Business Law Chapter 8 Smartbook

"Good faith" refers to

"honesty in fact" in performing the duties assumed in a contract or in carrying out the transaction an expectation of performance the UCC imposes on both buyers and sellers

If a party demands from the other party assurance that the contract will be performed, such assurance must be given

30

The Magnuson-Moss Warranty Act is applicable under which of the following conditions?

A sale of consumer goods costing more than $5 and the seller has provided the consumer a written warranty

Which of the following is true regarding the UCC and rescission?

Although the UCC does not explicitly use the common law contract term rescission, it does incorporate the concept.

Which of the following arises regardless of whether the seller has made express promises as to the quality of the goods?

An implied warranty

Which of the following is true regarding a manufacturer's duty to warn of obvious dangers?

An increasing number of courts hold that the obvious danger rule is no longer a complete defense.

Which of the following is not one of the theories of seller liability for personal injury or property damage that results from the use of goods?

Assumption of the risk

Which of the following is true regarding the buyer's right of rejection?

If a buyer has a basis for rejecting a delivery of goods, the buyer must act within a reasonable time after delivery.

Which of the following is a remedy available to the seller under the UCC if the buyer breaches the contract?

Recover the purchase price of goods delivered to or accepted by the buyer

If goods delivered by a seller to a buyer do not conform to the contract, the buyer may do which of the following? (Check all that apply.)

Reject all of the goods Accept all of the goods Accept any commercial units and reject the rest

Which of the following is true regarding the buyer's notice of rejection?

The buyer must give the seller notice of the rejection.

If a seller wishes to rely on trade usage to assist with the meaning of terms in a current contract with a buyer, the seller would look to which of the following?

The customs and practices usually assumed by parties to contracts for goods of that type

When did courts begin to apply strict liability in tort to product liability cases?

The mid-1960s

Which of the following is true regarding the Magnuson-Moss Warranty Act?

The seller is not required to give a written warranty.

Which of the following is true regarding the warranty disclosure requirements of the Magnuson-Moss Warranty Act?

The text of the warranty may be displayed next to the product or on the package in which the product is enclosed.

What is the ultimate objective of remedies for breach of contract?

To put the injured person in the same position as if the contract had been performed

Trade usage may be used

Trade usage may be used

What is the court's focus in determining "state of the art?"

Whether anything else could have been done to make the product safer, given the practical and technological limitations of the time

To revoke acceptance of goods, a buyer must demonstrate

a nonconformity that substantially impairs the value of the goods

Regarding the basic duties of a seller, goods are to be provided to the buyer in

a single delivery unless otherwise agreed

The basic duty of the buyer is to

accept and pay for the goods if they conform to the contract

The seller is entitled to the purchase price of all goods

accepted by the buyer

Damages for nondelivery are

an alternative to cover

The primary way to determining the obligations of the buyer and seller is to

analyze the terms of the contract between the parties.

If the seller does not have a place of business, goods are to be delivered

at the seller's home

Unless the seller has agreed to extend credit to the buyer, the buyer must pay for the goods

at the time they are delivered

When a seller has attempted to limit liability to the repair or replacement of a product that is not as it was warranted to be, such a limitation may

be enforced unless a court finds that it is unconscionable

The Magnuson-Moss Warranty Act requires the seller to make the written warranty terms available to the buyer ______ the sale.

before

Smith purchases a drill manufactured by Performance One Tools from Spade Hardware. The drill is defective and injures Smith. Smith can sue

both Performance One and Spade

In the performance of sales contracts, the requirement of good faith is imposed on

both buyers and sellers

If the buyer refuses to accept goods that conform to the contract, the seller may elect to recover the lost profit and overhead the seller would have made if the sale had gone through, plus any incidental expenses. However, the seller must give the buyer credit for any expenses saved as a result of the buyer's

breach of contract

"Cover" is when a buyer

buys the goods from another seller and recovers damages from the original seller for any resulting additional expenses the buyer incurred

Upon delivery, buyer must make payment to seller

by personal check payable to the seller by any method used in the ordinary course of business.

Once a buyer has accepted goods, the buyer

can no longer reject the goods unless at the time they were accepted, the buyer had reason to believe that the nonconformity would be cured

If a seller had reason to believe the buyer would accept nonconforming goods, the seller

can take a reasonable time to reship conforming goods even if the original delivery time has expired

When a buyer breaches a contract, the seller has a number of remedies under the Uniform Commercial Code, including the right to

cancel the contract

If a buyer breaches a contract for previously ordered goods and the seller is in the process of manufacturing them, the seller must

choose between completing production of the goods or ceasing production and selling them for scrap or salvage value

Based upon the common law doctrine of impossibility, the Uniform Commercial Code uses a test of buyer may

commercial impracticability.

A seller's obligation is to tender to the buyer goods that

conform to the contract with the buyer

Damages for nondelivery are based on the difference between the

contract price of the goods and their market price at the time the buyer learns of the seller's breach

When the buyer refuses to accept goods that conform to the contract, the seller may recover as damages the difference between the

contract; market

The basic duty of the seller is to

deliver the goods called for by the contract

Manufacturers have a duty to do each of the following except

design a product that has no risk of injury

The retraction of a waiver is ______.

effective unless it would be unjust because of a material change of position by the other party in reliance on the waiver

The courts

favor implied warranties

If a seller chooses to allocate production, he or she must ______.

give notice to the buyer and the buyer is permitted to terminate the contract

If a buyer accepts goods that were nonconforming, the buyer can revoke his or her acceptance

if the nonconformity substantially impairs the value of the goods and the buyer accepted the goods without knowledge of the nonconformity.

