Business Law - Chapter 12

The obligation of commercial reasonableness underlies every sales and lease contract. True False

True

Warranties of title arise automatically in most sales contracts, and a thief breaches the warranty by selling stolen goods. True False

True

A bar of soap is unmerchantable if stepping on it would cause its user to slip and fall. True False

False

A buyer can revoke his or her acceptance if, despite assurances by the seller that the goods would conform, the buyer was aware of their nonconformity before acceptance. True False

False

A buyer is required to cover, and a failure to do so, will bar the buyer from using any other remedies available under the UCC. True False

False

A warranty against infringement guarantees that there are no encumbrances, or liens on the product. True False

False

An express warranty arises when a seller (or lessor) indicates that the goods are the "best" of the kind of goods sold. True False

False

Any use of delivered goods by the buyer—even for the limited purpose of testing them—constitutes acceptance. True False

False

If a breach occurs when the seller still possesses the identified goods, the seller must nevertheless deliver the goods to pursue a remedy. True False

False

If a buyer rightfully rejects nonconforming goods, he or she can resell them and retain the proceeds, without crediting the amount to the seller. True False

False

If a buyer wrongfully refuses to pay for goods, the seller can reclaim them and resell them, without crediting the sale proceeds to the buyer. True False

False

If a contract states that repair or replacement is the exclusive remedy, then it is, even if repair or replacement is not possible. True False

False

If a creditor repossesses goods from a buyer who bought the goods knowing they were subject to a prior claim, the buyer can recover from the seller for breach of warranty. True False

False

If a seller fails to deliver the goods, the buyer can purchase other goods to substitute for those due under the contract but cannot then sue for consequential damages. True False

False

If, before the time for contract performance, one party communicates an intent not to perform, the other party can only wait to see if the repudiating party will decide to perform. True False

False

Tender can occur at any hour and in any manner—such as by a phone call to the buyer, allowing "fifteen minutes to pick up the goods." True False

False

The statute of limitations to file actions under the UCC is three years after the cause of action accrues, or the breach occurs. True False

False

Under a shipment contract for the sale of a certain quantity of solar panels, the seller is required to deliver conforming goods at a particular destination. True False

False

Under the UCC, because a contract for the sale of six freezers does not designate where the goods will be delivered, the place of delivery is the buyer's place of business. True False

False

When the time for performance under a contract expires, the right to cure also expires. True False

False

The parties to a sales contract can limit or exclude consequential damages for any commercial loss—such as a business's lost profits or property damage. True False

True

To create an express warranty, a reasonable buyer must regard a seller's representation of fact—for example, on a product label—as part of the basis of the bargain. True False

True

Under the UCC, good faith can never be disclaimed. True False

True

Under the perfect tender rule, a buyer or lessee has the right to insist on goods that conform to their contract in every detail. True False

True

Unless the contract provides otherwise, the entire installment contract is breached only when one or more nonconforming installments substantially impair the value of the whole contract. True False

True

A buyer can revoke his or her acceptance if it were predicated on a reasonable assumption that the goods' nonconformity would be cured, and the nonconformity was not cured. True False

True

A merchant who is in the business of selling certain goods makes an implied warranty of merchantability every time she sells any type of merchandise. True False

True

An implied warranty can arise as a result of a well-recognized trade custom that a court could infer the parties intended to apply to their contract. True False

True

Destruction of goods that were identified in a contract can excuse both parties from performance True False

True

Express and implied warranties do not displace each other because more than one warranty can cover the same goods in the same transaction. True False

True

For an implied warranty to be created, the buyer (or lessee) must have relied on the skill (or judgment) of the seller (or lessor) in selecting or furnishing suitable goods. True False

True

If a buyer wrongfully refuses to accept the goods, the seller can bring an action for damages equal to the difference between the contract and market prices, at the time and place of tender. True False

True

If a seller fails to deliver conforming goods, the measure of recovery in the buyer's suit for damages is the difference between the contract price and the market price at the place of delivery, and at the time the buyer learns of the breach. True False

True

In a destination contract, the seller agrees to deliver conforming goods to the buyer at a particular destination True False

True

In an action based on breach of implied warranty, a buyer must show that the warranty existed, and its breach proximately caused the damage sustained. True False

