Contract Law AMP - Performance And Breach

Question 1

Under Article 2, unless the contract provides otherwise, a buyer has a right to inspect the goods __________.

A at the expense of the seller before the buyer pays for the goods

B at the expense of the seller after the buyer pays for the goods

C at the buyer’s own expense before she pays for the goods

D at the buyer’s own expense after she pays for the goods

Answer 1

C

Unless the contract provides otherwise, the buyer has a right to inspect the goods at the buyer’s own expense before she pays. Under Article 2, expenses of inspection must be borne by the buyer but may be recovered from the seller if the goods do not conform and are rejected. QUESTION ID: K0076 Additional Learning

Question 2

When should the nonbreaching party treat an otherwise minor breach as a material breach?

A When the breach causes the nonbreaching party damages

B When the breach relates to the timing of performance

C When the breach is part of a divisible contract

D When the breach is coupled with an anticipatory repudiation

Answer 2

D

If a minor breach is coupled with an anticipatory repudiation, the nonbreaching party may treat it as a material breach. Thus, the nonbreaching party may sue immediately for total damages and is permanently discharged from any duty of further performance. The courts hold that the nonbreaching party must not continue on with the contract, because to do so would be a failure to mitigate damages. There is no reason that a minor breach that is part of a divisible contract should be treated as a material breach. In fact, in a divisible contract, recovery is available for substantial performance of a divisible part even if there has been a material breach of the entire contract. Even a minor breach can cause the nonbreaching party damages. The effect of a minor breach is to provide a remedy for the immaterial breach to the aggrieved party. The aggrieved party is not relieved of her duty of performance under the contract by a minor breach, unlike in the case of a material breach. Unless the nature of the contract is such as to make performance on the exact day agreed upon of vital importance, or the contract by its terms provides that time is of the essence, a failure by a promisor to perform at the stated time will not be material. Thus, a minor breach that relates to the timing of performance generally should not be treated as a material breach. QUESTION ID: K0100C Additional Learning

Question 3

In a noncarrier case, for proper tender of delivery, the seller must:

A Put and hold the goods at the buyer’s disposition for a time sufficient for the buyer to take possession and give the buyer reasonable notice to enable the buyer to take possession of the goods

B Promptly deliver the goods to the buyer’s place of business or residence

C Put and hold conforming goods at the buyer’s disposition at an agreed upon destination

Answer 3

A

A noncarrier case is a sale in which it appears that the parties did not intend that the goods be moved by carrier. In a proper tender of delivery, the seller must put and hold conforming goods at the buyer’s disposition for a time sufficient for the buyer to take possession. The seller must give the buyer notice reasonably necessary to enable her to take possession of the goods. Absent a contrary agreement, a seller is not required to actually deliver the goods to the buyer. The seller need only tender (offer) the goods to the buyer at the seller’s place of business or residence. In a destination contract, the seller has agreed to tender at a particular destination. In that case, the seller must put and hold conforming goods at the buyer’s disposition at the agreed upon destination. He must also give the buyer any notice of tender that is reasonably necessary and provide her with any documents of title necessary to obtain delivery. QUESTION ID: K0073B Additional Learning

Question 4

Under a U.C.C. Article 2 shipment contract, the seller need not ___________ but must ___________.

A See that the goods reach the buyer; promptly notify the buyer of the shipment

B Notify the buyer of the shipment; put the goods into the hands of a reasonable carrier for shipment

C Notify the buyer of the shipment; see that the goods reach the buyer

D See that the goods reach the buyer; bear the risk of loss until the goods reach the destination

Answer 4

A

Under a U.C.C. Article 2 shipment contract, a seller need NOT see that the goods reach the buyer, but must: put the goods into the hands of a reasonable carrier and make a reasonable contract for their transportation to the buyer; obtain and tender any documents required to enable the buyer to take possession; and promptly notify the buyer of the shipment. In a shipment contract, the seller bears the risk of loss only until the seller delivers the goods to the carrier. QUESTION ID: K0074A Additional Learning

Question 5

Under Article 2 of the U.C.C., a buyer cannot reject a shipment of nonconforming goods if:

