R6-2 Flashcards
Under the Sales Article of the UCC, which of the following statements is correct regarding risk of loss and title to the goods under a sale or return contract?
a.
Title remains with the seller until the buyer approves or accepts the goods, but risk of loss passes to the buyer immediately following delivery of the goods to the buyer.
b.
Title and risk of loss remain with the seller until the buyer pays for the goods.
c.
Title and risk of loss are shared equally between the buyer and the seller.
d.
Title and risk of loss rest with the buyer until the goods are returned to the seller.
Choice “d” is correct. In a sale or return, the buyer has title and risk of loss unless and until the goods are returned to the seller.
Choices “c”, “a”, and “b” are incorrect, per the above.
An appliance seller promised a restaurant owner that a home dishwasher would fulfill the dishwashing requirements of a large restaurant. The dishwasher was purchased but it was not powerful enough for the restaurant. Under the Sales Article of the UCC, what warranty was violated?
a.
The express warranty against infringement.
b.
The implied warranty of merchantability.
c.
The express warranty that the goods conform to the seller’s promise.
d.
The implied warranty of marketability.
Choice “c” is correct. Any affirmation of fact or promise that becomes part of the basis of the bargain creates an express warranty.
Choice “d” is incorrect. There is no warranty under the Sales Article entitled the “warranty of marketability.”
Choice “b” is incorrect. The warranty of merchantability is a promise that the goods will be fit for their ordinary purposes. Nothing here indicates that the home dishwasher would be unfit for its ordinary purpose of washing dishes in a home.
Choice “a” is incorrect. The warranty against infringement is a promise that the goods sold do not infringe on another’s patents or copyrights. Nothing indicates that this warranty was breached here.
Under the Sales Article of the UCC, which of the following circumstances will relieve a buyer from the obligation of accepting a tender or delivery of goods?
I.
If the goods do not meet the buyer’s needs at the time of the tender or delivery.
II.
If the goods at the time of the tender or delivery do not exactly conform to the requirements of the contract.
a.
I only.
b.
Neither I nor II.
c.
Both I and II.
d.
II only.
Choice “d” is correct. A buyer may reject goods if they do not conform to the contract in any way. This is known as the perfect tender doctrine. However, the mere fact that the goods do not meet the buyer’s needs at the time of tender or delivery is not a ground for rejection if the goods conform to the contract.
Choices “a”, “c”, and “b” are incorrect. Each of these choices incorrectly address either I and/or II.
Under the Sales Article of the UCC, which of the following statements is correct regarding a good faith requirement that must be met by a merchant?
a.
The merchant must adhere to all written and oral terms of the sales contract.
b.
The merchant must provide more extensive warranties than the minimum required by law.
c.
The merchant must charge the lowest available price for the product in the geographic market.
d.
The merchant must observe the reasonable commercial standards of fair dealing in the trade.
Choice “d” is correct. The UCC imposes an obligation of good faith on both parties to a contract. For merchants, this includes the duty to observe reasonable commercial standards.
Choice “a” is incorrect. Under the parol evidence rule, a merchant would not have to adhere to oral statements made before a written contract was made if the written contract appears to be a total integration of the entire deal.
Choice “b” is incorrect. A merchant need not go beyond the warranties required by law.
Choice “c” is incorrect. There is no rule requiring merchants to sell at the lowest prices.
Under the Sales Article of the UCC, which of the following statements is correct regarding a seller’s obligation under a F.O.B. destination contract?
a.
The seller is required to tender delivery of conforming goods at a specified destination.
b.
The seller is required to tender delivery of conforming goods to a carrier who delivers to a destination specified by the buyer.
c.
The seller is required to tender delivery of conforming goods at the buyer’s place of business.
d.
The seller is required to arrange for the buyer to pick up the conforming goods at a specified destination.
Choice “a” is correct. Under an F.O.B. destination contract, the seller has the risk of loss until he places conforming goods into the buyer’s hands at the named destination, not necessarily the buyer’s place of business.
Choices “d”, “c”, and “b” are incorrect, per the above.