True

Only expressions of fact can make up an express warranty. True False

True

Bayou Boats, Inc., contracts for the sale of seven swamp boats to Eventide Fishing Tours. Bayou repudiates the contract. Eventide's recovery is measured at the time a.Eventide learned of the breach.b.Bayou advertised the goods.c.Eventide ordered the goods.d.Bayou knew that it would repudiate the contract.

a. Eventide learned of the breach

Brass Instruments, Inc., sells seventy-six trombones to Community Band. To avoid liability for most implied warranties, Brass should state in writing that the trombones are sold a.as is.b.in perfect condition.c.with no known defects.d.by a merchant.

a. as is

Pavers Inc. contracts to buy some heavy equipment from Earthmovers, Inc. Before either party performs, Earthmovers sells its assets to Excavation Corporation. On learning of the sale, Pavers is concerned about its contract with Earthmovers. Pavers should a.demand assurances of performance from the seller.b.buy the equipment from a different firm and bill Excavation for the price.c.buy the equipment from a different firm and bill the seller for the price.d.consider the contract repudiated and sue the seller for breach.

a. demand assurances of performance from the seller

A statement by a salesperson that "this bike will never break—it is the best bike ever made," will not lead to an express warranty because (choose all applicable answers) a.it is so clearly improbable.b.those words were only on a written advertisement, so no warranty is expected.c.no reasonable person would rely on that.d.the salesperson was not an expert

a. it is so clearly improbable

Beef Burgers, Inc. contracts to buy five hundred head of cattle from Cattle Ranch. Before the seller delivers, an outbreak of disease causes a quarantine of the ranch. In this circumstance, the perfect tender rule a.no longer applies.b.applies only to Cattle Ranch.c.applies only to Beef Burgers.d.applies to both parties.

a. no longer applies

Nature's Eggs, Inc. agrees to supply Omelet Express with five hundred eggs. Nature's Eggs can reasonably ask Omelet Express to pick up the eggs at a.any hour.b.any reasonable hour.c.no time—as a seller, Nature's Eggs must deliver the goods.d.no specific time—only a buyer can set the time.

b. any reasonable hour

Precise Parts, Inc., and Quality Auto stores enter into a contract for a sale of auto parts that meet certain specifications. Precise Parts ships goods that do not comply. Quality Auto a.cannot reject the entire shipment.b.can reject the entire shipment.c.must reject the entire shipment.d.must accept the entire shipment.

b. can reject the entire shipment

When the goods are unfinished at the time the buyer breaches the contract, the seller can (choose all applicable answers) a.hold the buyer liable for any difference between the contract price and sales price.b.complete the manufacturing process, resell, or dispose of the goodsc.cease manufacturing the goods and resell them for scrap.d.force the buyer to purchase the goods

b. complete the manufacturing process, resell, or dispose of the goods

Eliza buys a new motorcycle from Fast Bikes, Inc. The most important factor in determining whether an express warranty is created is whether a.Eliza's desire for the cycle becomes part of her motivation to deal.b.Fast Bikes' promise becomes part of the basis of the bargain.c.Fast Bikes expresses to Eliza what it expects of its customers.d.Eliza expresses to Fast Bikes what she wants warranted.

b. fast Bikes' promise becomes part of the basis of the bargain

Elegant Carpets, Inc., agrees to sell a certain quantity of carpeting to Fantastic Floors stores under a shipment contract. Elegant Carpets must a.inspect the carpeting before shipping it.b.place the carpeting into the hands of Great States Trucking, a carrier.c.allow Fantastic Floors to reject the goods for any reason.d.deliver the carpeting to a particular destination.

b. place the carpeting into the hands of Great States Trucking, a carrier

Cruisin' Autos, Inc., sells cars to consumers. To avoid liability for oral express warranties, each sales agreement should note that a car is sold a.in perfect condition.b.subject to warranties included in the written contract only.c.with no known defects.d.as is with no warranties

b. subject to warranties included in the written contract only

Loading Ramps Inc. contracts to sell sixteen loading ramps to Moving Service Inc. Loading Ramps ships the ramps, which Moving Service accepts but does not pay for. Loading Ramps can a.require Moving Service to revoke its acceptance of the ramps.b. sue to recover the purchase price plus incidental damages.c.resell the ramps to any buyer willing to repossess them from Moving Service.d.sue to recover the purchase price minus incidental damages.

