Deck 14: The UCC: Sales and Secured Transactions

Question 1

Megan agrees to sell Nancy her Rolex watch, but she does not specify a price. In such a case, the court would not enforce the agreement because all of the essential terms are not present.

Answer 1

False

Question 2

Which of the following is TRUE regarding an open price term?

A)It makes the contract unenforceable.
B)The price may be fixed by the seller.
C)The price is the "reasonable" price at the time of delivery.
D)The price is set by the buyer.

Answer 2

C

Question 3

Which of the following contracts requires a writing under the UCC, Article 2?

A)Jeremy, a full-time student, sold his snow blower to a friend for $450.
B)Kayla, a full-time student, purchased a used computer from Office Plus for $300.
C)A toy manufacturer contracted to sell dolls valued at $10,000 to a department store.
D)Tobias Department Store contracted to sell Jenny a $400 doll.

Answer 3

C

Question 4

The UCC is federal legislation enacted by Congress.

Question 5

In which of the following cases is the predominant purpose the sale of goods?

A)Juanita goes to her dentist to have a cavity filled; while there, she buys a tube of whitening toothpaste the dentist sells at the front desk.
B)Anderson makes an appointment with his stockbroker to purchase 100 shares of Microsoft stock.
C)Millicent purchases ten bags of gravel from a landscaping company; an employee carries them to her truck and loads them for her.
D)Thomas purchases a membership to a health club; his membership entitles him to a free bottle of water with every visit.

Question 6

In a mixed contract involving both goods and services, Article 2 of the UCC will govern if the predominant purpose is the sale of goods.

Question 7

Elizabeth worked as a salesperson in a carpet store. She was in the midst of divorce proceedings and needed some money. Elizabeth sold her wedding ring. Elizabeth is considered a merchant with regard to the sale of the ring.

Question 8

All of the following parties had a hand in creating the UCC except

A)the U.S. Senate.
B)the American Law Institute.
C)the National Conference of Commissioners on Uniform State Laws.
D)None of these are correct.

Question 9

If Edmund and Kaylin have a writing mistakenly showing a sale and purchase of goods for $10,000 when the price should have been $1,000, a court will most likely

A)enforce the agreement, relying on oral testimony to determine the correct price.
B)only enforce the agreement as written.
C)not hear the case unless both parties are merchants.
D)not enforce the agreement since the writing did not reflect a meeting of the minds of the parties.

Question 10

Uncle Brandon promises to give his motorcycle to you for free at the end of the month. This transaction is governed by UCC, Article 2, because a motorcycle is within the definition of "goods."

Question 11

A court is much more likely to find a contract unconscionable when one party is a consumer than if the two parties are businesses.

Question 12

Under the UCC, a merchant is frequently held to a higher standard of conduct than a non-merchant.

Question 13

Under the UCC, a modification to a contract for the sale of goods needs no consideration to be binding.

Question 14

The UCC does not apply to a contract for the sale of goods if the value of the goods is less than $500.

Question 15

Which of the following would be considered a merchant under the UCC?

A)A woman sells her pistol to someone responding to a classified ad.
B)A man who owns a jewelry store sells his used car to a neighbor.
C)A gun dealer sells a rifle to someone who enters his shop.
D)All of these are correct.

Question 16

In a "mixed contract," one involving a sale of both goods and services, the court will

A)apply the UCC to the provisions of the contract involving the sale of goods and the common law to the provisions involving the sale of services.
B)apply the lex mercatoria to the contract.
C)first determine the dominant purpose of the contract. If the sale of goods dominates the contract, then the court will apply the law of the UCC, Article 2. If the sale of services dominates the contract, the court will apply the common law.
D)apply UCC Article 2A.

Question 17

Rachel Retailer sends a preprinted purchase order offering to buy goods from Snidley Supplier. Snidley acknowledges Rachel's offer with a preprinted acceptance form. The terms of the two forms do not mirror each other. To analyze whether an enforceable contract exists, one must first determine whether the new language in the acceptance is an additional term or a different term.

