Total review 2.4

Anton promised to pay Beta $10,000 in exchange for an automobile. Accordingly, Anton executed a contract and delivered it to Beta. Beta then transferred the contract to Carl for value. When Beta failed to perform, Anton refused to pay. If Carl sues Anton,

Carl will win if the contract is instead a negotiable instrument and the requirements of Article 3 of the UCC are complied with.

Mix Clothing shipped 300 custom suits to Tara Retailers. The suits arrived on Thursday, earlier than Tara had anticipated and on an exceptionally busy day for its receiving department. They were perfunctorily examined and sent to a nearby warehouse for storage until needed. On the following day, upon closer examination, it was discovered that the quality of the linings of the suits was inferior to that specified in the sales contract. Which of the following is true insofar as Tara's rights are concerned?

Tara can reject the suits upon subsequent discovery of the defects.

Cara Fabricating Co. and Taso Corp. agreed orally that Taso would custom manufacture a compressor for Cara at a price of $120,000. After Taso completed the work at a cost of $90,000, Cara notified Taso that the compressor was no longer needed. Taso is holding the compressor and has requested payment from Cara. Taso has been unable to resell the compressor for any price. Taso incurred storage fees of $2,000. If Cara refused to pay Taso and Taso sues Cara, the most Taso will be entitled to recover is

$122,000

Which of the following instruments is subject to the provisions of the Negotiable Instruments Article of the UCC?

A certificate of deposit.

Gold is holding the following instrument

A draft. A draft is a three-party instrument in which one person (the drawer) orders a second person (the drawee) to pay a third person (the payee). With this instrument, Lester Davis (the drawer) is ordering Sussex National Bank (the drawee) to pay Tom Gold (the payee).

Badger Corporation sold goods to Watson. Watson has arbitrarily refused to pay the purchase price. Under what circumstances will Badger not be able to recover the full contract price if it seeks this remedy instead of other possible remedies? A) If Watson refused to accept delivery and the goods were resold in the ordinary course of business. B) If Watson accepted the goods but seeks to return them. C) If the goods sold were destroyed shortly after the risk of loss passed to the buyer. D) If the goods were identified to the contract, and Badger made a reasonable effort to resell them at a reasonable price but was unable to do so.

A) If Watson refused to accept delivery and the goods were resold in the ordinary course of business.

Which of the following factors is most important in deciding who bears the risk of loss between merchants when goods are destroyed during shipment? A) The agreement of the parties. B) Whether the goods are perishable. C) Who has title at the time of the loss. D) The terms of applicable insurance policies.

A) The agreement of the parties.

Bush Hardware ordered 300 Ram hammers from Ajax Hardware. Ajax accepted the order in writing. On the final date allowed for delivery, Ajax discovered it did not have enough Ram hammers to fill the order. Instead, Ajax sent 300 Strong hammers. Ajax stated on the invoice that the shipment was sent only as an accommodation. Which of the following statements is true?

Ajax's shipment of Strong hammers is a breach of contract.

Grill deals in the repair and sale of new and used clocks. West brought a clock to Grill to be repaired. One of Grill's clerks mistakenly sold West's clock to Hone, another customer. Under the Sales Article of the UCC, will West win a suit against Hone for the return of the clock? A. No, because the clerk was not aware that the clock belonged to West. B. No, because Grill is a merchant to whom goods had been entrusted. C. Yes, because Grill could not convey good title to the clock. D. Yes, because the clerk was negligent in selling the clock.

B

If a contract for the sale of goods includes a C&F shipping term and the seller has fulfilled all of its obligations, the A. Title to the goods will pass to the buyer when the goods are received by the buyer at the place of destination. B. Risk of loss will pass to the buyer upon delivery of the goods to the carrier. C. Buyer retains the right to inspect the goods prior to making payment. while the goods are in transit and before inspection. D. Seller must obtain an insurance policy at its own expense for the buyer's benefit.

B

Sand Corp. sold and delivered a photocopier to Barr for use in Barr's business. According to their agreement, Barr may return the copier within 30 days. During the 30-day period, if Barr has not returned the copier or indicated acceptance of it, which of the following statements is true with respect to risk of loss and title? A. Risk of loss and title passes to Barr. B. Risk of loss and title remain with Sand. C. Risk of loss passes to Barr, but title remains with Sand. D. Risk of loss remains with Sand, but title passes to Barr.

B

On April 5, Anker, Inc., furnished Bold Corp. with Anker's financial statements dated March 31. The financial statements contained misrepresentations indicating that Anker was solvent when it was insolvent. Based on Anker's financial statements, Bold agreed to sell Anker 90 computers, "FOB -- Bold's loading dock." On April 14, Anker received 60 of the computers. The remaining 30 computers are in the possession of the common carrier and in transit to Anker. With respect to the remaining 30 computers in transit, which of the following statements is correct if Anker refuses to pay Bold in cash, and Anker is not in possession of a negotiable document of title covering the computers?