A The nonconforming shipment causes no monetary damage to the buyer

B The defect can be cured within the time for performance

C The nonconforming shipment is part of an installment contract

D The nonconforming shipment is part of an installment contract and the defect can be cured

Answer 5

D

Article 2 follows the Perfect Tender Rule. If the goods fail to conform to the contract in any way, the buyer generally may reject tender. An exception to this rule is that a defective shipment in an installment contract cannot be rejected if the defect can be cured. In a single delivery contract, the buyer can always reject the goods because of defects under the perfect tender rule. Note, however, that the seller may, within the time originally provided for performance, “cure” by giving reasonable notice of her intention to do so and making a new tender of conforming goods, which the buyer must then accept. It is not enough that the defective shipment be part of an installment contract; the defect must be capable of being cured. For example, if the defects are in the particular goods themselves and thus cannot be cured, the buyer can reject them. The seller retains the right to cure within the time for performance by making a tender of conforming goods within the time for performance. Under the perfect tender rule, a buyer can choose to reject nonconforming goods even if they cause no monetary damage to the buyer. For example, a buyer could rightly reject nearly identical goods in a different color than those ordered even if the monetary value of the goods is the same. QUESTION ID: K0107B Additional Learning

Question 6

Under the UCC, in a single delivery contract, a seller may always cure a shipment that the buyer has rejected because of defects by delivering conforming goods within:

A The time originally provided for performance

B Ten days after the notice of rejection is received

C A reasonable time beyond the original contract time

D Ten days after the notice of rejection is sent

Answer 6

A

If the buyer has rejected goods because of defects, the seller may, within the time originally provided for performance, “cure” by giving reasonable notice of her intention to do so and making a new tender of conforming goods which the buyer must then accept. Ordinarily, the seller has no right to cure beyond the original contract time. However, in cases where the buyer rejects a tender of nonconforming goods that the seller reasonably believed would be acceptable “with or without money allowance,” the seller, on reasonable notification to the buyer, has a further reasonable time beyond the original contract time within which to make a conforming tender. A seller will probably be found to have had reasonable cause to believe that the tender would be acceptable if the seller can show that trade practices or prior dealings with the buyer led the seller to believe that the goods would be acceptable, or the seller could not have known of the defect despite proper business conduct. There is no set time period, such as 10 days after the notice of rejection is sent or received, in which the seller always has a right to cure. As stated above, the length of time to cure depends on the specifics of the contract and the circumstances surrounding the defective delivery. QUESTION ID: K0105A Additional Learning

Question 7

Under Article 2, a buyer’s right to reject is cut off by __________.

A Failure to return the goods within a reasonable time

B Delivery of goods in substantial conformity with the contract

C Receipt of the goods followed by a submission of the goods to inspection

D Acceptance of the goods, even if the goods are nonconforming

Answer 7

D

A buyer’s right to reject under the perfect tender doctrine generally is cut off by acceptance of the goods by the buyer, even though they are nonconforming. Under Article 2, a buyer accepts when, after a reasonable opportunity to inspect the goods, she indicates to the seller that they conform to requirements or that she will keep them even though they are nonconforming; or she fails to reject within a reasonable time after tender or delivery of the goods or fails to seasonably notify the seller of her rejection; or she does any act inconsistent with the seller’s ownership. When a buyer receives goods and submits them to an inspection, she has not yet accepted the goods. A buyer must be given a reasonable opportunity to inspect the goods before acceptance; thus, merely receiving the goods and submitting them to an inspection is not yet an acceptance and the buyer’s right to reject has not yet been cut off. Delivery of goods in substantial conformity with the contract would not cut off a buyer’s right to reject. Article 2 generally does not follow the common law substantial performance doctrine. Instead, it follows the perfect tender rule—if goods or their delivery fail to conform to the contract in any way, the buyer generally may reject all, accept all, or accept any commercial units and reject the rest. The buyer is not obligated to return the goods within a reasonable time; she only needs to notify the seller of her rejection. After rejecting the goods, the buyer has an obligation to hold them with reasonable care at the seller’s disposition for a time sufficient to permit the seller to remove them. If the seller has no agent or place of business within the market area where the goods are rejected, a merchant buyer has an obligation to obey any reasonable instructions as to the rejected goods. If a seller gives no instructions within a reasonable time after notification of rejection, the buyer may reship the goods to the seller, store them for the seller’s account, or resell them for the seller’s account. The buyer has a security interest in rejected goods in her possession for any part of the price already paid and for expenses reasonably incurred in connection with handling them after rejection. QUESTION ID: K0102A Additional Learning

