18: Formation of Sales and Lease Contracts
Which of the following is correct regarding Article 2 of the Uniform Commercial Code (UCC)? A) Money is a tangible good. B) Intangible goods must be exchanged for other intangible goods. C) Goods in a contract must be movable. D) Immovable goods like real estate must have provisions of service attached to their contracts.
C) Goods in a contract must be movable.
Which of the following is correct regarding a finance lease? A) It involves leasing out money to a lessee. B) The lessor is the supplier of the goods. C) It consists of a lessor, a lessee, and a supplier. D) The lessee acquires title to the goods.
C) It consists of a lessor, a lessee, and a supplier.
The ________ is a set of rules promulgated by the International Chamber of Commerce (ICC) that establishes specific terms (called Incoterms) that are used to govern international letters of credit. A) UCC B) USA C) UCP D) LC
C) UCP
A ________ is a transfer of the right to the possession and use of named goods for a set term in return for certain consideration. A) trade B) gift C) lease D) sale
C) lease
A contract is created when ________. A) acceptance has been received by the offeror B) the offeror acknowledges receipt of acceptance C) the offeree sends acceptance D) the offeree acknowledges receipt of the offer
C) the offeree sends acceptance
In a lease contract, title to the goods is passed from the lessor to the lessee.
FALSE
The Uniform Commercial Code (UCC) does not allow for open terms to be read into a sales or lease contract.
FALSE
The formation of sales and lease contracts requires consideration.
TRUE
Which of the following is correct regarding consideration for modifying a sales or lease contract under the Uniform Commercial Code (UCC)? A) An agreement modifying the contract needs no consideration to be binding. B) Modifying the contract requires that the offeree provide additional consideration. C) Modifying the contract requires that the offeror provide additional consideration. D) The exact consideration required for the modification is determined by either industry standard or the prior course of dealings between the parties.
A) An agreement modifying the contract needs no consideration to be binding.
Which of the following sections of the Uniform Commercial Code (UCC) applies to transactions in goods? A) Article 2 B) Article 3 C) Article 5 D) Article 7
A) Article 2
What is the function of the Uniform Commercial Code's (UCC's) gap-filling rule? A) It permits certain open terms to be "read into" a contract. B) It helps a merchant revoke its offer even after acceptance. C) It assures the offeree that goods will be held open for a reasonable time. D) It protects the offeror from additional terms that may be added by the offeree.
A) It permits certain open terms to be "read into" a contract.
A computer program or an electronic or other automated means used independently to initiate an action or respond to electronic records or performances in whole or in part, without review or action by an individual, is known as a(n) ________. A) electronic agent B) electronic record C) digital mapper D) automation
A) electronic agent
A person who transfers the right of possession and use of goods under a lease is known as the ________. A) lessor B) lessee C) seller D) consignee
A) lessor
A(n) ________ is a document that is issued by a bank on behalf of a buyer who purchases goods from a seller that guarantees that the bank will pay the seller. A) letter of credit B) accommodation C) finance lease D) e-record
A) letter of credit
The ________ says that if a written contract is a complete and final statement of the parties' agreement, any prior or contemporaneous oral or written statements that alter, contradict, or are in addition to the terms of the written contract are inadmissible in court regarding a dispute over the contract. A) parol evidence rule B) firm offer rule C) open terms rule D) gap-filling rule
A) parol evidence rule
Eminence Front Classic Autos, LLC (Eminence Front), a vintage car dealer, advertises the sale of a 1964 Ford Thunderbird. Ralph responds to the advertisement with an offer of $80,000 for the car. Eminence Front signs a written assurance to keep that offer open to Ralph for ten (10) days. Five (5) days later, Eminence Front sells the car to another buyer. At the end of the ten-day period, Ralph tenders $80,000 for the car, but the car has already been sold. Ralph then buys the same year, make, and model of car from another dealer for $90,000 and sues Eminence Front for breach of contract. The court rules that Eminence Front is liable to Ralph for breach of contract and orders Eminence Front to pay Ralph $10,000 in monetary damages. Which of the following rules governs the execution of this contract? A) the firm offer rule B) the mirror image rule C) the battle of the forms rule D) the gap-filling rule
A) the firm offer rule
According to the common law of contracts, which of the following rules governs the propriety of an acceptance? A) the mirror image rule B) open terms C) the battle of the forms D) additional terms
A) the mirror image rule
Kimberly, a merchant-seller in Kansas, had an oral contract to sell goods to Jane, a merchant-buyer in Memphis, for $100,000. Two (2) days after contracting, Kimberly sends a sufficient written confirmation to Jane of the agreed-upon transaction. Jane, who has reason to know the contents of the written confirmation, fails to object to the contents of the confirmation immediately. Two (2) weeks after receiving the written confirmation, Jane receives a delivery of the goods from Kimberly. Jane immediately sends an objection to the confirmation to Kimberly. Which of the following is correct regarding the contract between Kimberly and Jane? A) The Statute of Frauds can be successfully asserted against the contract because a letter of objection was sent to the offeror. B) The offer is valid, since the offeree knew the contents of the confirmation and did not object within ten (10) days. C) The contract is void, since the offeror did not receive a letter of confirmation from the offeree for delivery. D) The Statute of Frauds can be successfully raised because the offeree did not sign the contract.