Bold may stop delivery of the computers to Anker despite the passage of title to Anker.

Under a contract governed by UCC Article 2, which of the following statement is true? A) Unless both the seller and the buyer are merchants, neither party is obligated to perform the contract in good faith.. B) The contract will not be enforceable if it fails to expressly specify a time and a place for delivery of the goods. C) The seller may be excused from performance if the goods are accidentally destroyed before the risk of loss passes to the buyer. D) If the price of the goods is less than $500, the goods need not be identified in the contract for title to pass to the buyer.

C) The seller may be excused from performance if the goods are accidentally destroyed before the risk of loss passes to the buyer.

Under Article 2 of the UCC, which of the following events will result in the risk of loss passing from a merchant seller to a buyer? Order: Tender of the Goods at the Sellers Place of Business, Use of the Seller's Truck to Deliver the Goods A. Yes Yes B. Yes No C. No Yes D. No No

D

Under Article 2 of the UCC, which of the following statements is true regarding the warranty of merchantability arising from a sale of goods by a merchant seller? A. The warranty must be in writing. 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 arises as a matter of law when the seller ordinarily sells the goods purchased.

D

Under the Sales Article of the UCC, most goods sold by merchants are covered by certain warranties. An example of an express warranty is a warranty of A. Usage of trade. B. Fitness for a particular purpose. C. Merchantability. D. Conformity of goods to the sample.

D

Which of the following is necessary for the warranty of merchantability to arise in a sale of goods? 1. The seller must be a merchant with respect to goods of that kind. 2. The warranty must be in writing. 3. The buyer must have relied on the seller's skill or judgment in selecting the goods. A. I and III only. B. I, II, and III. C. II and III only. D. I only.

D

Cara Fabricating Co., and Taso Corp. agreed orally that Taso would custom manufacture a compressor for Cara at a price of $120,000. After Taso completed the work at a cost of $90,000, Cara notified Taso that the compressor was no longer needed. Taso is holding the compressor and has requested payment from Cara. Taso has been unable to resell the compressor for any price. Taso incurred storage fees of $2,000. If Cara refused to pay Taso and Taso sues Cara, the most Taso will be entitled to recover is: A) $92,000. B) $105,000. C) $120,000. D) $122,000.

D) $122,000.

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 UCC Article 2, will Patch win a suit to enforce the rain check? A) No, because one month is too long a period of time for a rain check to be effective. B) No, because the rain check did not state the effective time period necessary to keep the offer open. C) Yes, because Soon-Shop is required to have sufficient supplies of the sale item to satisfy all customers. D) Yes, because the rain check met the requirements of a merchant's firm offer even though no effective time period was stated.

D) Yes, because the rain check met the requirements of a merchant's firm offer even though no effective time period was stated.

The following instrument is negotiable

Promissory note. The instrument is a promissory note because it is a two-party instrument in which the maker unconditionally promises to pay a fixed amount of money to the payee.

A trade acceptance usually

Provides that the drawer is also the payee.

On April 5, Anker, Inc., furnished Bold Corp. with Anker's financial statements dated March 31. The financial statements contained misrepresentations indicating that Anker was solvent when it was insolvent. Based on Anker's financial statements, Bold agreed to sell Anker 90 computers, "FOB -- Bold's loading dock." On April 14, Anker received 60 of the computers. The remaining 30 computers are in the possession of the common carrier and in transit to Anker.

Reclaim the computers upon making a demand.

Under the Negotiable Instruments Article of the UCC, an endorsement of an instrument "for deposit only" is an example of what type of endorsement?

Restrictive.

When a buyer is in breach of a contract for the sale of goods, the seller may withhold delivery. Which of the following is true?

When the breach regarding one installment substantially impairs the value of the whole contract, all undelivered goods may be withheld.

14 Vick bought a used boat from Ocean Marina that disclaimed "any and all warranties" in connection with the sale. Ocean was unaware the boat had been stolen from Kidd. Vick surrendered it to Kidd when confronted with proof of the theft. Vick sued Ocean. Who is likely to prevail and why? A. Vick, because the warranty of title has been breached. B. Vick, because a merchant cannot disclaim implied warranties. C. Ocean, because of the disclaimer of warranties. D. Ocean, because Vick surrendered the boat to Kidd.

A

An important factor in determining whether an express warranty has been created is whether the A. Statements made by the seller became part of the basis of the bargain. B. Sale was made by a merchant in the regular course of business. C. Statements made by the seller were in writing. D. Seller intended to create a warranty.

