Chapter 14 MindTap Questions

The UCC does not apply to a contract for the sale of goods if the value of the goods is less than $500.

False

A buyer has an absolute right to reject non-conforming goods as long as the rejection is timely.

False (The buyer may reject non-conforming goods by notifying the seller within a reasonable time.)

Ahmir agrees to purchase a shipment of oriental rugs from Oriental Rug Company for the price of $50,000, to be delivered on August 15. On July 15, Ahmir notifies Oriental that he no longer wants to purchase the rugs. Oriental spends $1,000 to advertise the rugs and obtains a new purchaser who buys the rugs for $40,000. Oriental then sues Ahmir for breach of contract. If Oriental is successful in its breach of contract suit against Ahmir, Oriental may receive:

$11,000 from Ahmir ($10,000+$1,000)

A Purchase Money Security Interest ("PMSI") in consumer goods perfects automatically, without filing.

False

Lloyd purchases a combine harvester from John Deere for use on his wheat farm. The price is $400,000. Wyatt pays $20,000 down and signs a financing agreement with John Deere for the other $380,000, payable in monthly installments. John Deere files a financing statement covering the loan. Lloyd uses the combine for two years and makes all his monthly installment payments. After a major flood destroys Lloyd's crops, Lloyd is desperate for money. Lloyd takes out a loan with Farm Bureau Credit Company for $100,000 and uses the combine for collateral. Because Lloyd cannot currently use the combine due to the extensive damage to his fields from the flood, Lloyd lets Farm Bureau take possession of the combine. Four months later, Lloyd files for bankruptcy. John Deere and Farm Bureau each file claims to reclaim the combine, because it was collateral for their loans to Lloyd. The entity that can lawfully reclaim the combine as collateral for Lloyd's loan is:

John Deere (Both John Deere and Farm Bureau Credit Company have perfected loans. The loan with John Deere is perfected by a financing statement. The loan with Farm Bureau is perfected by possession of the collateral. When two or more secured parties have perfected security interests in the same collateral, the first to perfect (by filing or taking possession of the collateral) generally has priority. Here, John Deere was the first to perfect by filing a financing statement, so John Deere has priority interest in the combine.)

Under the UCC, a merchant is frequently held to a higher standard of conduct than a non-merchant.

True

Erika was planning her first cross country bike trip. She wanted a bike that would handle rough terrain easily because part of the trip would be through Kings Canyon National Park. Salisar is a salesman at Bikes by the Bay, a specialty bike store near Erika. Erika explains the details of the strenuous trip she is planning and states that she needs a very sturdy mountain bike that will handle it. Salisar recommends the Crosstrain 2000, a bike his store is pushing that month because both the store and the salesperson get a bonus for each bike sold. Erika purchases the bike and begins her adventure. Twenty miles into her journey, the front axle breaks due to the rough terrain, causing Erika to plunge down a steep hillside and sustain serious injuries. In advising Erika to purchase the Crosstrain 2000 for her trip, Salisar:

breached the implied warranty of fitness for a particular purpose.

In a "mixed contract," one involving a sale of both goods and services, the court will

first determine the dominant purpose of the contract. if the sale of goods dominates the contract, then the court will apply the law of the UCC, Article 2. If the sale of services dominates the contract, the court will apply the common law.

Implied Warranties are created by

the UCC itself

Larue owns a horse ranch. Larue enters into a contract with Dora for the purchase of thirty saddles for his ranch to be delivered on a specific date. If the price of the saddles is not included in the contract, under the U.C.C.:

the court will determine a reasonable price at the time for delivery