Question 8

A buyer orders 600 widgets to be delivered on the 10th of each month in lots of 100. The second month’s shipment arrived on the 8th of the month and contains only 95 widgets.
The buyer ____________________.

A May not reject the shipment

B May cancel the contract

C May reject all, accept all, or accept any commercial units and reject the rest in the shipment

Answer 8

A

The buyer may not reject the shipment. Under a single delivery sale of goods contract, a five-widget shortfall could be the basis for rejection under the perfect tender rule. However, this is an installment contract, and the buyer cannot reject the installment unless he can show that the shortfall substantially impairs the value of the installment and cannot be cured. A deficiency in quantity can always be cured, and there are still two days before performance is due. Under the perfect tender rule, if goods or their delivery fail to conform to the contract in any way, the buyer may reject all, accept all, or accept any commercial units and reject the rest. However, in an installment contract, the right to reject an installment is limited to nonconformities that substantially impair the value of the installment and cannot be cured. In an installment contract, a buyer may cancel the entire contract due to breach only if the buyer can show that the nonconformity substantially impairs the value of the entire contract. The five-widget deficiency is easily cured and is unlikely in any event to be found to impair the value of the entire 600-widget contract. QUESTION ID: K0104B Additional Learning

Question 9

If a seller gives no instructions within a reasonable time after notification of rejection, the buyer may _________________ the goods.

A Reship, store, or resell

B Store, resell, or destroy

C Reship, resell, or destroy

D Reship, store, or destroy

Answer 9

A

If a seller gives no instructions within a reasonable time after notification of rejection, the buyer may reship the goods to the seller, store them for the seller’s account, or resell them for the seller’s account. A buyer may not destroy rejected goods. QUESTION ID: K0103B Additional Learning

Question 10

A destination contract __________.

A requires the seller to tender the goods to the buyer at a particular destination

B requires the seller to put the goods into the hands of a carrier for shipment to a particular destination

C requires the buyer to arrange for shipment of the goods to a particular destination

D requires the buyer to take possession of the goods at the seller’s place of business

Answer 10

A

A destination contract is one in which the seller is required to tender delivery of the goods at a particular destination. At the destination, the seller must give the buyer notice of the tender, put and hold conforming goods at the buyer’s disposition, and provide the buyer with documents of title. The requirement that the seller put the goods into the hands of a carrier for shipment is a requirement of a shipment, rather than a destination, contract. Requirements that the buyer take possession of the goods at the seller’s place of business and arrange for shipment of the goods describe a noncarrier case, not a destination contract. A noncarrier case is a sale in which the parties did not intend that the goods be moved by carrier. QUESTION ID: K00147 Additional Learning

Question 11

Under U.C.C. Article 2, unless the contract provides otherwise, any expenses for inspection of the goods sold will be borne by:

A The seller in all cases

B The buyer in all cases

C orrect

C The buyer, but may be recovered from the seller if the goods do not conform and are rejected

D Both the buyer and the seller in equal shares

Answer 11

C

Under Article 2, unless the contract provides otherwise, the buyer has a right to inspect the goods before paying. Expenses of inspection must be borne by the buyer, but may be recovered from the seller if the goods do not conform and are rejected. A buyer may inspect at any reasonable time and in any reasonable manner. If the contract between the parties provides for payment C.O.D. or otherwise indicates that the buyer has promised to pay without inspecting the goods, there is no right of inspection prior to payment. If payment is due before inspection, the fact that the goods are defective does not excuse nonpayment unless the defect appears without inspection or there is fraud in the transaction. Thus, generally the seller will not share in the cost of inspections, but may have to pay the costs if the goods do not conform and are rejected, as noted above. QUESTION ID: K0076A Additional Learning

Question 12

Which of the following statements regarding shipment and destination contracts is accurate?