A

Bond purchased a painting from Wool, who is not in the business of selling art. Wool tendered delivery of the painting after receiving payment in full from Bond. Bond informed Wool that Bond would be unable to take possession of the painting until later that day. Thieves stole the painting before Bond returned. The risk of loss A. Passed to Bond on Wool's tender of delivery. B. Passed to Bond at the time the contract was formed and payment was made. C. Remained with Wool because the parties agreed on a later time of delivery. D. Remained with Wool because Bond had not yet received the painting.

A

Buyer ordered goods from Sue Seller. The contract required Seller to deliver them FOB Buyer's place of business. Buyer inspected the goods, discovered they failed to conform to the contract, and rightfully rejected them. In the event of loss of the goods, which of the following is a true statement? A. Seller initially had the risk of loss, and it remains with her after delivery. B. Risk of loss passes to Buyer upon tender of the goods FOB Buyer's place of business. C. Buyer initially had the risk of loss, but it is shifted to Seller upon rightful rejection. D. If Seller used a public carrier to transport the goods to Buyer, risk of loss is on Buyer during transit.

A

On Monday, Gullible George is induced to sell a computer to Fraudulent Freddy on the basis of Freddy's misrepresentation that he is Wealthy Walter. That same day, Freddy resells the computer to Innocent Ivan, a good faith purchaser for value. On Tuesday, Gullible George sells an electronic typewriter to Dishonest David who pays for the goods with a check that is later dishonored by the payor (drawee) bank. Before the check is dishonored, David sells the typewriter to Innocent Irene, a good faith purchaser for value. On the basis of these facts, A. George's best remedy is to recover the value of the goods from Freddy and David in a tort action for deceit. B. George is entitled to recover the computer from Ivan, but he is not entitled to recover the typewriter from Irene. C. George is entitled to recover the typewriter from Irene, but he is not entitled to recover the computer from Ivan. D. George is entitled to recover the computer from Ivan and the typewriter from Irene.

A

Razor Corp. agreed to purchase 100 mixers from Home Suppliers, Inc. Home is a wholesaler of small home appliances, and Razor is an appliance retailer. The contract required Home to ship the mixers to Razor by common carrier, "FOB Home Suppliers, Inc. Loading Dock." Under Article 2 of the UCC A. Title to the mixers passes to Razor at the time they are delivered to the carrier, even if the goods are nonconforming. B. Razor must inspect the mixers at the time of delivery or waive any defects and the right to sue for breach of contract. C. Home must pay the freight expense associated with the shipment of the mixers to Razor. D. Razor would have the right to reject any shipment if Home fails to notify Razor that the goods have been shipped.

A

Under Article 2 of the UCC and the United Nations Convention for the International Sale of Goods (CISG), absent specific terms in an international sales shipment contract, when will risk of loss pass to the buyer? A. When the goods are delivered to the first carrier for transmission to the buyer. B. When the goods are tendered to the buyer. C. When the execution of the contract is concluded. D. When the goods are identified to the contract.

A

Under the UCC Sales Article, the implied warranty of merchantability A. May be disclaimed by a seller's oral statement that mentions merchantability. B. Arises only in contracts involving a merchant seller and a merchant buyer. C. Is breached if the goods are not fit for all purposes for which the buyer intends to use the D. Must be part of the basis of the bargain to be binding on the seller.

A

Which of the following factors is most important in deciding who bears the risk of loss between merchants when goods are destroyed during shipment? A. The agreement of the parties. B. Whether the goods are perishable. C. Who has title at the time of the loss. D. The terms of applicable insurance policies.

A

Which of the following factors result(s) in an express warranty with respect to a sale of goods? 1. The seller's description of the goods as part of the basis of the bargain 2. The seller's selection of goods knowing the buyer's intended use A. I only. B. II only. C. Both I and II. D. Neither I nor II.

A

Under the negotiable instruments article of the UCC, which of the following circumstances would prevent a promissory note from being negotiable?

A clause that allows the maker to satisfy the note by the performance of services or the payment of money.

A company has in its possession the following instrument:

A negotiable bearer note. The instrument is a signed writing unconditionally promising to pay a fixed amount of money at a definite time to the bearer. It thus meets all of the requirements of negotiability. It is a two-party instrument with a maker and a payee, so it is a promissory note. It is a bearer note because it is payable to the order of cash.

An instrument complies with the requirements for negotiability contained in the UCC article on negotiable instruments. The instrument contains language expressly acknowledging the receipt of $40,000 by Mint Bank and an agreement to repay principal with interest at 11% 6 months from date. The instrument is

A negotiable certificate of deposit.

There are several legally significant differences between a negotiable instrument and a contract right, and the transfer of each. Which of the following statements is true?

A negotiable instrument is deemed prima facie to have been issued for consideration, whereas a contract right is not.

Ed Johnson lost a check that he had received for professional services rendered. The instrument on its face was payable to Johnson's order. He had endorsed it on the back by signing his name and printing "for deposit only" above his name. Amy found the check. Which of the following is true?