Question 18

Lorene, an artist, orally agrees to sell Sabrina a painting for $600. While Lorene is busy talking on the phone, Sabrina writes her a note on the back of an envelope she finds in her purse. The signed note states that she will stop by the studio to pick up the painting within the week. Sabrina changes her mind about the painting, and when Lorene sues to enforce the contract, Sabrina defends on the basis of the Statute of Frauds. Sabrina will succeed with this defense.

Question 19

Lian contracted for financial services from E-wise. This contract is governed by Article 2 of the UCC.

Question 20

Newt, a gun dealer, offers to sell a rare civil war musket to Rush, another dealer, for "$15,000, insurance and shipping paid by buyer." Rush responds, "I accept. Insurance and shipping costs divided equally between seller and buyer." The parties

A)do not have a contract since the acceptance violated the mirror image rule.
B)do not have a contract since Rush's response was a counteroffer.
C)have a contract, and in the majority of states, the terms of the offeree control.
D)have a contract, and in the majority of states, the different terms will cancel each other out.

Question 21

Which article of the UCC covers the sale of goods?

A)Article 1
B)Article 2
C)Article 3
D)Article 4

Question 22

Harriett raises and sells hippos. In order to keep her hippos happy and healthy, she feeds them Hippo Chow, which she buys from the local pet store. Under the UCC, Harriett is

A)a merchant of both hippos and Hippo Chow.
B)a merchant of hippos, but not of Hippo Chow.
C)a merchant of Hippo Chow, but not of hippos.
D)not a merchant of either hippos or Hippo Chow.

Question 23

Betty's BBQ orally contracts with Denny's Design House for 10,000 matchbooks at the price of 10 cents per matchbook. The matchbooks are to be embossed with a logo to be designed by Denny's Design promoting Betty's BBQ. Price, payment terms, and delivery terms are agreed upon between the parties. Denny's Design creates the logo, gets Betty's BBQ's approval of the design, and begins applying the logo on the matchbook covers. Denny's Design has almost finished the order when Betty's BBQ calls to say it has decided to make the eatery a smoke-free restaurant and cancels the order. Denny's Design sues, but Betty's BBQ states that the agreement is unenforceable under the Statute of Frauds. Who wins?

A)Denny's Design House wins. This situation falls under an exception to the Statute of Frauds.
B)Denny's Design House wins. This is a service contract for design of a logo. Therefore, the UCC, including the Statute of Frauds provisions of Article 2, does not apply.
C)Betty's BBQ wins. This is a contract for $1,000. The Statute of Frauds requires all sales contracts in excess of $500 be in writing.
D)Betty's BBQ wins. The Statute of Frauds only applies to merchants. Betty's BBQ is not a merchant in this instance because it intended to give the matchbooks away and not sell them.

Question 24

Tu-thumbs buys a used paint sprayer from the local paint store. The sprayer had a large sign on it that said "AS IS." The dealer made no promises or statements concerning the performance of the paint sprayer. When Tu-thumbs attempts to spray paint his house, the trigger on the sprayer sticks in the "on" position and before Tu-thumbs can pull the electrical cord to cut the power, paint is sprayed all over his prize Borzoi dog that is scheduled to be shown in a dog show the next day. Tu-thumbs sues the dealership. Who wins?

A)Dealer wins; there were no express warranties, and all implied warranties have been successfully disclaimed.
B)Tu-thumbs wins; he can recover on the basis of express warranties.
C)Tu-thumbs wins; he can recover on the basis of the implied warranty of merchantability because the word "merchantability" was not used in the disclaimer.
D)Dealer wins; even though there were implied warranties, the damage to the dog could not have been foreseen.

Question 25

Discuss the importance of the UCC to the law of sales. Include who created the UCC and how it became law.

Question 26

ABC Siding, Inc. manufactures aluminum siding. ABC enters into a contract to deliver siding to Slippery Siding, Ltd., a retailer of aluminum siding. The written agreement insists that all modifications to the agreement be in writing and signed by both parties. This prohibition against oral modifications is

A)valid regardless of whether the clause is signed separately.
B)invalid unless the clause is signed separately by Slippery Siding, Ltd.
C)invalid unless the clause is signed separately by ABC Siding, Inc.
D)invalid unless new consideration is supplied by the parties when the modification agreement is made.

