Contract Law AMP - Terms And Warranties Flashcards
The implied warranty of merchantability is ______________.
A Implied in every contract for the sale of goods by a merchant
B Implied in every contract for the sale of goods
C Implied in every contract for the sale of goods by a merchant who deals in goods of the kind sold
C
The implied warranty of merchantability is implied in every contract for the sale of goods by a merchant who deals in goods of the kind sold. It is not implied in every sale of goods by any seller or even any merchant. QUESTION ID: K0067C Additional Learning
Which of the following statements is true?
A The buyer may revoke acceptance of goods destroyed in a warehouse fire if they were defective, and the seller will bear the loss
B In a destination contract, the risk of loss is on the seller until the goods are tendered to the buyer at the destination, even if the goods are defective
C In a shipment contract, the risk of loss passes to the buyer when the goods are delivered to the carrier, unless the goods are defective
C
Usually, the risk of loss passes to the buyer when the goods are delivered to the carrier, but if the goods are defective the risk remains on the seller. If goods are defective, the risk remains on the seller regardless of the type of shipping contract. Thus, the risk remains on the seller in a destination contract if the goods are defective. A buyer may not rightfully revoke acceptance once the goods are destroyed. A revocation is rightful only if it occurs before any substantial change in the condition of the goods which was not caused by their own defects. QUESTION ID: K0066B Additional Learning
Which of the following is a true statement about express warranties?
A The buyer must have relied on the statement or affirmation when the buyer entered into the contract
B A sample or model can create an express warranty
C The seller must intend that the statement, affirmation of fact, or description create a warranty
D The statement or affirmation may relate to the value of the goods
B
Any affirmation of fact or promise made by the seller to the buyer, any description of the goods, and any sample or model creates an express warranty if the statement, description, sample, or model is part of the basis of the bargain. The buyer does not have to prove that she actually relied on the statement or affirmation, only that it came at such a time that she could have relied on it when she entered into the contract. It is not necessary that the seller intended the affirmation of fact, description, model, or sample to create a warranty. A statement relating to the value of the goods does not create an express warranty. QUESTION ID: K0069A Additional Learning
In a contract in which the seller is in Michigan and the buyer is in Texas, which of the following terms is interpreted as creating a destination contract?
A F.O.B. the buyer’s place of business
B F.A.S. Texas
C F.O.B. Michigan
D F.A.S. the buyer’s place of business
A
F.O.B. the buyer’s place of business is a destination contract. Under an F.O.B. (free on board) contract, the seller has the risk of loss until the goods reach the location specified. An F.O.B. buyer’s place of business is a destination contract, so the seller has the risk of loss until the goods reach the buyer’s place of business. F.A.S. stands for “free alongside.” The term is generally used only when goods are to be shipped by boat. The risk of loss passes to the buyer once the goods are delivered to the dock. Because the risk of loss shifts when the goods are delivered to the carrier at the dock, these are shipment contracts. F.O.B. Michigan is the same as F.O.B. the seller’s location. Because the seller does not bear the risk of loss while the goods are in transit, this is considered a shipment contract. QUESTION ID: K0065 Additional Learning
Seller offers in writing to sell 1,000 widgets to Buyer for $10 per widget. Buyer replies in writing, “I accept. Please ship 1,000 widgets for $10 per widget, including shipping charges.”
Which of the following statements is true?
A If both Seller and Buyer are merchants, the shipping charges term is knocked out and replaced by a gap-filler
B If both Seller and Buyer are merchants, the contract includes the shipping charges term unless Seller objects within a reasonable time
C If Seller is a merchant and Buyer is a nonmerchant, the contract includes the shipping charges term unless it is considered a material alteration
D If both Seller and Buyer are nonmerchants, there is no contract
B
If both the buyer and seller are merchants, an additional term in an acceptance is included in the contract unless it materially alters the original offer terms, the offer expressly limited the acceptance to its terms, or the offeror objects within a reasonable time. (The shipping charge does not materially alter the original offer.) If both Seller and Buyer are merchants, different (not additional) terms in an acceptance may be knocked out and replaced by a gap-filler. (The shipping charge is an additional term.) Under the U.C.C., a contract is formed even if terms of the acceptance do no match the terms of the offer. However, if either party is a nonmerchant, an additional term in an acceptance does not become part of the contract unless the offeror expressly agrees to it. Here, if both Buyer and Seller are nonmerchants, there is a contract, but the shipping charges term will not be included unless Seller expressly agrees to it. QUESTION ID: K0061A Additional Learning
An implied warranty of merchantability may be disclaimed __________.