A nonbank party who purchases the instrument commits a tort unless the amount paid is received by the endorser or applied consistently with the endorsement.

To be negotiable, an instrument must be written and signed. Which of the following is true?

A signature may be any symbol intended by a party to authenticate a writing.

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 Article 2 of the UCC, will the weaver win? A) Yes, because this was an output contract. B) Yes, because both price and quantity terms were omitted. C) No, because quantity cannot be omitted for a contract to be enforceable. D) No, because the omission of price and quantity terms prevents the formation of a contract.

A) Yes, because this was an output contract.

A client has an instrument that contains certain ambiguities or deficiencies. In construing the instrument, which of the following is false?

An instrument that does not state any time of payment is not negotiable.

15 Sutter purchased a computer from Harp. Harp is not in the business of selling computers. Harp tendered delivery of the computer after receiving payment in full from Sutter. Sutter informed Harp that Sutter was unable to take possession of the computer at that time but would return later that day. Before Sutter returned, the computer was destroyed by a fire. The risk of loss A. Remained with Harp because title had not yet passed to Sutter. B. Passed to Sutter upon Harp's tender of delivery. C. Remained with Harp because Sutter had not yet received the computer. D. Passed to Sutter at the time the contract was formed and payment was made.

B

15 Under the Sales Article of the UCC, which of the following statements is correct regarding the creation of express warranties? A. Express warranties must contain formal words such as warranty or guarantee. B. Express warranties must be part of the basis of the bargain between buyer and seller. C. Express warranties are not enforceable if made orally. D. Express warranties cannot be based on statements made in the seller's promotional materials.

B

17 Parks furnished specifications and ordered 1,000 specially constructed folding tables from Metal Manufacturing Company, Inc. The tables were unique in design and had not appeared in the local market. Metal completed the job and delivered the order to Parks. Parks sold about 600 of the tables when Unusual Tables, Inc., sued both Parks and Metal for patent infringement. If Unusual wins, what is the status of Parks and Metal? A. Metal is liable to Parks for breach of the warranty against infringement. B. Parks is liable to Metal for damages resulting from an infringement claim. C. The UCC does not allocate liability for infringement between Parks and Metal. D. Parks and Metal are jointly and severally liable and, as such, must pay the judgment in equal amounts.

B

Lazur Corp. entered into a contract with Baker Suppliers, Inc., to purchase a used computer from Baker. Lazur is engaged in the business of selling new and used computers to the general public. The contract required Baker to ship the goods to Lazur by common carrier pursuant to the following provision: "FOB Baker Suppliers, Inc. loading dock." During shipment to Lazur, the computer was seriously damaged when the carrier's truck was involved in an accident. When the carrier attempted to deliver the computer, Lazur rejected it and has refused to pay Baker the purchase price. Under Article 2 of the UCC, A. Lazur rightfully rejected the damaged computer. B. The risk of loss for the computer was on Lazur during shipment. C. At the time of the accident, risk of loss for the computer was on Baker because title to the computer had not yet passed to Lazur. D. Lazur will not be liable to Baker for the purchase price of the computer because of the FOB provision in the contract.

B

Under the Sales Article of the UCC, the warranty of title A. Provides that the seller cannot disclaim the warranty if the sale is made to a bona fide purchaser for value. B. Provides that the seller deliver the goods free from any lien of which the buyer lacked knowledge when the contract was made. C. Applies only if it is in writing and signed by the seller. D. Applies only if the seller is a merchant.

B

Under the Sales Article of the UCC, unless a contract provides otherwise, before title to goods can pass from a seller to a buyer, the goods must be A. Tendered to the buyer. B. Identified to the contract. C. Accepted by the buyer. D. Paid for.

B

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. The manner in which the goods were lost.

B

When do title and risk of loss for conforming goods pass to the buyer under a shipment contract covered by the Sales Article of the UCC? A. When the goods are identified and designated for shipment. B. When the goods are given to a common carrier. C. When the goods arrive at their destination. D. When the goods are tendered to the buyer at their destination.

B

Which of the following conditions must be met for an implied warranty of fitness for a particular purpose to arise in connection with a sale of goods? 1. The warranty must be in writing. 2. The seller must know that the buyer was relying on the seller in selecting the goods. A. I only. B. II only. C. Both I and II. D. Neither I nor II.

B

Which of the following is excluded from the UCC's definition of goods? A) Minerals (including oil and gas) to be extracted by the seller. B) Investment securities. C) Growing crops and timber. D) The unborn young of animals.

B) Investment securities.

Assume that the parties have entered into a contract for the sale of goods. Which of the following is a false statement under the UCC? A) Retention of title by the seller to goods delivered to the buyer is, in effect, a reservation of a security interest. B) Title to goods may pass under a contract for sale prior to identification of the goods in the contract. C) Title can pass to the buyer when the seller completes physical delivery of the goods if a document of title is to be delivered at a different time and place. D) Identification of the goods to the contract gives the buyer an insurable interest in the good even before delivery.