A In a shipment contract, the cost of the buyer’s inspection of the goods is borne by the seller, and in a destination contract, the cost of the buyer’s inspection of the goods is borne by the buyer.

B In both a shipment contract and in a destination contract, the price must be paid in legal tender unless the agreement permits payment by check.

C In both a shipment contract and in a destination contract, the price is due when the goods reach the named destination.

D In a shipment contract, the price is due when the goods are put in the hands of the carrier, and in a destination contract, the price is due when the goods reach the named destination.

Answer 12

D

The correct statement is that in a shipment contract, the price is due when the goods are put in the hands of the carrier, and in a destination contract, the price is due when the goods reach the named destination. In both a shipment and destination contract, the cost of the buyer’s inspection of the goods is borne by the buyer. The buyer may recover inspection costs from the seller if the goods are nonconforming and the buyer rejects them. In both a shipment and destination contract, tender of payment by check is sufficient unless the seller demands legal tender. QUESTION ID: K0075 Additional Learning

Question 13

Which of the following is a true statement regarding a minor breach of contract under the common law?

A The aggrieved party will gain the substantial benefit of her bargain, and thus is not entitled to a remedy for the minor breach.

B The aggrieved party will not gain the entire benefit of her bargain, and therefore any duty of counterperformance owed by the aggrieved party is discharged.

C The aggrieved party will not gain the entire benefit of her bargain, and therefore is entitled to a remedy for breach of the entire contract.

D The aggrieved party will gain the substantial benefit of her bargain, but is still entitled to a remedy for the minor breach.

Answer 13

D

When a breach of contract is minor, the obligee still gains the substantial benefit of her bargain despite the obligor’s defective performance. The aggrieved party is entitled to a remedy for the minor breach. Although a minor breach may prevent the aggrieved party from gaining the entire benefit of her bargain, she still gains the substantial benefit of her bargain. Thus, the minor breach will not discharge any duty of counterperformance owed by the aggrieved party, nor entitle her to a remedy for breach of the entire contract. QUESTION ID: K0100 Additional Learning

Question 14

Which of the following does not constitute an acceptance of goods under Article 2?

A The buyer does any act inconsistent with the seller’s ownership.

B The buyer fails to reject the goods within a reasonable time after tender or delivery.

C The buyer indicates to the seller that she will keep the goods even though they fail to conform to the contract requirements.

D The buyer receives the goods and submits them to an inspection.

Answer 14

D

When a buyer receives goods and submits them to an inspection, he has not yet accepted the goods. A buyer must be given a reasonable opportunity to inspect the goods before acceptance, thus merely receiving the goods and submitting them to an inspection is not yet an acceptance. After inspection, the buyer may then accept the goods if they conform. In addition, it is also an acceptance, if the buyer indicates to the seller that she will keep the goods even though they fail to conform to the contract requirements. Failure to reject the goods within a reasonable time after tender or delivery and any act inconsistent with the seller’s ownership are also considered an acceptance under Article 2. QUESTION ID: K0102 Additional Learning

Question 15

After a reasonable time has passed since the notification of rejection, if the seller has given the buyer no instructions as to the disposal of the defective goods, the buyer may do any of the following, except:

A store the goods

B return the goods

C destroy the goods

D resell the goods

Answer 15

C

After rejecting goods in her physical possession, a buyer has an obligation to hold them with reasonable care at the seller’s disposition for a time sufficient to permit the seller to remove them; thus, the buyer should not destroy the goods. If the seller gives no instructions to the buyer within a reasonable time after notification of rejection, the buyer may return the goods to the seller by shipment, store the goods for the seller’s account, or resell the goods for the seller’s account. QUESTION ID: K0103 Additional Learning

Question 16

In an installment contract situation, the contract can be canceled by the buyer if:

A There is a nonconformity in a shipment that substantially impairs the value of the installment and cannot be cured

