland is correct but only because of the special UCC exception for consumer goods.
C) Roland is incorrect. Selina had a right to resell the furniture.
D) Roland is incorrect but only if Selina can prove that she had no reason to believe that he was a credit risk prior to signing the contract of sale.
E) Roland is correct because of federal consumer protection laws.

Question 59

What is the likely effect of Trudy reselling the defective fixtures for $100?

A) That is the only remedy Trudy will receive.
B) The $100 will be deducted from the $400 Theresa owes leaving Theresa owing Trudy $300.
C) Trudy will be allowed to keep the $100 and is still entitled to receive $400 from Trudy.
D) Because of the extra work involved, Trudy will be required to deduct only half of the $100 from Theresa's debt, leaving Theresa owing $350.
E) After the $100 is deducted, Trudy and Theresa will be required under the UCC to split the difference leaving Theresa owing $150.

Question 60

"Refused Furniture." Selina arranges to sell furniture from her furniture store to Roland for $3,000. Roland was supposed to give Selina a $500 deposit on February 1 and pay the remainder in monthly installments. Selina was to deliver the furniture by February 7. Roland did not pay Selina as promised on February 1. He asked her to wait until March 1, but she refused. She told him that the contract was canceled, and she refused to deliver the furniture at all. Selina was able to sell the furniture for only $2,500 because of a downturn in the economy. Roland told Selina that she had no right to withhold or sell his furniture and that he was suing. Selina also incurred $100 in additional amounts in advertising costs to advertise the furniture that Roland initially purchased. Selina saved $40 in delivery costs because she did not have to deliver the furniture to Roland. The subsequent purchaser picked up her own furniture.


-Which of the following is true regarding Roland's claim that Selina had no right to withhold his furniture?

A) Roland is correct. Selina was required to deliver the furniture, but she retained the right to sue him for any deficiency.
B) Roland is correct but only because of the special UCC exception for consumer goods.
C) Roland is incorrect. Selina had a right to withhold the furniture.
D) Roland is incorrect but only if Selina can prove that she had no reason to believe that he was a credit risk prior to signing the contract of sale.
E) Roland is correct because of federal consumer protection laws.

Question 61

Discuss the steps that may be taken and the damages a seller and lessor may recover when a buyer or lessee is in breach, and the goods have not yet been delivered.

Question 62

Bernice purchased a new trampoline from ABC Trampolines. The purchase agreement signed provided that she released ABC Trampolines from any consequential damages for personal injury. Unfortunately, the trampoline ripped while she was using it causing Bernice to fall and break her leg. She asked ABC for damages but the manager refused. The manager referenced her agreement whereby she signed away her rights to consequential damages for personal injury. Is the manager right, and why or why not?

Question 63

Discuss when specific performance is available as a remedy against a seller or lessor when the sale of goods is involved, and what is involved if specific performance is decreed.

Question 64

Which of the following must a buyer do in obtaining cover?

Question 65

List the various options discussed in the text that may be available to a buyer/lessee when the seller/lessor is in breach.

Question 66

Define punitive damages, set forth how the UCC handles the issue of punitive damages, and discuss whether you believe they should be available in breach of contract actions.