B) Title to goods may pass under a contract for sale prior to identification of the goods in the contract.

Lazur Corp. entered into a contract with Baker Suppliers, Inc., to purchase a computer from Baker. Lazur is engaged in the business of selling computers to the general public. The contract required Baker to ship the goods to Lazur by common carrier pursuant to the following provision in the contract: "FOB - Baker Suppliers, Inc., loading dock." Assume that Lazur refused to accept the computer even though it was in all respects conforming to the contract and that the contract is otherwise silent. Under UCC Article 2,

Baker may resell the word processor to another buyer.

Under UCC Article 2, a plaintiff who proves fraud in the formation of a contract may

Be entitled to rescind the contract and sue for damages resulting from the fraud.

If a required element of negotiability is not present, special protections provided by the law are not available. Nevertheless, the contract right embodied in the nonnegotiable instrument will usually be transferable because most contract rights, especially the right to receive money, are assignable. But the assignee will take no better right than that held by his/her assignor.

Both the drawee and the acceptor.

13 Under Article 2 of the UCC, the warranty of title may be excluded by A. Merchants or nonmerchants, provided the exclusion is in writing. B. Nonmerchant sellers only. C. The seller's statement that it is selling only such right or title that it has. D. Use of an "as is" disclaimer.

C

16 Under the Sales Article of the UCC, which of the following circumstances best describes how the implied warranty of fitness for a particular purpose arises in a sale of goods transaction? A. The buyer is purchasing the goods for a particular purpose and is relying on the seller's skill or judgment to select suitable goods. B. The buyer is purchasing the goods for a particular purpose, and the seller is a merchant in such goods. C. The seller knows the particular purpose for which the buyer will use the goods and knows the buyer is relying on the seller's skill or judgment to select suitable goods. D. The seller knows the particular purpose for which the buyer will use the goods, and the seller is a merchant in such goods.

C

On May 2, Handy Hardware sent Ram Industries a signed purchase order that stated, in part, as follows: "Ship for May 8 delivery 300 Model A-X socket sets at current dealer price. Terms 2/10/net 30." Ram received Handy's purchase order on May 4. On May 5, Ram discovered that it had only 200 Model A-X socket sets and 100 Model W-Z socket sets in stock. Ram shipped the Model A-X and Model W-Z sets to Handy without any explanation concerning the shipment. The socket sets were received by Handy on May 8. Assuming a contract exists between Handy and Ram, which of the following warranties would result? 1. Implied warranty of merchantability 2. Implied warranty of fitness for a particular purpose 3. Warranty of title A. I only. B. III only. C. I and III only. D. I, II, and III.

C

Pulse Corp. maintained a warehouse where it stored its manufactured goods. Pulse received an order from Star. Shortly after Pulse identified the goods to be shipped to Star but before moving them to the loading dock, a fire destroyed the warehouse and its contents. With respect to the goods, which of the following statements is true? A. Pulse has title but no insurable interest. B. Star has title and an insurable interest. C. Pulse has title and an insurable interest. D. Star has title but no insurable interest.

C

Under Article 2 of the UCC, in an FOB place of shipment contract, the risk of loss passes to the buyer when the goods A. Are identified to the contract. B. Are placed on the seller's loading dock. C. Are delivered to the carrier. D. Reach the buyer's loading dock.

C

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, "FOB purchaser's loading dock," which of the parties bears the risk of loss during shipment? A. The purchaser, because risk of loss passes when the goods are delivered to the carrier. B. The purchaser, because title to the goods passes at the time of shipment. 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.

C

Which of the following statements applies to a sale on approval under the UCC Sales Article? A. Both the buyer and seller must be merchants. B. The buyer must be purchasing the goods for resale. C. Risk of loss for the goods passes to the buyer when the goods are accepted after the trial period. D. Title to the goods passes to the buyer on delivery of the goods to the buyer.

C

Bush Hardware ordered 300 Ram hammers from Ajax Hardware. Ajax accepted the order in writing. On the final date allowed for delivery, Ajax discovered it did not have enough Ram hammers to fill the order. Instead, Ajax sent 300 Strong hammers. Ajax stated on the invoice that the shipment was sent only as an accommodation. Which of the following statements is true? A) Ajax's note of accommodation cancels the contract between Bush and Ajax. B) Bush's order can be accepted only by Ajax's shipment of the goods ordered. C) Ajax's shipment of Strong hammers is a breach of contract. D) Ajax's shipment of Strong hammers is a counteroffer, and no contract exists between Bush and Ajax.

C) Ajax's shipment of Strong hammers is a breach of contract.