B There is a nonconformity in a shipment that substantially impairs the value of the contract and cannot be cured

C Any shipment is deficient in quantity

D Any shipment fails to conform to the contract in any way

Answer 16

B

To cancel the entire installment contract due to breach, the buyer must show that the nonconformity substantially impairs the value of the entire contract and cannot be cured. If the nonconformity substantially impairs the value of only the installment and cannot be cured, only the single installment may be rejected. Unlike most contracts for the sale of goods, under which a shipment may be rejected in it fails to conform to the contract in any way, installment contracts have special rules limiting the right to reject to substantial impairment of the value of the installment. The right to cancel the entire contract is even further limited to substantial impairment of the value of the entire contract. A shipment that is deficient in quantity is not grounds for canceling an installment contract. This situation is the least likely to even give rise to a right to reject an installment because it is easily cured by a shipment of the missing quantity. QUESTION ID: K0104A Additional Learning

Question 17

A breach of contract where the obligee gains the substantial benefit of her bargain despite the obligor’s defective performance is commonly known as:

A A divisible breach

B A material breach

C A common law breach

D A minor breach

Answer 17

D

If an obligee gains the substantial benefit of her bargain despite the obligor’s defective performance, the breach of contract is considered a minor breach. The effect of a minor breach is to provide a remedy (e.g., damages) for the immaterial breach to the aggrieved party. The aggrieved party is not relieved of her duty of performance under the contract. If the obligee does not receive the substantial benefit of her bargain as a result of failure to perform or defective performance, the breach is considered material. If the breach is material, the consequences are more severe. The nonbreaching party may treat the contract as at an end and will have an immediate right to all remedies for breach of the entire contract, including total damages. Both minor and material breaches are terms used in common law contract situations. The distinction is one of degree, as discussed above. In a divisible contract, recovery is available for substantial performance of a divisible part even though there has been a material breach of the entire contract. QUESTION ID: K0100A Additional Learning

Question 18

Performance under Article 2 generally requires:

A Substantial conformity

B Reasonable compliance

C Perfect tender

D Good faith effort

Answer 18

C

Article 2 generally requires a perfect tender—the delivery and condition of the goods must be exactly as promised in the contract. Delivery must conform to the contract in every way. Substantial conformity or reasonable compliance is insufficient. Article 2 requires the parties to act in good faith, but a good faith effort alone is not adequate performance; a perfect tender is required. QUESTION ID: K0072 Additional Learning

Question 19

When a seller has agreed to tender goods at a particular location, this is also known as a:

A Destination contract

B Noncarrier contract

C Shipment contract

D Perfect tender contract

Answer 19

A

A destination contract is one where the seller has agreed to tender the goods at a particular location. The seller must, at the destination, put and hold conforming goods at the buyer’s disposition. The seller must also give the buyer any notice of tender that is reasonably necessary and provide the buyer with any documents of title necessary to obtain delivery. In a shipment contract, the parties intend the goods to be moved by common carrier, but the seller has not agreed to deliver them at a particular destination. In the absence of an agreement otherwise, the seller need not see that the goods reach the buyer, but must: put the goods into the hands of a reasonable carrier and make a reasonable contract for their transportation to the buyer; obtain and promptly tender any documents required by the contract or usage of trade or otherwise necessary to enable the buyer to take possession; and promptly notify the buyer of the shipment. A noncarrier case is a sale in which the parties did not intend that the goods be moved by carrier. In a proper tender of delivery, the seller must put and hold conforming goods at the buyer’s disposition for a time sufficient for the buyer to take possession. The seller must give the buyer notice reasonably necessary to enable her to take possession of the goods. Article 2 generally requires perfect tender for performance in all cases, i.e., the delivery and condition of the goods must be exactly as promised in the contract. QUESTION ID: K0147A Additional Learning

Question 20

Under an Article 2 shipment contract, when the parties have agreed that a carrier will be used to move the goods, which of the following is generally not an obligation of the seller?

A To obtain any documents necessary to enable the buyer to take possession.

B To make a reasonable contract with a carrier for transportation of the goods to the buyer.