A only if the buyer has an opportunity to inspect the goods before entering into the contract
B only by a written, conspicuous disclaimer that specifically mentions merchantability
C at any time before the goods are used
D either by a specific disclaimer mentioning merchantability or by general language such as “as is”
D
An implied warranty of merchantability may be disclaimed either by a specific disclaimer mentioning merchantability or by general language, such as “as is.” Under Article 2, the warranty of merchantability can be specifically disclaimed or modified only by mentioning merchantability. However, unless the circumstances indicate otherwise, an implied warranty of merchantability can be disclaimed by expressions, such as “as is,” “with all faults,” or other expressions that call the buyer’s attention to the fact that there are no implied warranties. To be effective, the disclaimer need not be in writing. A written, conspicuous disclaimer is necessary only if the sales contract is in writing. Also, a specific disclaimer is not the only way to disclaim the implied warranty of merchantability. General disclaimer language is also effective. An implied warranty of merchantability cannot be disclaimed at any time before the goods are used. To be effective, a warranty disclaimer must be agreed to during the bargaining process. A thorough inspection or refusal to inspect by the buyer can create a general disclaimer of warranties, but an opportunity to inspect the goods is not a precondition to disclaiming the implied warranty of merchantability. QUESTION ID: K0070 Additional Learning
Which of the following is an element of the implied warranty of fitness for a particular purpose?
A The goods must pass without objection in the trade under the contract description
B The seller is a merchant
C The goods must conform to any promises or affirmations of fact made on the label
D The buyer relied on the seller’s skill and judgment
D
The warranty of fitness for a particular purpose is implied when:(i) any seller (merchant or not) has reason to know the particular purpose for which the goods are to be used and that the buyer was relying on the seller’s skill and judgment to select suitable goods; and (ii) the buyer in fact relied on the seller’s skill or judgment. The warranty that the goods will pass without objection in the trade under the contract description and the warranty that the goods conform to any promises or affirmations of fact made on the label are both elements of the implied warranty of merchantability, not fitness for a particular purpose. QUESTION ID: K0068A Additional Learning
Which of the following is not a general rule of contract construction?
A Printed provisions will prevail over handwritten provisions
B Custom and usage in the particular business and in the particular locale where the contract is either made or to be performed is considered
C Ambiguities in a contract are construed against the party preparing the contract
D Words will be construed according to their “ordinary” meaning
A
Printed provisions will not prevail over handwritten provisions. In fact, if provisions are inconsistent, written or typed provisions will prevail over printed provisions (which indicate a form contract). Courts construe words according to their “ordinary” meaning unless it is clearly shown that they were meant to be used in a technical sense. Courts generally look to see what custom and usage is in the particular business and in the particular locale where the contract is either made or is to be performed. Ambiguities in a contract are construed against the party preparing the contract, absent evidence of the intention of the parties. QUESTION ID: K0051 Additional Learning
Under Article 2, which of the following is not a true statement concerning contract terms?
A If the price is not specified, the price is a reasonable price at the time of delivery.
B If the time for payment is not specified, payment is due at the time and place at which the buyer is to receive the goods.
C If a quantity is not specified, the quantity is a reasonable quantity under the circumstances at the time the contract was made.
D If the time for delivery is not specified, delivery is due within a reasonable time.
C
If a quantity term is not specified, a reasonable quantity term will NOT be supplied. To form a valid sale of goods contract, there must be a quantity term. A quantity term will not be supplied by the court, and therefore, there is no gap-filling provision with respect to quantity. Under the Article 2 gap-filler provisions, if the price is not specified, the price is the reasonable price at the time of delivery. Similarly, if the time for delivery is not specified, the gap-filler provides that delivery is due within a reasonable time. The gap-filler provisions also provide that payment is due at the time and place at which the buyer is to receive the goods if the time for payment is not specified in the agreement. QUESTION ID: K0062 Additional Learning
Which of the following statements could give rise to an express warranty?