Casassa, a merchant in San Francisco, under the terms of a non-shipment contract, agrees to sell 50 cases of packaged macaroni to Paoli, a restaurant owner whose business is in San Jose. At the time of contracting for the sale, both parties are aware that these identified goods are in a warehouse in Fresno. The place for delivery is not specified in the agreement. On the basis of these facts, the place for delivery is? A) San Francisco. B) San Jose. C) Fresno. D) Indefinite, and the contract is unenfoceable.

C) Fresno.

Bell, by telegram to Major Corp., ordered 10,000 yards of fabric, first quality, 50% wool and 50% cotton. Major accepted the order and packed the fabric for shipment. In the process, it discovered that one-half of the fabric packed had been commingled with fabric that was 30% wool and 70% cotton. Because Major did not have any additional 50% wool fabric, it decided to send the shipment to Bell as an accommodation. The goods were shipped and, later the same day, Major wired Bell its apology, informing Bell of the facts and indicating that the 5,000 yards of 30% wool would be priced at $2 a yard less. The carrier delivering the goods was destroyed on the way to Bell. Who bears the risk of loss? A. Bell, because Bell has title to the goods. B. Major, because the order was not a signed writing. C. Bell, if the shipping terms were FOB Bell's place of business. D. Major, because it shipped goods that failed to conform to the contract.

D

Cey Corp. entered into a contract to sell parts to Deck, Ltd. The contract provided that the goods would be shipped "FOB Cey's warehouse." Cey shipped parts different from those specified in the contract. Deck rejected the parts. A few hours after Deck informed Cey that the parts were rejected, they were destroyed by fire in Deck's warehouse. Cey believed that the parts were conforming to the contract. Which of the following statements is true? A. Regardless of whether the parts were conforming, Deck will bear the loss because the contract was a shipment contract. B. If the parts were nonconforming, Deck had the right to reject them, but the risk of loss remains with Deck until Cey takes possession of the parts. C. If the parts were conforming, risk of loss does not pass to Deck until a reasonable period of time after they are delivered to Deck. D. If the parts were nonconforming, Cey will bear the risk of loss, even though the contract was a shipment contract.

D

If goods have been delivered to a buyer pursuant to a sale or return contract, the A. Buyer may use the goods but not resell them. B. Seller is liable for the expenses incurred by the buyer in returning the goods to the seller. C. Title to the goods remains with the seller. D. Risk of loss for the goods passed to the buyer.

D

Larch Corp. manufactured and sold Oak a stove. The sale documents included a disclaimer of warranty for personal injury. The stove was defective. It exploded, causing serious injuries to Oak's spouse. Larch was notified 1 week after the explosion. Under the UCC Sales Article, which of the following statements concerning Larch's liability for personal injury to Oak's spouse is true? A. Larch cannot be liable because of a lack of privity with Oak's spouse. B. Larch will not be liable because of a failure to give proper notice. C. Larch will be liable because the disclaimer was not a disclaimer of all liability. D. Larch will be liable because liability for personal injury cannot be disclaimed.

D

Lazur Corp. entered into a contract with Baker Suppliers, Inc., to purchase a used personal computer from Baker. Lazur is engaged in the business of selling new and used personal computers to the general public. Baker also represented in the contract that the word processor had been used for only 10 hours by its previous owner. The contract included the provision that the word processor was being sold "as is," and this provision was in a larger and different font than the remainder of the contract. With regard to the contract between Lazur and Baker, A. An implied warranty of merchantability does not arise unless both Lazur and Baker are merchants. B. The "as is" provision effectively disclaims the implied warranty of title. C. No express warranties are created by the contract. D. The "as is" provision would not prevent Baker from being liable for a breach of any express warranties created by the contract.

D

On May 2, Lace Corp., an appliance wholesaler, offered to sell appliances worth $3,000 to Parco, Inc., a household appliances retailer. The offer was signed by Lace's president and provided that it would not be withdrawn before June 1. It also included the shipping terms: "FOB -- Parco's warehouse." Parco accepted Lace's offer. If Lace inadvertently ships the wrong appliances to Parco and Parco rejects them 2 days after receipt, title to the goods will A. Pass to Parco when they are identified to the contract. B. Pass to Parco when they are shipped. C. Remain with Parco until the goods are returned to Lace. D. Revest to Lace when they are rejected by Parco.

D

On Monday, Wolfe paid Aston Co., a furniture retailer, $500 for a table. On Thursday, Aston notified Wolfe that the table was ready to be picked up. On Saturday, while Aston was still in possession of the table, it was destroyed in a fire. Who bears the loss of the table? A. Wolfe, because Wolfe had title to the table at the time of loss. B. Aston, unless Wolfe is a merchant. C. Wolfe, unless Aston breached the contract. D. Aston, because Wolfe had not yet taken possession of the table.