Question 27

Oxtren, Inc. is a tools wholesaler. Oxtren sent M&E Tools a purchase order offering to buy 200 Model 308 milling and drilling machines with R-8 spindles. The purchase order stated the credit term to be 2% discount if payment was made in 10 days, with the full amount due in 30 days. M&E responded with an acceptance form accepting the offer. The acceptance form, however, stated that full payment was due on delivery and that disputes under the contract would be settled by arbitration.
(A)Do the parties have an agreement?

(B)What is the payment term?

(C)Is the arbitration clause part of the agreement?

Question 28

A sales representative at Oxtren, Inc. orally tells the purchasing agent at Wety, Inc. that its industrial saw is exceptional. Which statement is correct concerning the claim that the saw is exceptional?

A)The claim is an express warranty.
B)The claim is an implied warranty of merchantability.
C)The claim is not a warranty because it is not in writing.
D)The claim is not a warranty because it is sales puffery.

Question 29

Sean of Sean's Shrimp House was enjoying a cup of cappuccino while visiting with Ollie at Ollie's Ocean Front Bar & Grill. During the course of their conversation, Sean agreed to supply 100 pounds of shrimp per month for the next year to Ollie's restaurant at the price of $2.50 per pound. When Sean got back to his office, he sent a written confirmation of the agreement to Ollie. Six weeks after receiving the confirmation Ollie wrote back, stating that he had not agreed to the price of $2.50 per pound. Is Ollie bound to the confirmation?

Question 30

Jones contracts to buy a computer from Martin for $1,500. The contract calls for Martin to service the computer quarterly for the first year and to tutor Jones on how to use the software. Is this contract covered by the UCC or common law?

Question 31

A statement that a particular warranty does not apply is called a(n)

A)disclaimer.
B)infringement.
C)limitation of remedy clause.
D)voidable title.

Question 32

UCC Section 2-204 provides three important rules that enable parties to make a contract quickly and informally. Which of the following is NOT one of these rules?

A)The parties may make a contract in any manner sufficient to show that they reached an agreement.
B)A writing sufficient under the Statute of Frauds may be a simple memo, a letter, or informal note, but need not itself be a contract.
C)The UCC will enforce a deal even though it is difficult to say exactly when it was formed.
D)A court may enforce a bargain even though one or more terms were left open.

Question 33

Which of the following would be a breach of the implied warranty of merchantability?

A)a knife that cuts its user when slicing a bagel
B)a radio that does not pick up FM signals
C)a match that burns a spot in the carpet when accidentally dropped
D)a dress watch that does not keep accurate time after getting wet

Question 34

Mark, a power tool salesman, promises Jill, a customer, that the Turbo Power Hedge Trimmer 1000 will easily cut through bamboo up to 3 inches thick. Mark's statement constitutes an express warranty if Jill purchases the hedge trimmer.

Question 35

Mason bought a rotisserie in preparation for a party he was planning. When he put a chicken on the rotisserie, it would not rotate, but stayed in one position where it burned the chicken on one side and left it raw on the other. When he returned the rotisserie to the store, the salesperson disclaimed any responsibility because he had never told Mason the rotisserie would rotate the food as it cooked. Does Mason have any recourse?

A)No, the salesperson did not make any express warranties.
B)Yes, the salesperson made an express warranty just by selling the goods.
C)Yes, although the salesperson did not make any express warranties, the UCC imposes an express warranty on the sale.
D)Yes, although the salesperson did not make any express warranties, the UCC imposes an implied warranty of merchantability under which the rotisserie is guaranteed to be fit for the ordinary purposes for which it is used.

Question 36

Alice's Aspirin Inc. produces and packages aspirin for sale to retail stores. Bob buys a bottle of Alice's aspirin at Dahl's Food Stores. Two days later Bob takes two aspirin and within minutes, becomes very ill and is rushed to the hospital, where it is found that a defect in the aspirin caused the reaction. Which of the following is correct?