C To notify the buyer of shipment.

D To see that the goods reach the buyer.

Answer 20

D

In the absence of an agreement otherwise, the seller need not see that the goods reach the buyer. The seller must, however, put the goods into the hands of a reasonable carrier and make a reasonable contract for their transportation to the buyer; obtain and promptly tender any documents required by the contract or usage of trade or otherwise necessary to enable the buyer to take possession; and promptly notify the buyer of the shipment. QUESTION ID: K0074 Additional Learning

Question 21

Under the UCC, in the case of a single delivery contract, if the buyer finds that the goods are defective at the time of delivery:

A The buyer can reject the goods outright, thus placing the seller in immediate breach with no right to cure

B The buyer must accept the defective goods, but may recover from the seller whatever damages she has suffered as a result of the defects

C The buyer can reject the goods, but the seller then has a right to cure within the original time for performance of the contract

D The buyer must accept the defective goods, but must allow the seller to cure the defects within the original time for performance of the contract

Answer 21

C

In a single delivery contract, a buyer can reject defective goods, but the UCC grants the seller the right to cure the defective shipment within the original time for performance of the contract. A seller cures by giving reasonable notice of his intention to do so and making a new tender of conforming goods within the time originally provided for performance in the contract. A buyer is not required to accept the defective goods. But if the seller properly cures the defect, the buyer must accept the cure or will be in breach of contract. QUESTION ID: K0105C Additional Learning

Question 22

Under the common law, __________ the aggrieved party’s duty of performance.

A A material breach of contract may discharge

B Only a willful breach of contract extinguishes

C Even a minor breach of contract will relieve

D One party’s breach of contract never releases

Answer 22

A

Under the common law, if a breach is material, the aggrieved party may treat the contract as at an end, and her duty of performance will be discharged. The aggrieved party will then have an immediate right to all remedies for breach of the entire contract, including total damages. A breach will be deemed material if, as a result of the breach, the obligee does not receive the substantial benefit of her bargain. The aggrieved party generally is not relieved of her duty of performance under the contract by a mere minor breach. A minor breach gives rise to a cause of action for damages for the breach but does not excuse the other party’s duty to perform. If the minor breach is coupled with an anticipatory repudiation, however, then the aggrieved party may treat it as a material breach. It is incorrect to state that one party’s breach of contract never releases the aggrieved party’s duty of performance. In common law contract situations, a material breach relieves the aggrieved party of his duty of performance. Under the U.C.C. the seller’s performance must be perfect; thus, most breaches by the seller, even minor ones, relieve the buyer of his duty of performance. A willful breach of contract is more likely to be found to be a material breach, but it is not the only type of breach that will extinguish the aggrieved party’s duty of performance. QUESTION ID: K0100B Additional Learning

Question 23

What does it mean when a performance satisfies the perfect tender requirement of Article 2?

A The delivery and condition of the goods are in substantial conformity with the contract

B The delivery and condition of the goods are exactly as promised in the contract

C The delivery and condition of the goods are in reasonable compliance with the contract

D The delivery and condition of the goods were tendered in good faith

Answer 23

B

Article 2 generally requires a perfect tender—the delivery and condition of the goods must be exactly as promised in the contract. Delivery must conform to the contract in every way. Substantial conformity or reasonable compliance is insufficient. Article 2 requires the parties to act in good faith, but a good faith effort alone is not adequate performance; a perfect tender is required. QUESTION ID: K0072B Additional Learning

Question 24

Under Article 2, in a noncarrier case, in the absence of an agreement otherwise, the place of delivery is generally__________.