b. sue to recover the purchase price plus incidental damages

Builders Inc. and Concrete Supply Company enter into a contract for a sale of cement. Concrete delivers, but Builders does not pay. Concrete can recover as damages a.whatever amount Concrete wishes to claim.b.the purchase price plus incidental damages.c.any profit lost minus any loss avoided.d.the market price at the place at which Concrete delivered the goods.

b. the purchase price plus incidental damages

Fiesta LLC contracts to buy 1,000 balloons from Gas Bags Inc. for $1 per item. When the market price decreases to 50 cents per balloon, Fiesta refuses to go through with the deal. Gas Bags can recover a.$1,000.b.$0.c.$500.d.$1,500.

c. $500

Fuel Connector Products, Inc., agrees to sell Go-Flo, Inc., a certain quantity of hose couplings and fittings, but the contract does not specify a place of delivery. Go-Flo is expected to pick up the goods. The place of delivery is a.the current location of the hose couplings and fittings.b.a warehouse midway between the parties' places of business.c.Fuel Connector's place of business.d.Go-Flo's place of business.

c. Fuel Connector's place of business

Parties to a contract can change the statute of limitations as long as it falls between these guidelines a. The parties can agree in their contract to reduce this period to not less than six months, but cannot extend it beyond four years. b. The parties can agree in their contract to reduce this period to not less than one year, but cannot extend it beyond five years. c. The parties can agree in their contract to reduce this period to not less than one year, but cannot extend it beyond four years. d. The parties can agree in their contract to reduce this period to not less than six months, but cannot extend it beyond three years.

c. The parties can agree in their contract to reduce this period to not less than one year, but cannot extend it beyond four

Real Stones, Inc., and Sparkling Jewelry Stores enter into a contract for a sale of gemstones. Real Stones does not deliver. Sparkling can recover as damages the difference between a.the contract price and the market price.b.the current prices in the contracting parties' places of business.c.any loss avoided and any profit gained.d.the actual price and the hoped-for price.

c. any loss avoided and any profit gained

Rancho Stables orders ten saddles from Saddles, Inc. The sales contract states that if the tack is defective, Rancho will allow Saddles to repair or replace it instead of rejecting the shipment. When the gear arrives, it is defective. In this case, the perfect tender rule a.applies only to Rancho.b.applies only to Saddles.c.does not apply.d.applies to both parties.

c. does not apply

Business Rents LLC and Cartage Trucking Inc. enter into a contract for a lease of ten hydraulic lifts. Under the perfect tender rule, Business Rents must ship or tender lifts to Cartage that, with regard to the contract specifications, conform a.to the best of Business Rents' ability.b.substantially.c.in every way.d.reasonably.

c. in every way

Minerals Ltd. contracts to provide several manufacturers with tin. When a cartel of tin-producing countries suddenly embargoes future shipments of tin to Minerals so that it cannot fulfill its contracts, the distributor a.is liable for breach of contract. b.must obtain tin in any way to meet the needs of its customers. c.is excused from the performance of its contracts. d.can substitute some other material for the tin.

c. is excused from the performance of its contracts

H2O Company contracts to sell pumps, tanks, and water storage systems to In-Flo Irrigation, Inc. Before the goods are delivered, In-Flo indicates that it will not be able to pay. H2O can a.force In-Flo to accept and pay for the goods.b.do nothing—there are no remediesc.resell the goods and recover any damages from In-Flo.d.require In-Flo to find a buyer for the goods.

c. resell the goods and recover any damages from In-Flo

Pipe Company includes in its contracts a provision that reads, in large red letters, "There are no warranties that extend beyond the description on the face hereof." This disclaimer negates a.the implied warranty of merchantability.b.the implied warranty of title.c.the implied warranty of fitness for a particular purpose.d.none of the choices.

c. the implied warranty of fitness for a particular purpose

Ski Shop sells a pair of skis to Tami. When Tami uses the skis, they snap in two. The cause is something that Ski Shop did not know about and could not have discovered. This is a breach of a.an express warranty.b.the implied duty of inspection.c.the implied warranty of merchantability.d.none of the choices.