Under the Sales Article of the UCC, in an auction announced in explicit terms to be without reserve, when may an auctioneer withdraw the goods put up for sale?
I.
At any time until the auctioneer announces completion of the sale.
II.
If no bid is made within a reasonable time.
a.
II only.
b.
I only.
c.
Either I or II.
d.
Neither I nor II.
Explanation
Choice “a” is correct. In an auction without reserve, the goods must be sold if an offer is made. Of course, if no offer is made within a reasonable time, the goods need not be sold. Item I describes a sale with reserve.
Choices “b”, “c”, and “d” are incorrect. Each of these choices incorrectly addresses either I and/or II.
Patch, a frequent shopper at Soon-Shop Stores, received a rain check for an advertised sale item after Soon-Shop’s supply of the product ran out. The rain check was in writing and stated that the item would be offered to the customer at the advertised sale price for an unspecified period of time. A Soon-Shop employee signed the rain check. When Patch returned to the store one month later to purchase the item, the store refused to honor the rain check. Under the Sales Article of the UCC, will Patch win a suit to enforce the rain check?
a.
Yes, because Soon-Shop is required to have sufficient supplies of the sale item to satisfy all customers.
b.
No, because one month is too long a period of time for a rain check to be effective.
c.
No, because the rain check did not state the effective time period necessary to keep the offer open.
d.
Yes, because the rain check met the requirements of a merchant’s firm offer even though no effective time period was stated.
Choice “d” is correct. The rain check satisfied the requirements of a “firm offer” because it involved the sale of goods, the seller was a merchant, it was in writing and signed by the merchant, and the writing included words of firmness (i.e., a promise to keep the offer open). If no time is stated, as in this case, the offer is irrevocable for a reasonable time, up to three months.
Choice “b” is incorrect. A merchant’s firm offer can be irrevocable for up to three months.
Choice “c” is incorrect. If a merchant’s firm offer does not indicate how long the offer will be kept open, it is irrevocable for a reasonable time, not to exceed three months.
Choice “a” is incorrect. There is no such rule under the UCC Sales Article, and, as a practical matter, it would be difficult to predict the supply needed.
A sheep rancher agreed, in writing, to sell all the wool shorn during the shearing season to a weaver. The contract failed to establish the price and a minimum quantity of wool. After the shearing season, the rancher refused to deliver the wool. The weaver sued the rancher for breach of contract. Under the Sales Article of the UCC, will the weaver win?
a.
Yes, because this was an output contract.
b.
No, because the omission of price and quantity terms prevents the formation of a contract.
c.
No, because quantity cannot be omitted for a contract to be enforceable.
d.
Yes, because both price and quantity terms were omitted.
Choice “a” is correct. Under the UCC, a contract to buy all of one’s requirements or to sell all of one’s output is valid even though an exact quantity is not stated. In addition, price and time for delivery are not essential terms under the UCC. As a general rule, the only essential term under the UCC is quantity, and an output or requirements term is considered a sufficiently precise quantity.
Choice “d” is incorrect. First, the contract has a quantity term, the rancher’s output for the season. Thus, this choice is factually incorrect. Second, if it were missing a quantity term, that would be a reason preventing enforcement.
Choice “c” is incorrect. Although it is true that an agreement is unenforceable under the Sales Article if it lacks a quantity term, the UCC treats output as an acceptable quantity term.
Choice “b” is incorrect because when a price term is omitted, the UCC implies a reasonable price, and the contract here does have a quantity term because output is considered an acceptable quantity.
EG Door Co., a manufacturer of custom exterior doors, verbally contracted with Art Contractors to design and build a $2,000 custom door for a house that Art was restoring. After EG had completed substantial work on the door, Art advised EG that the house had been destroyed by fire and Art was canceling the contract. EG finished the door and shipped it to Art. Art refused to accept delivery. Art contends that the contract cannot be enforced because it violated the Statute of Frauds by not being in writing. Under the Sales Article of the UCC, is Art’s contention correct?
a.
No, because the cancellation of the contract was not made in writing.
b.
Yes, because the contract cannot be fully performed due to the fire.
c.
Yes, because the contract was not in writing.
d.
