Quiz #4 Flashcards
Heavy Metal in Chicago makes a contract to sell to a Holiday Inn hotel in Detroit one commercial-grade multi-station weightlifting machine for $20,000 for use in the hotel’s fitness room. The contract provides that the goods will be delivered on or before June 1, “FOB Seller’s Place.” Payment is due on July 1. On May 30, Heavy Metal has Dependo, a reliable 3rd party carrier, come pick up the machine for delivery after Heavy Metal gives timely notice of this fact to Holiday Inn. Dependo picks up the machine but severe flooding on the highways from Chicago from Detroit ruins the machine by rusting the metal parts. When Holiday Inn receives the machine on May 31, it immediately rejects the machine because of the severe rust. Will Heavy Metal be able to recover from Holiday Inn in an action for the price of the weightlifting machine?
A. No, because Holiday Inn never accepted the goods.
B. No, because Heavy Metal failed to delver conforming goods to Holiday Inn.
C. No, for both of the reasons given by (a) and (b).
D. Yes, and for the result would be the same even if the delivery term had been “FOB Buyer’s Place”
E. Yes, as long as Heavy Metal brings its action for the price within a commercially reasonable time after risk of loss has passed to Holiday Inn.
E.
UCC 2-709(1)(a) and 2-509(1)(a)
Same questions as Heavy Metal, except there is no FOB delivery term in the contract and nothing is said about the risk of loss in the contract. Furthermore, in this variation, Holiday Inn does not notice the rust problem with the machine and initially accepts the machine. A couple of weeks later, however, Holiday Inn attempts to revoke its acceptance when it discovers the rust on the machine after some hotel guests complain about it. Now will Heavy Metal be able to recover from Holiday Inn in an action for the price of weightlifting machine?
A. Yes, because Holiday Inn still has risk of loss as to the defect on which it bases its attempt to revoke acceptance.
B. Yes, because even a justified revocation of acceptance by Holiday Inn does not change the fact that once Holiday Inn accepted the goods, Heavy Metal because eligible to recover for the price of the goods.
C. No, because Heavy Metal had the risk of loss as to the damage caused to the machine that was the basis of Holiday Inn’s revocation of acceptance.
D. No, because the acceptance that gives rise to an action for price under 2-709(1)(a) includes only cases in which there has been no justified revocation of acceptance.
E. No, for the reasons given in both (c) and (d).
A.
Seller agrees to sella drill-press machine to Buyer for 450,000, “FOB Buyer’s Place of Business.” The cost of delivering the goods from Houston to LA is 15,000. The machine arrives to Buyer on the stated delivery date, and Buyer wrongfully reject the machine. A week later, Seller is able to resell the machine in a commercially reasonable and procedurally proper resale for 360,000 to a different LA buyer that agrees to pick up the machine at its own expense from the rejecting buyer. The market price for this drill-press machine on the date of tender is 390,000 in Houston and 375,000 in LA. Assuming the Seller is not a lost-profits seller, for what amount may Seller recover from buyer?
A. 90,000
B. 45,000
C. 75,000
D. 60,000
E. 105,000
A.
Same facts with the Buyer and Seller of the drill-press, except not the Buyer repudiates the contract with Seller a month prior to the performance date (not prior to delivery by Seller), and Seller ultimately decides not to resell the machine in question. The market price of the machine on the date of Buyer’s repudiation is 380,000 in Houston and 365,000 in LA. The market price of the machine on the performance date is 390,000 in Houston and 375,000 in LA. Assuming that Seller is not a lost-profits seller, for what amount may Seller recover from Buyer?
A. 75,000
B. 60,000
C. 85,000
D. 70,000
E. 0, at least if we assume that a resale by the Seller was possible.
B.