B) The offer is valid, since the offeree knew the contents of the confirmation and did not object within ten (10) days.
How are additional terms in an acceptance to a contract viewed under the common law? A) They are viewed as proposed additions to the contract. B) They are seen as a counteroffer. C) They become part of the contract by the battle of the forms rule. D) They must be accepted pursuant to the mirror image rule.
B) They are seen as a counteroffer.
Miranda Airways (Miranda), a commercial air carrier, has a contract with Wurtherton, Inc. (Wurtherton), an airplane manufacturer, to purchase a new plane. Due to a sudden shortage of cash, Miranda goes to First Global Bank (First Global). First Global issues a document to Wurtherton which indicates that if Miranda does not pay for the transaction, First Global will. Wurtherton considers the offer and then sends an acceptance with additional terms. The additional terms stipulate that Miranda can use the new airplane for a period of ten (10) years and then return it to Wurtherton. Miranda Airways agrees to the acceptance, and Wurtherton delivers the new airplane to them. What is the nature of the contract between Miranda and Wurtherton? A) a sale of goods B) a lease C) a sale-or-return contract D) a sale-on-approval contract
B) a lease
Which of the following is defined as the passing of title of goods from a seller to a buyer for a price? A) a lease B) a sale C) a loan D) a gift
B) a sale
A shipment that is offered to a buyer as a replacement for the original shipment when the original shipment cannot be filled is referred to as a(n) ________. A) remuneration B) accommodation C) surrogate D) open delivery
B) accommodation
Which of the following does Article 2 of the Uniform Commercial Code (UCC) define as goods? A) company shares B) crops C) trade secrets D) money
B) crops
The ________ rule states that a merchant who offers to buy, sell, or lease goods and gives a written and signed assurance on a separate form that the offer will be held open cannot revoke the offer for the time stated or, if no time is stated, for a reasonable time. A) gap-filling B) firm offer C) mirror image D) open term
B) firm offer
Rhianna Air (Rhianna), a commercial air carrier, decides to lease a new airplane that is manufactured by Boeing. To finance the airplane acquisition, Rhianna goes to Municipal Bank (Municipal). Municipal purchases the airplane from Boeing, and Municipal then leases the airplane to Rhianna. In this transaction, Rhianna is the ________, Boeing is the ________, and Municipal is the ________. A) lessor; supplier; lessee B) lessee; supplier; lessor C) supplier; lessor; lessee D) lessee; lessor; supplier
B) lessee; supplier; lessor
What is "course of dealing"? A) the previous conduct of the parties regarding the contract in question B) the conduct of the parties in prior transactions and contracts C) the conduct of contractual parties with parties not involved in the contract D) any practice of dealing that is regularly observed or adhered to in an industry
B) the conduct of the parties in prior transactions and contracts
Which of the following is covered by Article 2 of the Uniform Commercial Code (UCC)? A) the sale of intangible goods B) the sale of tangible goods C) the sale of real estate D) the sale of stocks
B) the sale of tangible goods
Miranda Airways, a commercial air carrier, has a contract with Wurtherton, Inc., an airplane manufacturer, to purchase a new plane. Due to a sudden shortage of cash, Miranda Airways goes to MetrosBank. MetrosBank issues a document to Wurtherton that if Miranda does not pay for the transaction, MetrosBank would. Wurtherton considers the offer and then sends an acceptance with additional terms. The additional terms stipulate that Miranda Airways could have the new airplane for a period of ten (10) years and then return it to Wurtherton. Miranda Airways agrees to the acceptance, and Wurtherton hands over the new airplane to them. Which of the following documents did MetrosBank issue to Wurtherton to help Miranda Airways secure the airplane? A) a bill of exchange B) a warehouse receipt C) a letter of credit D) a remittance advice
C) a letter of credit
Article 2A of the Uniform Commercial Code (UCC) covers ________. A) mixed sales B) the sale of goods C) leases D) letters of credit
C) leases
Article 5 of the Uniform Commercial Code (UCC) governs ________. A) sales of intangible goods B) finance leases C) letters of credit D) general provisions
C) letters of credit
According to the gap-filling rule of the Uniform Commercial Code (UCC), if a sales contract does not contain a specific price, a(n) ________ price is implied at the time of delivery. A) buyer-preferred B) seller-preferred C) reasonable D) fair market value
C) reasonable
Earhart Airways (Earhart), a commercial air carrier, has a contract with Red Baron, L.L.C. (Red Baron), an airplane manufacturer, to purchase a new plane. Due to a sudden shortage of cash, Earhart goes to Lindberg Bank (Lindbergh). Lindbergh issues a document to Red Baron that if Earhart does not pay for the transaction, Lindbergh would. Red Baron considers the offer and then sends an acceptance with additional terms. The additional terms stipulate that Earhart can use the new airplane for ten (10) years and then return it to Red Baron. Earhart agrees to the acceptance, and Red Baron delivers the new airplane to them. What Uniform Commercial Code (UCC) rule applied when Earhart agreed to the additional terms in the acceptance proposed by Red Baron? A) the firm offer rule B) the mirror image rule C) the battle of the forms rule D) the gap-filling rule