No, because the goods were specially manufactured for Art and cannot be resold in EG’s regular course of business.
Explanation
Choice “d” is correct. The Statute of Frauds requires contracts involving the sales of goods to be in writing if they exceed $500 (MYLEGS). However, if any of these exceptions apply, an oral contract will be enforceable:
Specially manufactured (custom) goods
Written confirmation between merchants
Admission in court
Performance
Choice “c” is incorrect. Although the contract is within the Statute of Frauds because it involves the sale of goods for $500 or more and Art did not sign a memorandum sufficient to satisfy the Statute, the contract is nevertheless enforceable against Art under an exception to the Statute for specially manufactured goods.
Choice “b” is incorrect. Whether or not the contract can still be performed is not relevant to the Statute of Frauds. The Statute of Frauds conerns whether certain contracts need written evidence of their existence signed by the party being sued.
Choice “a” is incorrect. Nothing in the UCC requires cancellations to be in writing.
Under the Sales Article of the UCC, when a contract for the sale of goods stipulates that the seller ship the goods by common carrier “F.O.B. purchaser’s loading dock,” which of the parties bears the risk of loss during shipment?
a.
The purchaser, because title to the goods passes at the time of shipment.
b.
The purchaser, because risk of loss passes when the goods are delivered to the carrier.
c.
The seller, because risk of loss passes only when the goods reach the purchaser’s loading dock.
d.
The seller, because risk of loss remains with the seller until the goods are accepted by the purchaser.
Choice “c” is correct. When a contract for the sale of goods includes an F.O.B. (free on board) delivery term, that term controls risk of loss. The seller has the risk of loss until the goods are delivered at the location named after the F.O.B. term. Here, the location is the purchaser’s loading dock, so risk of loss remains with the seller until the goods are delivered there.
Choice “b” is incorrect. When the delivery term is F.O.B. purchaser’s loading dock, risk of loss does not pass to the purchaser until the goods are delivered at the purchaser’s loading dock.
Choice “a” is incorrect. Under the UCC, risk of loss does not depend upon title, but rather upon the delivery term.
Choice “d” is incorrect. Risk of loss under an F.O.B. term passes when the goods are delivered at the named location, not when the goods are accepted by the purchaser.
Under the Sales Article of the UCC, a firm offer will be created only if the:
a.
Offer is made by a merchant in a signed writing.
b.
Offeree gives some form of consideration.
c.
Offer states the time period during which it will remain open.
d.
Offeree is a merchant.
Choice “a” is correct. A firm offer (an offer that must remain open despite the absence of consideration) can be made only by merchants and must be in a signed writing.
Choice “c” is incorrect. If a firm offer does not state its period of irrevocability, it will remain open for a reasonable time not to exceed three months.
Choice “b” is incorrect. A firm offer is an offer that must remain open despite the lack of consideration.
Choice “d” is incorrect. The offeree need not be a merchant in a firm offer situation; only the offeror need be a merchant.
Under the Sales Article of the UCC, the warranty of title:
a.
Provides that the seller deliver the goods free from any lien of which the buyer lacked knowledge when the contract was made.
b.
Applies only if the seller is a merchant.
c.
Provides that the seller cannot disclaim the warranty if the sale is made to a bona fide purchaser for value.
d.
Applies only if it is in writing and signed by the seller.
Choice “a” is correct. The warranty of title is a guarantee from the seller that the goods are delivered free of all liens of which the buyer is unaware.
Choice “c” is incorrect. The warranty of title can be disclaimed by specific language or circumstance.
Choice “d” is incorrect. The warranty of title arises automatically in every sale of goods; it need not be in writing.
Choice “b” is incorrect. The warranty of title arises automatically in every sale of goods; even when the seller is not a merchant.
To establish a cause of action based on strict liability in tort for personal injuries that result from the use of a defective product, one of the elements the injured party must prove is that the seller:
a.
Sold the product in a defective condition.
b.
Was aware of the defect in the product.
c.
Sold the product to the injured party.
d.
Failed to exercise due care.
