Deck 22: Remedies for Breach of Sales Contracts

Question 1

If the seller fails or refuses to deliver the goods called for in the contract, the buyer can purchase substitute goods; this is known as rescission.

Answer 1

False

Question 2

An agreement for liquidated damages is enforced if the amount is reasonable and if actual damages would be difficult to prove in the event of breach of the contract.

Answer 2

True

Question 3

The amount of liquidated damages is considered reasonable if it is not so large as to be a penalty or so small as to be unconscionable.

Answer 3

True

Question 4

After a breach of contract by a buyer, if a seller auctions the goods and makes a profit, he is not liable to give the profit to the buyer.

Question 5

If the buyer "covers," the buyer can recover as damages from the seller the difference between the breached contract price and the cost of the substituted goods.

Question 6

The objective of the various remedies for breach of contract is to put the injured person in the same position as if the contract had been performed.

Question 7

An injured buyer is able to recover consequential damages even if he could have prevented the damage by obtaining substitute goods.

Question 8

A buyer whose seller breaks the contract may recover punitive damages based on three times the difference between the contract price and the current market price of the goods.

Question 9

If the parties agree on the amount of damages that will be paid to the injured party if the other party fails to perform, this amount is known as illusory damages.

Question 10

Buyers are entitled to specific performance of a contract if the goods covered by the contract are unique.

Question 11

Which of the following statements is true of consequential damages?

A) Liability for consequential damages cannot be excluded by an agreement between the parties.
B) A limitation on the liability for consequential damages cannot be enforced if it is unconscionable.
C) Consequential damages do not involve the recovery of damages caused by consumer goods.
D) Exclusion of or limitation on consequential damages is permitted where the loss is not commercial.

Question 12

The objective of providing remedies for the breach of a sales contract is to:

A) punish or penalize the party responsible for breaching the contract.
B) encourage parties to rely on trade practices rather than express terms.
C) put the injured person in the same position as if the contract has been performed.
D) encourage parties to rely on oral contracts rather than written contracts.

Question 13

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

A) liquidated damages
B) registration expenses
C) consequential damages
D) remedial agreements

Question 14

Unless the seller has agreed to extend credit to the buyer, the buyer must pay for the goods at the time they are delivered.

Question 15

When a buyer breaches a contract, the seller has the right to cancel the contract.

Question 16

The Uniform Commercial Code (UCC) provides that a lawsuit for breach of a sales contract must be filed within three years after the breach occurs.

Question 17

Which of the following is a correct statement regarding the statute of limitations period recognized by the Uniform Commercial Code (UCC) for a breach of sales contract lawsuit?

A) The parties to a contract for the sale of goods may not shorten the statute of limitations period.
B) The parties to a contract for the sale of goods may shorten the statute of limitations period to one year.
C) The parties to a contract for the sale of goods may extend the statute of limitations beyond the time period recognized by the UCC.
D) There is no statute of limitations period for a lawsuit for breach of a contract for the sale of goods.

Question 18

If a seller discovers a buyer is insolvent, the seller must continue to ship contracted-for goods to the buyer until the bankruptcy court issues a formal declaration of insolvency.

Question 19

Which of the following results from a breach of contract and may be limited or excluded by an agreement?

A) Liquidated damages
B) Registration default
C) Consequential damages
D) Specific performance

Question 20

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

Question 21

An injured buyer can recover consequential damages when a seller breaches a contract if the:

A) expenses incurred during storage of goods do not conform to those called for in the contract.
B) buyer purchases goods that have a higher market price than the contract price in the breached contract.
C) goods are not consumer products.
D) buyer can show that the damage could not have been prevented by obtaining substitute goods.

Question 22

Under the Uniform Commercial Code (UCC), which of the following remedies is available to both buyers and sellers?

A) Recovering the total value of goods in the contract
B) Recovering profit from the resale of nonconforming goods by the other party
C) Damages in the amount of the difference between the contract price and the market price of goods
D) Obtaining specific performance of the contract

Question 23

When a buyer covers, he or she may recover from the seller the:

A) difference between the contract price and the market price.
B) difference between the contract price and the cost of the substitute goods.
C) goods the seller has failed to deliver.
D) reasonable value of the goods as decided by the buyer.