A)Bob can sue both Alice's Aspirin Inc. and Dahl's because he suffered personal injury due to the defective product.
B)Bob cannot sue anyone because he assumed the risk of taking the aspirin.
C)Bob cannot sue anyone because he is not in privity with Dahl's or Alice's.
D)Bob can sue but will not be able to recover consequential damages for his medical expenses.

Question 37

Long's Department Store contracted to buy 1,000 drop-waist velour dresses in heather gray from Durham. Subsequently, Durham called and asked to ship mink-colored dresses instead of heather gray. Long agreed, in writing, to the change. Which statement is correct?

A)The modification is not enforceable since there was no consideration for the change.
B)The modification is not enforceable since the parties are merchants.
C)The modification is enforceable.
D)Whether the modification is enforceable depends on the gap-filler rule.

Question 38

A tag attached to a tree in a nursery identifying the tree as a Southern Magnolia creates an express warranty.

Question 39

By definition, a sale under Article 2 of the UCC requires

A)that the parties involved be merchants.
B)that the product involved be goods, services, or a mixture; that the sale be between or among merchants; and that the sale take place in the normal course of business for that industry.
C)that title to the goods pass between the seller and the buyer and that a price be paid for the goods.
D)that the product involved be an item that can be sold or leased.

Question 40

If a seller includes an express warranty in the written sales contract, any disclaimer is invalid.

Question 41

A buyer who accepts nonconforming goods may revoke the acceptance under limited circumstances.

Question 42

What is the difference between incidental damages and consequential damages?

Question 43

Wimble ordered 1,000 pro-quality luminescent orange tennis balls from Sports Unlimited at a cost of $800. On June 1, Sports Unlimited shipped standard white tennis balls, but Wimble rejected them. Wimble bought the same number of pro-quality luminescent orange balls from another supplier the same day for $650. In a suit against Sports Unlimited, Wimble may recover $800.

Question 44

Meister Bros. shipped 250 radiator belts to fill Braybon's order. Quality control measures had been in place in Meister's factory when the belts were manufactured. When Braybon received the order one day before it was due, it notified Meister that it rejected the belts because of a variation from the contract specifications. Meister, although it believed the original belts met the contract specifications, notified Braybon that it would supply conforming goods within one week. When the conforming goods arrive in one week,

A)Braybon must accept them, but does not have to pay the full price because the contract deadline has passed.
B)Braybon does not have to accept them because Meister Bros. only has one chance to fill the order correctly.
C)Braybon should accept them because Meister Bros. has a right to cure even after the contract deadline under these circumstances.
D)Braybon does not have to accept them because Meister Bros. failed to meet its UCC requirement to deal in good faith.

Question 45

Under the UCC, a buyer's right to reasonably obtain substitute goods because another party has not honored a contract is called

A)breach.
B)cure.
C)cover.
D)consideration.

Question 46

A baseball team ordered 500 wooden baseball bats from Bats, Inc., for delivery on June 1. On May 15, the ball team received 500 aluminum bats instead of the wooden ones. As of May 16, Bats, Inc.

A)may cure before June 1.
B)has breached the contract and is liable for damages.
C)has breached the contract only if the baseball team rejects the goods.
D)may cure if the baseball team gives Bats, Inc. permission to do so.

Question 47

Which of the following statements is NOT TRUE regarding the buyer's right to cover?

A)The buyer must cover.
B)The measure of damages in a cover is the difference between the cover price and the contract price.
C)Cover must be done by reasonably obtaining substitute goods.
D)Consequential damages can be recovered in addition to the cover damages.

Question 48

A buyer's material breach gives the seller the right to refuse to deliver the goods.

Question 49

If a buyer does not receive goods by the contract deadline, remedies available include all of the following EXCEPT

A)incidental and consequential damages.
B)cover.
C)damages for non-delivery.
D)cure.

Question 50

Inez contracted with Filippo Furnaces Co. for the installation of a new furnace. Inez selected the furnace she wanted, accepting no suggestions from Filippo Furnaces' heating engineer. The furnace operated fine, but it did not heat the entire house. The size of the blower on the furnace was too small to accommodate the third floor of the house. Inez sued Filippo Furnaces Co. for the breach of the implied warranties of merchantability and fitness. What result?