A The buyer’s place of business

B Either the seller’s place of business or the buyer’s place of business, at the seller’s discretion

C The seller’s place of business

Answer 24

C

A noncarrier case is a sale in which it appears that the parties did not intend that the goods be moved by carrier. Under Article 2, in a noncarrier case, in the absence of an agreement otherwise, the place of delivery is generally the seller’s place of business, or if he has none, his residence. It is not at the seller’s discretion to choose the buyer’s place of business in the absence of an agreement to the contrary, as the buyer may not be prepared to accept delivery at its own place of business. QUESTION ID: K0073A Additional Learning

Question 25

After a reasonable time, a buyer may resell rejected goods only if:

A The seller agrees

B The buyer holds the proceeds for the seller’s account

C The buyer does not take a commission

D The buyer is a merchant

Answer 25

B

After a reasonable time and in the absence of instructions from the seller, a buyer may resell the goods and hold the proceeds for the seller’s account. The seller does not have to agree to the sale, and it is not necessary that the buyer is a merchant. A merchant buyer has an obligation to obey any reasonable instructions of the seller as to the rejected goods. By contrast, a nonmerchant buyer is merely required to hold the goods with reasonable care for a time sufficient for the seller to remove them. If a buyer resells rejected goods, he is entitled to any commission ordinarily paid in the trade or, if none, a reasonable commission not exceeding 10%. QUESTION ID: K0103A Additional Learning

Question 26

The UCC gives a seller the right to cure a defective shipment within a reasonable time beyond the original time for performance in the contract if:

A The seller notifies the buyer of his desire to cure before the time for performance in the original contract

B The buyer would suffer no damages by allowing the seller to cure

C The buyer agrees to extend the terms of the contract to allow for late delivery without additional consideration

D Prior dealings with the buyer led the seller to reasonably believe that the defective shipment would be acceptable

Answer 26

D

The UCC provides that in cases where a buyer rejects a tender of nonconforming goods that the seller reasonably believed would be acceptable “with or without money allowance,” the seller, upon a reasonable notification to the buyer, has a further reasonable time beyond the original contract time within which to make a conforming tender. A seller will probably be found to have had reasonable cause to believe that the tender would be acceptable if the seller can show that trade practices or prior dealings with the buyer led the seller to believe that the goods would be acceptable, or the seller could not have known of the defect despite proper business conduct. Although notification of the desire to cure is required before the seller can cure the defective delivery, it is not enough that the seller notifies the buyer of his desire to cure before the time for performance in the original contract. To extend the right to cure beyond the original time of performance, the seller must show that he mistakenly, but reasonably, believed that the nonconforming goods would be acceptable to the buyer. The seller’s right to cure under the UCC is not determined by whether the buyer would suffer damages by allowing the seller to cure; and the buyer need not agree to extend the terms of the contract to allow for late delivery without additional consideration for the seller to exercise the right to cure under the UCC. QUESTION ID: K0106B Additional Learning

Question 27

Under the U.C.C., what is required to cure a defective delivery in a single delivery contract?

A Reasonable notice of the intention to cure and a new tender of delivery of conforming goods within ten days after notice of rejection is received

B A new tender of delivery of conforming goods within a reasonable time

C Reasonable notice of the intention to cure and a new tender of delivery of conforming goods within the time for performance

D A new tender of delivery of conforming goods within the time for performance

Answer 27

C

Under the U.C.C., a seller may “cure” a defective delivery by giving reasonable notice of the intention to cure and making a new tender of conforming goods within the time for performance. If the seller follows this procedure, the buyer must then accept the new tender. There is no set time period, such as 10 days after the notice of rejection is received, in which the seller has a right to cure. The length of time to cure depends on the specifics of the contract and the circumstances surrounding the defective delivery. The seller generally has no right to cure beyond the original contract time. However, in cases where the buyer rejects a tender of nonconforming goods that the seller reasonably believed would be acceptable “with or without money allowance,” the seller, on reasonable notification to the buyer, has a further reasonable time beyond the original contract time within which to make a conforming tender. A seller will probably be found to have had reasonable cause to believe that the tender would be acceptable if the seller can show that trade practices or prior dealings with the buyer led the seller to believe that the goods would be acceptable, or the seller could not have known of the defect despite proper business conduct. In any case, reasonable notice of intent to cure is required. QUESTION ID: K0105B Additional Learning

Question 28

Unless the contract provides otherwise, in a shipment contract, payment is due __________.