Lessor and Lessee enter into a three-year lease of a drill-press machine for 10,000 per month. 14 months into the lease, Lessee has missed 2 lease payments and Lessor repossesses the machine according to its rights under the contract. Lessor spends 3 month and 2,000 in advertising costs from the point of repossession trying to re-lease the machine, and finally is able to enter into a substantially similar lease with a new lessee. The new lease is for 5 years at 9,000 a month. The old lease, but not the new one, required Lessor to do an annual maintenance treatment midway through each lease year that cost Lessor 2,000 for each treatment, one of which was performed under the old lease. Assuming that Lessor is not a lost-volume lessor and putting aside discounting to present value, for what amount of damages may Lessor recover from Lessee?
A. 67,000
B. 37,000
C. 71,000
D. 65,000
E. None of above
A
Same as the Lessor and Lessee with the 3-year lease except the Lessor ends up selling the machine 3 months following the repossession, and Lessor does not spend any advertising costs to find the buyer for the machine. The market rent at the place the machine is located for a substantially similar lease as fo the date Lessor repossessed the goods is $12,000 per month. Assuming that Lessor is not a lost-volume lessor and putting aside discounting to present value, for what amount of damages may Lessor recover from Lessee?
A. 60,000
B. Zero.
C. 20,000
D. 16,000
E. Non of the above
D.
Shortly before the new year, Toronto Seller (“Seller”) and New York City Buyer (“Buyer”) enter into a contract for the sale of 20 new Cadillac Convertible cars for $800,000, “FOB Seller’s Place of Business.” Seller explains to Buyer before signing the contract that by selling these 20 cars before ether end of the calendar year, Seller will be receiving a $100,000 incentive bonus from its manufacturer for reaching an overall sales goal for the year. The day before the delivery date, Buyer repudiates the contract. The cost of shipping the cars from Toronto to New York City would have been $20,000. Upon learning of the Buyer’s repudiation, Seller choose to avoid the contract and resells the 20 cars to a local Toronto buyer for 770,000. In the resale contract, Seller has to spend 5,000 to deliver the cars to the local buyer. However, because the resale takes place just after the calendar year begins, Seller is no longer eligible for the 10,000 incentive bonus from its manufacturer. Assuming that Seller is not a lost-volume seller, for what amount of damages may Seller recover from Buyer under the CISG?
A. 35,000
B. 135,000
C. 115,000
D. 15,000
E. None
B.
Same facts as Toronto and New York City Buyer, except that Seller does not give Buyer any notice of the special bonus that Seller will get with this sales contract. and Seller doe snot end up reselling these 20 cars at all, but decides to use them in its rental fleet of cars. In this variation, the delivery term is “FOB Buyer’s Place of Business” (but delivery costs would still have been 20,000) The market price for these 20 cars at the time of Seller’s avoidance is 775,000 in Toronto and 765,000 in New York City. Assuming that Seller is not a lost-volume seller, for what amount of damages may Seller recover from Buyer under CISG?
A. 35,000
B. 5,000
C. 115,000
D. 25,000
E. None
E.
Buyer makes a contract to purchase 10 widgets from Seller for a total cost of 100,000. Buyer wrongfully repudiates that contract, and Seller resells and widgets to a new buyer for 100,000. The market price of the widgets at the time and place for tender is 98,000. Seller has fixed annual expenses of 100 million overall, and in additional spends 5,000 in direct labor costs and 3,500 in direct material costs for each widget produced. Assuming that Seller is a lost-volume seller, for what amount of damages may Seller recover from Buyer for Buyer’s breach?
A. 0
B, 2,000
C. 15,000
D. 17,000
E. None
C.
Buyer and seller enters into a contract in which Seller agrees to build a custom-designed drill-press machine for Buyer for a total price of 3.2 Mill. Seller plans to spend 1.2 Mill. in direct labor costs and 800,000 in direct material costs. Buyer repudiates the contract in mid-production, at which point Seller has purchased and used 400,000 in raw materials and has expended $800,000 in direct labor costs. Assume that Seller knows that if Seller completes the machine, there is a different buyer to whom Seller could sell the completed machine for 1.9 Mill. Seller also knows that if Seller ceases production at this point, no other buyer will buy the partially completed machine. If Seller decides to complete the machine at this point, will a court uphold that decision as commercially reasonable on Seller’s part?