Question 51

Under which circumstances has the buyer accepted goods?

A)A shipment of goods was delivered to Kamala, who immediately picked up the box from her porch and placed it on her dining-room table.
B)Peter received a shipment of 100 toy soldiers on Monday; by the end of the week, he had already sold half of them.
C)Goods were delivered to Lao-tzu, who told the seller that he had received them; two days later, Lao-tzu informed the seller that, upon inspection, the goods were not conforming.
D)None of these are correct.

Question 52

Reba orders a pair of custom-made cowboy boots, C.O.D. from Home on the Range Western Wear. When the boots arrive, Reba pays the carrier for the boots, then opens the package, only to discover that the boots are the wrong snake skin color and three sizes too big. At this point

A)Reba is entitled to inspect the goods after payment (due to the C.O.D. terms)and she can reject the boots because they are nonconforming.
B)Reba cannot revoke the acceptance, because the wrong color and size of the boots are not substantial impairments.
C)Home on the Range can allege that Reba did not conduct a proper inspection; therefore, Home on the Range owes Reba nothing.
D)Reba has no recourse; she should have known to inspect the goods before paying the C.O.D. amount.

Question 53

A buyer who accepts goods but notifies the seller the goods are non-conforming

A)cannot recover any damages.
B)can recover the difference between the goods as promised and as delivered, plus incidental and consequential damages.
C)cannot recover incidental damages.
D)cannot recover consequential damages.

Question 54

If a seller cures within a reasonable amount of time, the contract

A)has been performed.
B)is breached.
C)is void.
D)is voidable.

Question 55

Neon orders one thousand 25-foot nylon ropes from Hang'em High Co. Upon inspection of the delivery, Neon learns that Hang'em sent five hundred 25-foot ropes and five hundred 20-foot ropes. Neon may

A)demand that Hang'em send 500 additional 25-foot ropes and get to keep the 20-foot ropes as well.
B)accept the 500 conforming ropes and reject the 500 nonconforming ropes.
C)seek an installment contract.
D)immediately "cure" by finding a substitute product.

Question 56

If a contract does not provide for a time for inspection, the UCC allows inspection to take place

A)within a reasonable time.
B)the same day as delivery.
C)within 3 days of delivery.
D)within 10 days of delivery.

Question 57

A seller may not make repairs or adjustments after the goods have been tendered, even if that action will bring the goods into conformity in order to "cure" nonconforming goods.

Question 58

Master Glue Hairspray, Inc. contracts to purchase 100 umbrellas with its logo and slogan, "A spray a day keeps the rain and wind away!" specially printed on the umbrellas and its 1-800 telephone number on the umbrella handle. After the seller completes the order, Master Glue refuses to accept or pay for the umbrellas. Because of the special logo and telephone number, the seller has been unable to find a new buyer. If the seller sues Master Glue, what is the proper measure of the seller's damages?

A)contract price minus market value of the goods at the time of delivery
B)contract price
C)lost profits
D)cover price minus contract price

Question 59

If Chuck buys frozen cheese from Cheese, Inc., then fails to inspect the cheese within a reasonable amount of time and does not reject the shipment, Chuck has accepted the shipment even if there is non-conformity.

Question 60

Buyer Bob breaches his contract for the sale of goods with Seller Suzie. Suzie still has possession of the goods at the time of the breach. Suzie can refuse to deliver the goods and

A)resell the goods and sue Bob for the total contract price.
B)either resell the goods or sue, but not both.
C)resell the goods and sue for any loss on the sale plus incidental damages less expenses saved.
D)resell the goods and sue only for incidental damages.

Question 61

Great State Bank and First Federal Bank have a security interest in TriColor's equipment. If neither secured party is perfected, the first to sue or repossess has priority over the collateral.

Question 62

To perfect a security interest in a negotiable document, Second State Savings and Loan should

A)file a financing amendment.
B)take possession of the instrument.
C)do nothing. Perfection is automatic.
D)secure a court order.