Question 24

_____ damages for a seller include storage charges and sales commissions.

A) Intentional
B) Incidental
C) Liquidated
D) Unconscionable

Question 25

Sam contracted with Roadies Garage for customized pink seat covers on a new Porsche intended as a gift to his fiancé. Two days before the delivery was due, Sam broke off his engagement and told Roadies Garage that he was no longer interested in getting the seat covers. Which of the following is the most reasonable course of action that Roadies Garage can take?

A) It should coerce Sam into buying the covers.
B) It should start a line of pink seat covers so that they have more to sell.
C) It should complete manufacture anyway and hope that Sam changes his mind.
D) It should sell the uncompleted covers for their scrap or salvage value.

Question 26

When a seller makes a profit from the resale of goods after a buyer breaches a contract, the seller:

A) may keep the profits.
B) must share the profit with the buyer who breached the contract.
C) must pay incidental damages to the buyer.
D) may not recover incidental damages from the profits.

Question 27

Monroe Hardware contracted to purchase 20 alarm clocks from Clocks Inc., a clock manufacturer. One week before delivery, Monroe Hardware notified Clocks Inc. that it was canceling its contract because it (Monroe Hardware) was overstocked with clocks. Which of the following is a remedy available to Clocks Inc. in this scenario?

A) Clocks Inc. must attempt to resell the clocks to another buyer before it can recover damages from Monroe.
B) Clocks Inc. must attempt delivery of the goods before it can sue Monroe for damages.
C) Clocks Inc. may recover the difference between the contract price of the clocks and the current market price of the clocks.
D) Clocks Inc. can recover the purchase price from Monroe even if resale is possible.

Question 28

Which of the following is true of damages incurred by the seller when a buyer repudiates a contract?

A) The buyer is not liable for the difference between the contract price and the market price at which the goods are currently selling.
B) The only way the seller can recover damages is by reselling the goods.
C) The seller can only recover incidental damages and not the lost revenue.
D) The seller can recover lost profit and overheads along with incidental expenses.

Question 29

Which of the following holds true of the seller's entitlement on the recovery of purchase price of goods?

A) The seller is not entitled to the purchase price of all goods accepted by the buyer.
B) The seller cannot recover the purchase price of goods damaged after the buyer assumed the risk for their loss.
C) Even if the seller successfully resells the goods, he can claim recovery of the purchase price from the buyer.
D) If the seller resells goods to another buyer, the seller must give the first buyer due credit for the proceeds of the resale.

Question 30

If the buyer and seller have an agreement for liquidated damages, and the seller justifiably withheld delivery of the goods because of the buyer's breach, the buyer is entitled to recover:

A) any money or goods he has delivered to the seller over and above the agreed amount of liquidated damages.
B) an amount in excess of $500 or 20 percent of the value of total performance.
C) any money or goods he has delivered to the seller only to the agreed amount of liquidated damages.
D) an amount in excess of $1,000 or 20 percent of the value of total performance or whichever amount is higher.

Question 31

Amir bought a television set from Corbel Electronics for $250. Corbel Electronics delivered a warranty of six years for any manufacturing defect in the product. After three years of use, the television set caught fire because of a manufacturing defect. The fire also damaged other goods in Amir's house. Which of the following statements is most accurate regarding this scenario?

A) Amir cannot recover damages for personal injuries under the warranty from Corbel Electronics.
B) Amir cannot recover damages for loss in value of the television set.
C) Amir can claim consequential damages for a breach of warranty resulting in injury to the property.
D) Amir's right to recover damages is barred by the Uniform Commercial Code's statute of limitations.

Question 32

If the future performance of a product is covered by its warranty, then a breach occurs:

A) at the time the buyer should have discovered the defect in the product.
B) one year after the defect in the product is discovered by the buyer.
C) when the buyer complains to the manufacturer about a defect in the product.
D) when the purchase is marked as complete, and the product is delivered to the buyer.

Question 33

If a seller discovers a buyer is insolvent, the seller:

A) must wait 10 days before taking action.
B) has the right to stop delivery of any goods that are being shipped to the buyer.
C) has to go ahead with the shipment anyway because doing otherwise would disrupt the purchase contract.
D) must wait seven days before taking any action.

Question 34

Under the Uniform Commercial Code (UCC), a lawsuit for breach of a sales contract must be filed:

A) as soon as the breach is detected.
B) within a year after the breach is detected.
C) within ten years after the breach occurs.
D) within four years after the breach occurs.