Choice “a” is correct. An action for strict product liability will succeed only if the product was in a defective condition when sold, the seller was in the business of selling goods, the defect caused the plaintiff’s injury, and the product was expected to and did reach the consumer without substantial change.
Choice “b” is incorrect. The seller need not have been aware of the defect.
Choice “c” is incorrect. Strict product liability extends to all foreseeable users, privity is not required.
Choice “d” is incorrect. The seller need not have failed to exercise due care; liability is strict and can be imposed even on a careful seller.
Under the Sales Article of the UCC, which of the following factors is most important in determining who bears the risk of loss in a sale of goods contract?
a.
The method of shipping the goods.
b.
The contract’s shipping terms.
c.
Title to the goods.
d.
How the goods were lost.
Choice “b” is correct. Assuming that the loss occurred under a shipment contract, risk of loss under the UCC is controlled by the shipping terms, not by title.
Choice “a” is incorrect. The method of shipping the goods (e.g., car vs. train) is irrelevant to who bears the risk of loss under the UCC; the shipping terms are the key when the contract is a shipment contract.
Choice “c” is incorrect. Risk of loss under the UCC is controlled by the shipping terms in a shipment contract, not by title.
Choice “d” is incorrect. Risk of loss under the UCC is controlled by the shipping terms in a shipment contract, not by how the goods were lost.
Under the Sales Article of the UCC, in an F.O.B. place of shipment contract, the risk of loss passes to the buyer when the goods:
a.
Are identified to the contract.
b.
Are delivered to the carrier.
c.
Are placed on the seller’s loading dock.
d.
Reach the buyer’s loading dock.
Choice “b” is correct. In an F.O.B. place of shipment contract, risk of loss passes when the goods are placed in the hands of a carrier at the seller’s loading dock.
Choice “a” is incorrect. Risk of loss would pass on identification only if the parties specifically so provided.
Choice “c” is incorrect. In an F.O.B. place of shipment contract, it is not sufficient just to get the goods to the loading dock; risk does not pass until the goods are placed in the hands of a carrier there.
Choice “d” is incorrect. In an F.O.B. place of shipment contract, risk of loss passes when the goods are placed in the hands of a carrier at the seller’s loading dock.
Under the Sales Article of the UCC, which of the following rights is(are) available to the buyer when a seller commits an anticipatory breach of contract?
~~Demand assurance of performance
~~Cancel the contract
~~Collect punitive damages
a.
Yes
Yes
No
b.
Yes
Yes
Yes
c.
Yes
No
Yes
d.
No
Yes
Yes
Choice “a” is correct. On an anticipatory breach of contract (or repudiation) the nonbreaching party has a right to demand assurances of performance or to cancel the contract. There is no right to punitive damages under contract law in general, even on anticipatory breach.
Under the Sales Article of the UCC, and unless otherwise agreed to, the seller’s obligation to the buyer is to:
a.
Hold conforming goods and give the buyer whatever notification is reasonably necessary to enable the buyer to take delivery.
b.
Deliver all goods called for in the contract to a common carrier.
c.
Deliver the goods to the buyer’s place of business.
d.
Set aside conforming goods for inspection by the buyer before delivery.
Choice “a” is correct. Absent an agreement otherwise, the seller is not obligated to deliver the conforming goods to the buyer, but merely needs to hold them for the buyer’s disposition.
Choice “c” is incorrect. Absent an agreement otherwise, a seller has no duty to deliver the conforming goods to the buyer.
Choice “b” is incorrect. Absent an agreement otherwise, a seller has no duty to deliver the conforming goods to a common carrier.
Choice “d” is incorrect. Absent an agreement otherwise, a seller need not hold the conforming goods aside for inspection before delivery.
Under the Sales Article of the UCC, which of the following statements regarding liquidated damages is (are) correct?
I.
The injured party may collect any amount of liquidated damages provided for in the contract.
II.
The seller may retain a deposit of up to $500 when a buyer defaults even if there is no liquidated damages provision in the contract.
a.
Both I and II.
b.
I only.
c.
II only.
d.
Neither I nor II.