Question 63

Dieter is a debtor to Maxwell, the secured party. Dieter lives in Ohio and works in Kentucky. Maxwell lives in Indiana and works in Iowa. Where must the secured party file the financing statement?

A)Ohio
B)Kentucky
C)Indiana
D)Iowa

Question 64

First Federal had a perfected security interest in Vicor's printing press. Second Credit had a security interest in the same press, but its interest was not perfected. First Federal takes priority over Second Credit.

Question 65

Spicy & Hot, Inc. is interested in expanding its Mexican food restaurant into a Mexican food catering business. Spicy & Hot, Inc. buys a new delivery van from Van World. Spicy & Hot, Inc. is a buyer in the ordinary course of business when purchasing the van.

Question 66

Article 9 of the UCC only applies to goods and does not include intangibles such as stocks, bonds or bills of lading.

Question 67

Which of the following is correct concerning termination statements?

A)A termination statement must be filed by a secured party when a debtor has defaulted on a loan.
B)For consumer debt, the secured party must complete a termination statement in every place that it filed a financing statement.
C)The secured party must file a termination statement within 30 days of a consumer debtor's demand, provided the debtor has paid the full debt.
D)A termination statement indicates that a secured party is transferring its rights to collateral to another party.

Question 68

Hiram is a debtor to Central Credit Union, a secured party. If Hiram fails to maintain insurance on the collateral, he has likely

A)attached the security agreement.
B)defaulted on the security agreement.
C)terminated the security agreement.
D)perfected the security agreement.

Question 69

Bagsby owns a business selling insects for organic gardening. Bagsby is seeking a loan from First Natural Bank. The loan officer is asking that the loan be secured by Bagsby's inventory of insects, now owned or hereafter acquired. In order to do this, a new security agreement will need to be signed each time Bagsby gets new insects or sells his insects.

Question 70

Identify the possible remedies for a buyer when the seller breaches a contract.

Question 71

Identify the possible remedies for a seller when the buyer breaches a contract.

Question 72

First Federal loaned Madeline $20,000 to purchase a new van. The van was for Madeline's personal and family use. First Federal's security interest is a purchase money security interest which perfects only upon filing a financing statement.

Question 73

Maddie enters into a secured consumer debt transaction with Friendly Bank. When Maddie pays the loan in full, Friendly Bank is required to file a statement indicating that it no longer claims a secured interest in the collateral. This statement must be filed within one month from the date the debt is fully paid.

Question 74

Article 9 applies to any transaction intended to create a security interest in personal property or fixtures.

Question 75

Masterview, Inc. purchased a new computer system, which included some computer programs. When Masterview developed financial troubles, two competing creditors of Masterview claimed the right to repossess the computer system and the programs. The UCC distinguishes "software" from "goods" and treats them differently for some purposes, which would be important in this situation.

Question 76

The property subject to a security interest is called

A)a fixture.
B)collateral.
C)consideration.
D)an account.

Question 77

For a security interest to attach, there must be an agreement.

Question 78

Donna defaulted on her loan owed to Second State Savings and Loan. The loan was secured with Donna's car. Donna used the car for personal and family reasons. Which statement is correct?

A)Second State may take Donna's car without a court order if this can be done without a breach of the peace.
B)Second State may take Donna's car without a court order even if it means a breach of the peace.
C)Second State may not take Donna's car because it is a consumer good.
D)Second State may not take Donna's car because perfection was automatic.

Question 79

Wanderlust gave a security interest in his Conestoga wagon to Iowa Bank who perfected its security interest by filing a financing statement with the appropriate officials in Iowa. Five months later, Wanderlust hit the trail again, moving to Montana. If Iowa Bank wants to continue its perfected interest in the Conestoga wagon, it should

A)file a continuation statement for another five years in Iowa before Wanderlust moves on.
B)re-perfect by filing a financing statement in the appropriate place in Montana, according to Montana law, within four months of Wanderlust's entering Montana.
C)repossess the Conestoga wagon.
D)file a continuation statement for another four months in Iowa before Wanderlust moves on.

Question 80

A PMSI in consumer goods perfects automatically, without filing.