D

Quick Corp. agreed to purchase 200 typewriters from Union Suppliers, Inc. Union is a wholesaler of appliances, and Quick is an appliance retailer. The contract required Union to ship the typewriters to Quick by common carrier, "FOB Union Suppliers, Inc. Loading Dock." Which of the parties bears the risk of loss during shipment? A. Union, because the risk of loss passes only when Quick receives the typewriters. B. Union, because both parties are merchants. C. Quick, because title to the typewriters passed to Quick at the time of shipment. D. Quick, because the risk of loss passes when the typewriters are delivered to the carrier.

D

Thorn purchased a used entertainment system from Sound Corp. The sales contract stated that the entertainment system was being sold "as is." Under the Sales Article of the UCC, which of the following statements is(are) correct regarding the seller's warranty of title and against infringement? 1. Including the term "as is" in the sales contract is adequate communication that the seller is conveying the entertainment system without warranty of title and against infringement. 2. The seller's warranty of title and against infringement may be disclaimed at any time after the contract is formed. A. I only. B. II only. C. Both I and II. D. Neither I nor II.

D

Eli contracted to buy 600 bales of No. 1 quality cotton from Whitney. The contract provided that Eli would make payment prior to inspection. The 600 bales were shipped, and Eli paid Whitney. Upon inspection, however, Eli discovered that the cotton was No. 2 quality. Eli returned the cotton to Whitney and demanded return of the payment. Whitney refused on the ground that there is no difference between No. 1 quality cotton and No. 2 quality cotton. What is Eli's remedy for the nonconforming cotton?

Damages measured by the price paid plus the difference between the contract price and the cost of buying substitute goods.

Dara bought an automobile needing repairs from Chevalier Motors, Inc. (CMI). CMI promised to repair it, but 1 month later had not yet completed the repairs. Dara was using the car anyway (1 month after purchase) when a fire in the dashboard rendered the vehicle inoperable. Dara returned the automobile immediately and orally informed a representative of CMI that she was demanding the purchase price. Dara sent a written notice of rescission 3 months later and filed suit 3 months after that. Who will most likely prevail, and what is the legal theory that best supports the result?

Dara, because she made a justifiable revocation of acceptance.

A person who endorses a check "without recourse"

Does not promise or guarantee payment of the instrument upon dishonor even if there has been a proper presentment and proper notice has been given.

Tim Teff entered Al Archer's office and stole some radios and Archer's wallet containing identification. Subsequently, representing himself as Archer, Teff induced Bob Bane to purchase one of the stolen radios for a fair price. Bane gave Teff his check made out to Archer. Teff endorsed the check "Pay to the order of Crown, Archer" and transferred it to Cal Crown for cash in the amount of the check. Crown endorsed the check "Pay to the order of Fox, Crown" and transferred the check to Fred Fox to be applied to his account. Bane's check was

Order paper initially and negotiated by Teff to Crown.

The following endorsements appear on the back of a negotiable promissory note payable to Lake Co.:

Harris's signature was not required to effectively negotiate the note to Sharp.

Eagle Corporation solicited bids for various parts it uses in the manufacture of jet engines. Eagle received six offers and selected the offer of Sky Corporation. The written contract specified a price for 100,000 units, delivery on June 1 at Sky's plant, with payment on July 1. On June 1, Sky had completed a 200,000 unit run of parts similar to those under contract for Eagle and various other customers. Sky had not identified the parts to specific contracts. When Eagle's truck arrived to pick up the parts on June 1, Sky refused to deliver claiming the contract price was too low. Eagle was unable to cover in a reasonable time. Its production lines were in danger of shutdown because the parts were not delivered. Eagle would probably

Have the right to obtain specific performance.

Devold Manufacturing, Inc., contracted to sell to Hillary Company 3,000 CB radios at $30 each. After delivery of the first 500 radios, a minor defect was discovered, which Hillary incurred costs to correct. Hillary sent Devold a signed memorandum indicating that it would relinquish its right to recover the costs to correct the defect, provided that the remaining radios were in conformity with the terms of the contract and the delivery dates were strictly adhered to. Devold met these conditions. Shortly before the last shipment of radios arrived, Hillary notified Devold that it was not bound by the prior generous agreement and would sue Devold for damages. In the event of litigation,

Hillary will lose in that the memorandum constituted a waiver of Hillary's rights.

Under the Negotiable Instruments Article of the UCC, which of the following statements is true regarding the requirements for an instrument to be negotiable? I. The instrument must be in writing, be signed by both the drawer and the drawee, and contain an unconditional promise or order to pay. II. The instrument must state a fixed amount of money, be payable on demand or at a definite time, and be payable to order or to bearer.

II only

Badger Corporation sold goods to Watson. Watson has arbitrarily refused to pay the purchase price. Under what circumstances will Badger not be able to recover the price if it seeks this remedy instead of other possible remedies?

If Watson refused to accept delivery and the goods were resold in the ordinary course of business.