c. the implied warranty of merchantability

On July 10, Bob's Pet Supply Store orders fifty small dog collars from Canine Collars, Inc. to be delivered by July 15. On July 13, Canine Collars tenders fifty large dog collars. Bob's rejects the shipment. Canine Collars has a.no right to cure.b.until the end of the business day on July 13 to cure.c.until July 15 to cure.d.unlimited time to cure.

c. until July 15 to cure

Blake, a salesperson for Custom Commercial Kitchens Inc., shows Dylan, a buyer for Eatery Inc., display items in Custom's showroom, stating that any purchased equipment will match the display. This statement is a.puffery.b.an express warranty.c.an implied warranty.d.none of the choices.

d. an express warranty

Trucks & Trailers, Inc. (T&T), and United Express Service enter into a contract for a lease of trucks. T&T is a merchant who deals in goods of the kind leased. Under the UCC, an implied warranty of merchantability arises a.only if the lessee asks for it.b.only if the lessor expresses such a warranty.c.only in conjunction with sales, not lease, contracts.d.automatically.

d. automatically

Chair Company contracts to deliver a dozen suites of dining room tables and chairs to Furniture Store on May 1. On April 15, Chair tells Furniture that delivery will be delayed until June 1. Furniture may a.only await Chair's performance for a commercially reasonable time.b.only sue Chair for breach of contract.c.only suspend its own performance.d.await performance, sue Chair, or suspend its own performance.

d. await performance, sue Chair, or suspend its own performance

Home Redo, Inc., and Ivy enter into a contract for a sale of cabinets and countertops. Home Redo, a merchant who deals in goods of the kind sold, notes that its goods come with an implied warranty of merchantability. Under the UCC, this means that the goods are reasonably a.suitable for resale at an acceptable price.b.the best quality that money can buy.c.fit for the buyer's particular purpose.d.fit for the ordinary purpose for which such goods are used.

d. fit for the ordinary purpose for which such goods are used

Text & Talk Corporation sells phones. Under most circumstances, Text & Talk will be presumed to have warranted that its title to the goods is a.the best that money can buy.b.the same as the manufacturer's.c.none of the choices—a warranty of title is not presumed.d.good and valid.

d. good and valid

Field Farm enters into a contract with Gourmet Restaurant for a sale of a certain quantity of specified vegetables. After Field ships the produce but before Gourmet receives it, the buyer declares bankruptcy. Field can stop delivery of the goods in transit a.only if the quantity is in a single "unit."b.only if the quantity is at least a truckload.c.only if the quantity is at least 50 percent of the contract amount.d.regardless of the quantity.

d. regardless of the quantity

Steel Buildings, Inc., agrees to sell four portable garages to Truck Service Center. Five days later, Truck Service refuses delivery and cancels the contract. Steel is entitled to a.recover any damages from Truck Service but not resell the garages.b.resell the garages but not recover any damages from Truck Service.c.force Truck Service to accept the garages.d.resell the garages and recover any damages from Truck Service

d. resell the garages and recover any damages from Truck Service

Refined Mills orders "Grade A" oats from Sweet Farms to grind and sell to Town Grocery. Sweet ships "Grade B" grain, which Refined accepts. To recover damages for the nonconformity, Refined must give notice of the breach within a reasonable time to a.Town.b.no one.c.the appropriate state government agency.d.Sweet.

d. sweet

Riverside Mill and Standard Contractors enter into a contract for a sale of lumber. The mill knows the purpose for which the buyer will use the goods. Under the UCC, an implied warranty of fitness of a particular purpose arises if a. the buyer is relying on the seller to select suitable goods. b. the seller knows that the product is fit for any purpose. c. the buyer asks for it. d. the seller is a merchant who deals in goods of the kind sold.

d. the seller is a merchant who deals in goods of the kind sold

Commercial impracticability arises only when the parties—at the time the contract was made—had reason to foresee a certain event that could make performance "impracticable." True False

false

If a party to a contract has reasonable grounds to believe that the other party will not perform, he or she can demand in writing assurance of performance. True False

true