Question 35

When the seller is rightfully claiming for the buyer's rejection or repudiation, the seller can recover the difference between the contract price and the market price or:

A) the "profit" the seller lost.
B) half of the cost price.
C) the amount equaling the accident insurance.
D) whatever the buyer determines in good faith.

Question 36

When a buyer breaches a contract, the seller:

A) must deliver the goods to the buyer anyway.
B) need not give any credit to the buyer for any expenses the seller saved.
C) may resell the goods covered by the contract.
D) cannot reclaim goods in the possession of an insolvent buyer.

Question 37

When a seller breaches a contract, the buyer may:

A) buy other goods and recover damages from the seller based on additional expense incurred in obtaining the goods.
B) obtain specific performance only if the goods are not unique and can be found elsewhere.
C) not recover consequential damages.
D) legally sue the seller into performing if the seller repudiated the contract based on the buyer's insolvency.

Question 38

A seller may resell the goods when:

A) the buyer breaches the contract, and the seller has possession of the goods.
B) the seller breaches the contract, and the buyer has possession of the goods.
C) neither party breaches the contract, but the seller can make a higher profit upon resale to another buyer.
D) the seller is sure that the buyer is going to breach the contract.

Question 39

A buyer is _____ if he cannot pay his bills when they become due.

A) unconscionable
B) liquidated
C) unaccountable
D) insolvent

Question 40

In which of the following ways can a seller breach a contract?

A) By selling the goods to the buyer at a price higher than the market value
B) By delivering goods that do not conform to the contract
C) By repudiating a contract because the buyer is insolvent
D) By indicating an intention to fulfill the obligations under the contract sooner than agreed

Question 41

Explain the buyer's right to specific performance when the seller breaches a contract for the sale of goods.

Question 42

What are liquidated damages?

Question 43

Bev ordered an alabaster-colored mink coat from Poe's Furs. The coat had been specially made because she required an unusually large size and had requested a particular styling. The coat cost was $5,500, of which Bev paid $250. Several months later, she decided that she did not want the coat and canceled the order even though Poe's Furs had completed the coat. Poe's Furs then filed a suit for the balance of the purchase price. What can Bev argue in defense?

Question 44

When the goods covered by a contract are unique and it is not possible for a buyer to obtain substitute goods, the buyer is entitled to _____ of the contract.

A) liquidated damages
B) specific performance
C) incidental damages
D) cover

Question 45

On May 1, Fred agreed to sell and deliver 1,000 bushels of wheat to a baker for $7 per bushel. After the market price of wheat rose to $8 per bushel, Fred breached the contract by refusing to sell a bushel of wheat at $7. He demanded that the baker pay $8.50 per bushel of wheat. If the baker can get substitute wheat at the current market price, can he get specific performance? If not, what options are available to him if he seeks damages for breach of contract from Fred? What will he recover under each option?

Question 46

Jim makes a contract with Oleta to sell her a 1965 lava lamp once owned by a famous artist. Jim later decides that he does not want to sell the lamp to Oleta. In this scenario, Oleta:

A) cannot get any remedy because the lamp is not a generic product.
B) can claim exemplary damages.
C) can require Jim to specifically perform the contract.
D) can sue Jim for an unfair and deceptive trade practice.

Question 47

What is the statute of limitations period for a lawsuit for breach of a sales contract? Does the Uniform Commercial Code (UCC) allow buyers and sellers to shorten or lengthen the statute of limitations period?

Question 48

When goods are defective and the buyer provides the seller with notice, which of the following remedies is applicable?

A) The buyer is entitled to only consequential damages.
B) The buyer can claim only incidental damages.
C) The buyer can recover the difference between the value of the goods received and the value the goods would have had if they had been as warranted.
D) The buyer cannot recover damages and can only get the reimbursement amount that the seller thinks is reasonable.

Question 49

If a buyer accepts defective goods and wants to hold the seller liable, the buyer must give the seller notice of the defect:

A) only in writing.
B) within a reasonable time after detecting the defect.
C) within the same financial year of the purchase.
D) when the contract is made.

Question 50

If the seller refuses to deliver the goods called for by the contract, the buyer can:

A) get the difference between the contract price of the goods and their market price at the time the buyer learns of the seller's breach.
B) sue for only consequential damages, and if he fails, get a percentage of the difference between contract price and market price.
C) avoid giving the seller any credit for expenses saved.
D) seek specific performance even if the goods ordered are not unique in nature.