A In cash upon tender of delivery

B When the goods reach their destination

C At the time of contracting

D When the goods are put in the hands of the carrier

Answer 28

D

When goods are shipped by carrier, the price is due only at the time and place at which the buyer receives the goods. In a shipment case, the price is due when the goods are put in the hands of the carrier. In a destination contract, which also involves a carrier, the price is due when the goods reach the named destination. In a noncarrier case, i.e., one in which it appears that the parties did not intend that the goods be moved by carrier, unless the contract provides otherwise, the sale is for cash and the price is due concurrently with tender of delivery. In a proper tender of delivery, the seller must put and hold conforming goods at the buyer’s disposition for a time sufficient for the buyer to take possession. The seller must give the buyer notice reasonably necessary to enable her to take possession of the goods. The tender must be at a reasonable hour. In no case is the price due at the time of contracting, because the obligation to pay is concurrent with delivery of the goods. QUESTION ID: K0075A Additional Learning

Question 29

Which of the following best summarizes a buyer’s right to reject a defective shipment under Article 2 of the U.C.C.?

A A buyer can always reject a defective shipment in a single delivery contract but cannot reject a defective shipment in an installment contract if the defect can be cured

B A buyer can always reject a defective shipment in either a single delivery contract or in an installment contract

C A buyer cannot reject a defective shipment in either a single delivery contract or in an installment contract if the defect can be cured within the time for performance

D A buyer cannot reject a defective shipment in a single delivery contract if the defect can be cured, but can always reject a defective shipment in an installment contract

Answer 29

A

In a single delivery contract, the buyer can always reject the shipment because of defects under the perfect tender rule. Note however, that the seller may, within the time originally provided for performance, cure by giving reasonable notice of her intention to do so and making a new tender of conforming goods, which the buyer must then accept. In contrast, Article 2 provides that a defective shipment in an installment contract cannot be rejected if the defect can be cured. For example, a deficiency in quantity could be cured by an additional delivery, so the buyer in an installment contract could not reject a shipment that was deficient in quantity. If the defects are in the particular goods themselves and thus cannot be cured, the buyer can reject them. The seller retains the right to cure within the time for performance by making a tender of conforming goods within the time for performance. QUESTION ID: K0107A Additional Learning

Question 30

In an installment contract situation, an installment can be rejected by the buyer __________.

A only if there is a nonconformity that substantially impairs the value of the entire contract and cannot be cured

B if there is a nonconformity that substantially impairs the value of that installment and cannot be cured

C if the shipment is deficient in quantity

D if the shipment fails to conform to the contract in any way

Answer 30

B

In an installment contract situation, an installment can be rejected only if the nonconformity substantially impairs the value of that installment and cannot be cured. In an installment contract situation, if there is a nonconformity that substantially impairs the value of the entire contract and cannot be cured, that is grounds for canceling the contract—but it is not the standard for rejecting a single installment. Under the perfect tender rule of Article 2, a buyer has a right to reject if the goods or their delivery fail to conform to the contract in any way. However, there is an exception for installment contracts, which requires that the nonconformity substantially impair the value of the installment in order for the buyer to reject the installment. If the shipment is deficient in quantity, the deficiency may be cured by an additional delivery. Thus, the buyer cannot reject the installment for that reason. QUESTION ID: K0104 Additional Learning

Question 31

Generally speaking, if a contract does not address the importance of timeliness of performance in its terms, a failure by the promisor to perform at the time stated in the contract will result in __________.

A A breach of contract at the option of the nonbreaching party

B No breach of contract

C A material breach of contract

D A minor breach of contract

Answer 31

D

If a contract does not address the importance of timeliness of performance in its terms, a failure by the promisor to perform at the stated time will result in a minor breach of the contract. Unless the nature of the contract is such as to make performance on the exact day agreed upon of vital importance, or the contract by its terms provides that time is of the essence, failure by a promisor to perform at the stated time generally will not be considered material. A failure to perform on time will always be some form of a breach of contract. It is not at the option of the nonbreaching party. The issue is the materiality of the breach. In mercantile contracts, timely performance is usually considered important. In contrast, more delay is generally permitted in land contracts. QUESTION ID: K0101A Additional Learning