Choice “c” is correct. I: An injured party cannot necessarily collect “any amount” of liquidated damages specified in a contract. UCC 2-718(1) restricts recovery to reasonable liquidated damages; any amounts above a reasonable amount are considered unenforceable penalties. II: Under UCC 2-718(2)(b), a seller can usually retain up to $500 of the buyer’s deposit on the buyer’s breach.
Under the Sales Article of the UCC, which of the following rights is available to a seller when a buyer materially breaches a sales contract?
~~Right to cancel the contract
~~Right to recover damages
a.
No
No
b.
Yes
No
c.
Yes
Yes
d.
No
Yes
Choice “c” is correct. When a buyer materially breaches a contract, the seller may cancel and seek damages.
Under the Sales Article of the UCC, which of following statements is correct?
a.
The obligations of the parties to the contract must be performed in good faith.
b.
None of the provisions of the UCC may be disclaimed by agreement.
c.
Merchants and nonmerchants are treated alike.
d.
The contract must involve the sale of goods for a price of more than $500.
Choice “a” is correct. The Sales Article imposes a duty of good faith on all parties.
Choice “c” is incorrect. Certain provisions of the Sales Article differentiate between merchants and nonmerchants (e.g., only a merchant makes the implied warranty of merchantability).
Choice “d” is incorrect. The Sales Article applies to all sales of goods. The $500 limit refers to the Statute of Frauds within the Sales Article.
Choice “b” is incorrect. Most provisions of the Sales Article can be varied by agreement (e.g., warranties may be disclaimed).
Under the Sales Article of the UCC, which of the following statements is correct regarding the warranty of merchantability arising when there has been a sale of goods by a merchant seller?
a.
The warranty arises as a matter of law when the seller ordinarily sells the goods purchased.
b.
The warranty arises when the buyer relies on the seller’s skill in selecting the goods purchased.
c.
The warranty cannot be disclaimed.
d.
The warranty must be in writing.
Choice “a” is correct. The warranty of merchantability is implied whenever a merchant (one who ordinarily sells goods of the kind sold) sells goods. UCC 2-314
Choice “d” is incorrect. The warranty of merchantability is an implied warranty—it need not be in writing.
Choice “b” is incorrect. The warranty of merchantability is implied whenever a merchant (one who ordinarily sells goods of the kind sold) sells goods. The warranty that can arise from reliance is the warranty of fitness for particular purpose.
Choice “c” is incorrect. The warranty of merchantability can be specifically disclaimed or by words such as “as is.”
High sues the manufacturer, wholesaler, and retailer for bodily injuries caused by a power saw High purchased. Which of the following statements is correct under strict liability theory?
a.
The manufacturer will avoid liability if it can show it followed the custom of the industry.
b.
Contributory negligence on High’s part will always be a bar to recovery.
c.
High may recover even if he cannot show any negligence was involved.
d.
Privity will be a bar to recovery insofar as the wholesaler is concerned if the wholesaler did not have a reasonable opportunity to inspect.
Choice “c” is correct. An action for strict product liability does not require a showing of negligence. The product must have been unreasonably dangerous when it left the seller’s hands.
Choice “b” is incorrect. In an action for strict liability in tort, High’s contributory negligence would be irrelevant.
Choice “a” is incorrect. Custom in the industry is good evidence that there was no negligence, but a whole industry can be found to be following a negligent practice, and industry custom is not a defense in a strict liability product liability case.
Choice “d” is incorrect. The fact that the wholesaler did not have an opportunity to inspect is not a defense.
Under the Sales Article of the UCC, which of the following events will result in the risk of loss passing from a merchant seller to a buyer?
~~Tender of the goods at the seller’s place of business
~~Use of the seller’s truck to deliver the goods
a.
No
No
b.
Yes
No
c.
Yes
Yes
d.
No
Yes
Choice “a” is correct. In a noncarrier case, risk of loss passes from a merchant seller on actual delivery of the goods into the buyer’s possession. Mere tender at the seller’s place of business does not pass the risk. Neither does the seller’s using its truck to deliver the goods. (Note that since the seller is using its own truck, this is a noncarrier case, no common carrier was involved.)