C) the battle of the forms rule
Under the Uniform Commercial Code (UCC), if the time, place, and manner of delivery of goods are not mentioned in a contract, ________. A) the place of delivery is the buyer's place of business B) the contract is void for lack of definiteness C) the place of delivery is the seller's place of business D) the seller is obligated to pay for shipping to the buyer's place of business
C) the place of delivery is the seller's place of business
When is the course of performance considered in a written contract? A) when an oral modification is required for the written contract B) when a sale or lease contract is not evidenced by a writing C) when the express terms of a written contract are not clear D) when there is a prior oral or written agreement that contradicts the written agreement
C) when the express terms of a written contract are not clear
According to the common law of contracts, in which of the following situations can the Statute of Frauds defense be successfully raised? A) when a seller of specially manufactured goods makes an oral agreement with the buyer B) when the party against whom enforcement of an oral sales or lease contract is sought admits to such a contract in court C) when the written agreement has not been signed by the party against whom enforcement is sought D) when a service contract valued at $500 has not been performed
C) when the written agreement has not been signed by the party against whom enforcement is sought
Which section of the Uniform Commercial Code (UCC) governs letters of credit? A) Article 2 B) Article 2A C) Article 3 D) Article 5
D) Article 5
According to the Uniform Commercial Code (UCC), which of the following is correct regarding additional terms in an acceptance? A) They extinguish the original offer. B) They become part of the resulting sales contract when the sale is between two (2) merchants. C) They become part of the resulting sales contract without the consent of the offeror. D) If one (1) or both parties are nonmerchants, the additional terms are considered proposed additions to the contract.
D) If one (1) or both parties are nonmerchants, the additional terms are considered proposed additions to the contract.
The ________ requires all contracts for the sale of goods costing $500 or more and lease contracts involving payments of $1,000 or more to be in writing. A) parol evidence rule B) gap-filling rule C) firm offer rule D) Statute of Frauds
D) Statute of Frauds
Which of the following is correct regarding the terms to be expressed in a contract according to the common law of contracts? A) Additional terms can be added during acceptance. B) Additional terms can be added without consideration. C) Gap-filling rules are permitted for price, payment, and delivery of the goods. D) The contract must contain all the material terms of the parties' agreement.
D) The contract must contain all the material terms of the parties' agreement.
In which of the following situations would a sales or lease contract that would otherwise be required to be in writing be enforceable even if it is not in writing? A) specially manufactured goods B) admissions in pleadings or court C) part acceptance D) a hybrid contract involving $500 in goods and $100 in services
D) a hybrid contract involving $500 in goods and $100 in services
Which of the following is a mixed sale? A) a sale that involves two (2) or more intangible goods B) a sale that involves the passing of title of goods from a seller to a buyer for a price C) a sale that involves the possession and use of named goods for a set term D) a sale that involves the provision of a service and a good in the same transaction
D) a sale that involves the provision of a service and a good in the same transaction
According to the battle of the forms rule, when do additional terms contained in an acceptance become part of the contract? A) if the additional terms materially alter the original contract B) if the sale is between two (2) nonmerchants C) if the additional terms expressly limit the acceptance to the terms of the offer D) if the offeror notifies the offeree that she does not object to the additional terms
D) if the offeror notifies the offeree that she does not object to the additional terms
A(n) ________ is a document that is issued by a bank on behalf of a buyer who purchases goods on credit from a seller that guarantees that if the buyer does not pay for the goods, then the bank will pay the seller. A) accommodation B) e-record C) finance lease D) letter of credit
D) letter of credit
Which of the following is a model act passed in 1949 that includes comprehensive laws that cover most aspects of commercial transactions? A) the Gramm-Leach Bliley Act B) the Interstate Commerce Act C) the Uniform Sales Act D) the Uniform Commercial Code
D) the Uniform Commercial Code
A finance lease involves a lessor leasing money to a lessee.