A. No, because Seller expected to sell the completed machine for 3.2 mill and this new buyer is offering to pay 1.3 mill less than that
B. No, because if Seller completes the machine, Seller will end up spending a total of 2 mill in direct labor and material costs for a sale that will only yield 1.9 million for the purchase price.
C. No, because the marginal costs of completion for Seller here is greater than the resale of the finished product minus the scrap value.
D. Yes, because the marginal costs of completion for Seller here is less than the resale of the finished product minus the scrap value.
E. Yes, but only if Seller can show that it would not have made the sale to the new buyer if the o.g. buyer had not breached its contract to buy the machine.
D.
Same facts as the custom drill-press, Once the seller completes production of the machine and sells it for 1.9 mill to the new buyer, what will Seller’s damages be against the o.g. Buyer?
A. 3.2 mill in an action of the price.
B. 1.3 mill, but Seller’s damages would be even more than that if Seller could show that in the absence of Buyer’s breach, it could have made both the sale to the o.g. buyer as well as the sale of the new buyer.
C. 1.3 mill, whether or not Seller could show that in the absence of Buyer’s breach, it could have made both the sale to the o.g. Buyer as well as the sale of the new buyer.
D. 1.2 mill, which represents Seller’s lost profits in its contract with the o.g. buyer
E. 0, because Seller actually made a profit with the new buyer by only having to spend 800,000 more in direct labor and material costs from the point of the o.g. buyer’s repudiation in order to ear 1.9 mill for the sale to the new buyer.
c.
Same facts as drill-press, expect the Seller realizes that by spending an additional 80,000 in direct labor costs, Seller will be able to sell the scrap fro 1.4 mill in a sale that Seller never would have made had Buyer not breached. Assume that Seller reasonably opts to send the additional 80,000 and sell the scraps for 1.4 mill. For what amount of damages can Seller recover from Buyer?
A. 1.2 Mill
B. 1.28 mill
C. 1 mill
D. 1.88 mill
E. none
e.
Seller, a Chicago Co., agrees to sell to Buyer, a Houston company, a shipment of six dozen widgets for a contract price of 430,000, “FOB Chicago.” Delivery date in the contract is July , Buyer arranges and pay for shipments and on July 9 the widgets arrive in Houston on time. However, they are clearly defective and Buyer immediately rejects them. The cost of shipping six dozen widgets from Chicago to Houston is 25,000. The market price of 6 dozen widgets on July 9 is 395,000 in Chicago and 460,000 in Houston. Assuming Buyer has not pre-paid any of the purchase price (or shipping charges) and buyer chooses not to cover, for what amount of damages may Buyer recover from Seller?
A. 30,000
B. 5,000
C. 0
D. 55,000
E. None
A
Same facts of Chicago widgets seller, except the Seller (without giving any advance notice to Buyer) fails to deliver the goods on July 9. Assuming Buyer has not pre-paid any of the purchase price (or shipping charges) and Buyer chooses not to cover, for what amount of damages may Buyer recover from Seller?
A. 0
B. 30,000
C. 35,000
D. 10,000
E. None
A
Same facts of Chicago widgets seller, except following Buyer’s rejection of the widgets after their arrival in Houston, Buyer spends a week searching around town and is able to purchase 6 dozen widgets substitute of the same type of 465,000. Buyer also spends 3,000 to have the substitute widgets deliver to Buyer’s place of business. Finally, Buyer ends up spending $2,000 to store the defective widgets until Seller can pick them up. Assuming Buyer has not pre-paid any of the purchase price (but Buyer did not pay the 25,000 shipping cost from Chicago to Houston), for what amount of damages may Buyer recover from Seller?
A. 32,000
B. 65,000
C. 40,000
D. 0
E. None
C.