A provision in a contract for the sale of goods providing that the seller may accelerate payment at will when (s)he deems him/herself insecure

Is enforceable subject to the good faith belief of the seller.

Anna Karr transferred a negotiable instrument payable to her order in exchange for value to John Watson. Karr did not endorse the instrument. As a result of the transfer, Watson

Is entitled to an unqualified endorsement by Karr.

A secured promissory note is nonnegotiable if it provides that

It is subject to the terms of the mortgage given by the maker to the payee.

If an instrument does not meet one of the requirements of negotiability,

It will usually be transferable. If a required element of negotiability is not present, special protections provided by the law are not available. Nevertheless, the contract right embodied in the nonnegotiable instrument will usually be transferable because most contract rights, especially the right to receive money, are assignable. But the assignee will take no better right than that held by his/her assignor.

Kirk Corp. sold Nix an Ajax freezer for $490. The contract required delivery to be made by June 23. On June 12, Kirk delivered a Sure freezer to Nix. Nix immediately notified Kirk that the wrong freezer had been delivered and indicated that the delivery of a correct freezer would not be acceptable. Kirk wishes to deliver an Ajax freezer on June 23. Which of the following statements is true?

Kirk may deliver the freezer on June 23 if it first reasonably notifies Nix of its intent.

A lessor of goods may be in rightful possession of the leased goods after a default by the lessee. In this circumstance, a lessor

May dispose of the goods by a lease agreement and recover damages.

On February 15, Mazur Corp. contracted to sell 1,000 bushels of wheat to Good Bread, Inc., at $6.00 per bushel, with delivery to be made on June 23. On June 1, Good advised Mazur that it would not accept or pay for the wheat. On June 2, Mazur sold the wheat to another customer at the market price of $5.00 per bushel. Mazur had advised Good that it intended to resell the wheat. Which of the following statements is true?

Mazur can successfully sue Good for the difference between the resale price and the contract price.

The following instrument is in the possession of Bill North:

Nonnegotiable because it is not payable to order or bearer. The instrument is a nonnegotiable note because it was not payable to order or bearer when it was first issued or came into the possession of a holder (UCC 3-104). It is payable only to Bill North and refers to him specifically as the bearer on its face.

An instrument will be negotiable only if it contains an order or promise to pay. Accordingly, an instrument is negotiable if it

Omits the word "promise" but states an undertaking to pay.

Who bears the risk of loss for goods sold, but not yet delivered? Governed by the UCC

Passage of Title - The risk of loss follows the title to the goods. The title to goods passes in any method agreed to by the parties. Absent an agreement, title passes when delivery is completed. In a shipment contract that requires the seller to ship the goods to the buyer via a common carrier and the seller is required to make proper shipping arrangements and deliver the goods into the carrier's hands, title passes to the buyer at the time and place of shipment. In a destination contract that requires the seller to deliver the goods either to the buyer's place of business or to another destination specified in the sales contract, title passes to the buyer when the seller tenders delivery of the goods at the specified destination.

Under UCC Article 2, which of the following legal remedies would a buyer not have when a seller fails to transfer and deliver goods identified to the contract?

Suit for punitive damages.

Herbert is a holder of a check originally payable to the order of Byron or bearer. These endorsements appear on the back:

The check is bearer paper in Herbert's hands.

One of the underlying purposes of the UCC is to permit the parties to exercise considerable contractual freedom. With regard to contractual modification or limitation of remedy, however, this freedom is circumscribed. Which is the true statement about the parties' ability to agree about remedies for breach of their contract for the sale of goods?

The damages for breach by either party may be liquidated in the agreement.

This instrument

The instrument is a draft because it is an order by one person (Luft) directing another (McHugh) to pay a third person (Luft). That the third party is the same as the first party is irrelevant. It is negotiable because all of the requirements of negotiability are met. The instrument is written, is signed by the drawer, contains an unconditional order to pay a fixed amount of money at a definite time, is payable to order, and contains no other promises or obligations (UCC 3-104).

An instrument reads as follows:

The instrument is nonnegotiable because it is not payable at a definite time. The instrument is a signed writing promising to pay a fixed amount of money to the order of an identified person. A fixed amount of money means it is possible to compute the amount from the face of the instrument. But the obligation to pay and its timing depend on an uncertain event (sale of a ring). The promise is therefore conditional; negotiability requires that it be unconditional. A "definite time" is not limited to one particular date. An instrument payable on or before a stated date is payable on demand until that date and is payable at a fixed date thereafter (if not yet paid).

On September 10, Bell Corp. entered into a contract to purchase 50 lamps from Glow Manufacturing. Bell prepaid 40% of the purchase price. Glow became insolvent on September 19 before segregating, in its inventory, the lamps to be delivered to Bell. Bell will not be able to recover the lamps because

The lamps were not identified to the contract.

To negotiate an instrument payable to bearer, one must

Transfer possession of the instrument.