FALSE
A payable on demand letter of credit is often used in domestic sales transactions term-72
FALSE
A sale that includes the provision of both services and goods is not covered by Article 2 of the Uniform Commercial Code (UCC).
FALSE
A standby letter of credit is rarely used in domestic sales transactions.
FALSE
According to the Uniform Commercial Code (UCC), a contract is created only when the offeror receives the offeree's acceptance.
FALSE
According to the Uniform Commercial Code (UCC), if one or both parties to a sales contract are merchants, any additional terms are considered proposed additions to the contract.
FALSE
An e-signature is the signature of a person that appears on an electronic record but is not recognized as a lawful signature.
FALSE
An open price term requires a contract to mention a specific price for the goods.
FALSE
Article 2 of the Uniform Commercial Code (UCC) applies to contracts for the sale of intangible goods.
FALSE
Article 2(A) of the Uniform Commercial Code (UCC) states that all lease contracts requiring payments of $500 or more must be in writing.
FALSE
In a finance lease, the lessor manufactures and supplies the goods included in the contract.
FALSE
Modification to a sales or lease contract is binding even if it is made under duress.
FALSE
The battle of the forms takes place between a merchant and a nonmerchant.
FALSE
The common law of contract's mirror image rule offers a more expansive interpretation of the formation of contracts than does UCC Section 2-207(1).
FALSE
The common law of contracts allows for gap-filling terms that are implied in the contract.
FALSE
The firm offer rule allows the offeror to revoke the offer at time prior to its acceptance.
FALSE
The offeror's delivery of the original offer to the offeree is called accommodation.
FALSE
The written confirmation rule requires that both parties to an oral agreement send written confirmation of the sale or lease.
FALSE
A sales contract evidenced by a writing cannot be contradicted by a prior oral or written agreement.
TRUE
According to the Uniform Commercial Code (UCC), a seller or buyer who reserves the right to fix a price must do so in good faith.
TRUE
According to the Uniform Commercial Code (UCC), an agreement sufficient to constitute a contract for the sale or lease of goods may be found even though the moment of its making is undetermined.
TRUE
According to the common law of contracts, a written contract must be signed by the party against whom enforcement is sought.
TRUE
According to the common law of contracts, the inclusion of additional terms in the acceptance of an offer is considered a counteroffer rather than an acceptance.
TRUE
An electronic agent is a computer program or an electronic or other automated means used independently to initiate an action or respond to electronic records or performances in whole or in part, without review or action by an individual.
TRUE
Article 2 of the Uniform Commercial Code (UCC) defines a merchant as a person who deals in the goods of the kind involved in the transaction.
TRUE
Article 2 of the Uniform Commercial Code (UCC) is also applied by federal courts to sales contracts governed by federal law.
TRUE
Article 2 of the Uniform Commercial Code (UCC) states that all contracts for the sale of goods priced at $500 or more must be in writing.
TRUE
Article 2A of the Uniform Commercial Code (UCC) covers lessors and lessees.
TRUE
Contracts for the provision of services are not covered by Article 2 of the Uniform Commercial Code (UCC).
TRUE
Course of performance between the parties is taken into account when the express terms of their written contract are not clear.
TRUE
Every state except Louisiana has enacted the majority of the Uniform Commercial Code (UCC) as a commercial statute.
TRUE
If a consumer purchase a computer, the sales contract associated with the purchase is subject to Article 2 of the Uniform Commercial Code (UCC).
TRUE
If the parties to a sales contract do not agree to the time, place, and manner of delivery of the goods, the place for delivery is the seller's place of business.
TRUE
In the battle of the forms, there is no contract if the additional terms so materially alter the terms of the original offer that the parties cannot agree on the contract.
TRUE
Incoterms are almost universally accepted and used to govern international letters of credit.
TRUE
Only movable goods are subject to Article 2 of the Uniform Commercial Code (UCC).
TRUE
Option contracts are examples of irrevocable offers.
TRUE
Under the common law of contract's mirror image rule, the offeree's acceptance must be on the same terms as the offer.
TRUE