A “Ford Fusions have the best resale value”
B “Your car will look just like the one in the showroom”
C “In my opinion, this is the best car with the most fuel-efficient engine available today”
B
“Your car will look just like the one in the showroom” is a description that could give rise to an express warranty if made at a time that the buyer could have relied on it when entering into the contract. It is a statement of fact about the good. Statements relating merely to the value of the goods, such as “Ford Fusions have the best resale value,” and statements purporting to be only the seller’s opinion, such as “In my opinion, this is the best car with the most fuel-efficient engine available today,” do not create express warranties. QUESTION ID: K0069B Additional Learning
Under the warranty of _____________ , goods are warranted to be fit for the ordinary purpose for which such goods are used.
A Merchantability
B Fitness for a particular purpose
C Against infringement
A
Under the implied warranty of merchantability, the goods are warranted to be at least fit for the ordinary purposes for which such goods are used. The warranty against infringement is provided by a merchant seller and warrants that the goods are delivered free of any patent, trademark, copyright, or similar claims. The implied warranty of fitness for a particular purpose arises when a seller has reason to know the particular purpose for which the goods are to be used and that the buyer was relying on the seller’s skill and judgment to select suitable goods when the buyer bought the goods. This warranty is for a specific use intended by the buyer, whereas the implied warranty of merchantability warrants fitness for ordinary purposes. QUESTION ID: K0067A Additional Learning
Under the common law of contracts, modification of a written contract generally requires __________.
A a waiver if the contract provides that all modifications must be in writing
B consideration
C a signed writing
D good cause
B
Contrary to the U.C.C. position, the common law of contracts generally requires that a modification be supported by new consideration. A signed writing is not required. A written contract may be modified orally. The common law rule is that even if a written contract provides that all modifications must be in writing, the parties can orally modify the contract. Good cause is not required; a contract may be modified for any reason at all. QUESTION ID: K0071 Additional Learning
In a shipment contract, when goods are destroyed en route from the seller to the buyer, the risk of loss is borne by:
A The buyer because the risk of loss passed to the buyer at the time of the contract because of the doctrine of equitable conversion
B The buyer because the risk of loss passed to the buyer when the goods were delivered to the carrier
C The seller because the risk of loss does not pass to the buyer until the shipment is tendered to the buyer
D The seller because it was the seller’s responsibility to contract with the carrier
B
In a shipment contract, the risk of loss passes to the buyer when the goods are delivered to the carrier. Any loss incurred en route is borne by the buyer. Equitable conversion is a doctrine that applies only to the sale of land, not goods. The risk of loss does not pass to the buyer until the goods are tendered to the buyer under a destination contract. This is a shipment contract, which means the risk of loss passes to the buyer when the goods are delivered to the carrier. While it is the seller’s responsibility to contract with the carrier, that does not affect the risk of loss rules. QUESTION ID: K0064 Additional Learning
Which of the following statements or actions cannot give rise to an express warranty?
A “We will include a free car wash whenever you bring your new car in for service”
B “This car has a 3.2 liter V6 engine”
C A test drive of a car represented to be “just like” the one for sale
D “In my opinion, this is the best car with the most fuel efficient engine available today”
D
The statement, “In my opinion, this is the best car with the most fuel efficient engine,” cannot give rise to an express warranty. Any affirmation of fact or promise made by the seller, any description of the goods, and any sample or model creates an express warranty if it is part of the basis of the bargain. A statement purporting to be only the seller’s opinion or commendation of the goods is not a statement of fact and does not create an express warranty. “This car has a 3.2 liter V6 engine” is an affirmation of fact and thus can give rise to an express warranty. A test drive of a car can give rise to an express warranty if it is part of the basis of the bargain. A test drive is a sample or model. The statement about the free car wash is a promise related to the sale and will give rise to an express warranty if it is part of the basis of the bargain. QUESTION ID: K0069 Additional Learning
For which of the following does Article 2 provide gap-filling provisions?
A Price, quantity, time for payment
B Quantity, time and place of delivery, time for payment
C Price, time and place of delivery, time for payment
C
Article 2 has gap-filler provisions to fill in certain missing terms in a contract such as price, time and place of delivery, and time for payment. There is no gap-filling term for quantity. If the price is left open to be agreed upon by the parties and they fail to agree, the price is a reasonable price at the time for delivery. If the place for delivery is not specified, the place is the seller’s place of business if he has one; otherwise, it is the seller’s house. If the time for delivery/shipment is not specified, delivery/shipment is due within a reasonable time. If the time for payment is not specified, payment is due at the time and place at which the buyer is to receive the goods. If the quantity term is not specified, there is no contract; the quantity term will not be supplied by a gap-filler. QUESTION ID: K0062B Additional Learning