After a delivery of nonconforming goods, the seller can take a reasonable time to redeliver conforming goods

if the seller had reason to believe the buyer would accept nonconforming goods

If a seller sets aside goods for a buyer, and the seller chooses to resell them upon the buyer's breach of contract, the seller must make any resale

in good faith and in a reasonable commercial manner

According to the UCC, the duties of a buyer or a seller may be delegated to another party

in many cases, unless there is a reason the obligation should be satisfied by the original party

In the past, the courts applied the general rule of contract law that a person who was not a party to the contract has no right to enforce it. A person had to be ______ to enforce the contract.

in privity of contract

Any reasonable expenses or charges the buyer has to pay in obtaining substitute goods are known as

incidental

An agreement for liquidated damages is enforced if the amount

is reasonable and if actual damages would be difficult to prove in the event of breach of contract

The Magunson-Moss Warranty Act does each of the following except:

it forced sellers to offer warranties

According to the Magnuson-Moss Warranty Act, a full warranty means

it is not limited in time

If a buyer receives nonconforming goods, the buyer's consequential damages may include damages related to

lost profits caused by the seller's breach of contract

An examination of the parties' course of dealing

may be used to explain the meaning of terms in a contract

If there is no credit agreement between buyer and seller, the buyer

may inspect the goods and make payment upon acceptance

After the buyer's breach of contract, if the seller resells the goods at a public sale (for example, an auction) and makes a profit, the seller

may keep the profit

If a buyer receives nonconforming goods from a seller, the buyer

may recover damages for receiving and storing such goods

If a seller delivers goods C.O.D. and the goods are obviously non-conforming, the buyer

may reject the goods without an inspection and without making payment

Generally, if the parties agree on C.O.D. shipping terms, the buyer

may reject the goods without payment if it is obvious that the goods do not conform must pay for the goods before inspecting them

After a buyer has accepted goods, he or she

may seek remedies against the seller after giving the seller timely notice of nonconformity.

If a seller learns that a buyer is insolvent, the seller

may withhold delivery until the buyer pays cash for the goods and for any goods previously delivered

The main difference between product liability under negligence and product liability under strict liability is that

negligence is based on the manufacturer's conduct, while strict liability is based on whether a product is unreasonably dangerous

Disclaimers of warranty that are ______ would be seen by a court as ______.

not conspicuous; unconscionable

If a seller sets aside goods for a buyer, upon the buyer's breach of contract, the seller is

not obligated to try to resell the goods to someone else

A liquidated damages amount is considered reasonable if it is

not so large as to be a penalty; unconscionable

To reject goods, a buyer must

notify the seller and specify the nonconformity.

In determining whether a product is inherently dangerous or has been defectively designed, the courts look to the state of the art in existence at the time

of manufacture

Tender of delivery means that the obligation is

on the seller to make the goods available to the buyer

If a seller wishes to rely on the course of dealing between parties to assist with the meaning of terms in a current contract with a buyer, he or she would look to:

previous shipments of similar goods with no buyer objections. the interpretation of similar contracts between the parties.

The seller is entitled to the

purchase price; conformed to the contract

A party who has waived rights to a portion of a sales contract not yet performed may retract the waiver by giving ______ notice to the other party that ______ performance will be required.

reasonable; strict

If a seller provides goods to a buyer in separate installments and one of the installments is nonconforming, the buyer may

reject that installment only if the nonconformity substantially affects the value of that delivery and the seller cannot correct it

A buyer whose seller breaks the contract may cancel the contract and recover damages where the buyer rightfully

rejected; revoked

If a party to a contract advises the other party that they do not intend to perform their obligations, the contract is

repudiated

When a buyer has rightfully rejected goods, the buyer's rights under the UCC are equivalent to the common law contract term

rescission

To satisfy the tender of delivery requirement, the

seller must make the goods available during reasonable hours and for a reasonable period of time

When a contract does not specify a place of delivery, the goods are to be delivered

seller's place of business

The UCC's rules for determining when a party is excused from performance are

similar to the general contract rules

If a seller gives no instructions for what a buyer should do with rejected goods, the buyer may

store the goods for the seller. reship the goods to the seller.

Under the theory of ______, sellers are held liable regardless of whether they exercised reasonable care.

strict liability

When one party repudiates the contract by advising the other party that they do not intend to perform their obligations under the contract, the other party may

suspend performance use the appropriate remedies for breach of contract await performance for a reasonable time

If a seller delivers goods and demands payment in cash and the buyer does not have cash on hand, the buyer may

take a reasonable time to obtain cash

If there is a conflict between the express terms of a contract and trade usage, the

terms of the contract prevail

If a buyer wrongfully rejects goods,

the buyer is liable for breach of contract. the seller may cancel the contract.

If a contract specifies that the duties of buyer or seller cannot be assigned,

the contract terms will prevail and an assignment will not be valid

If a buyer breaches a contract that does not contain a liquidated damages clause, the seller may retain

the lesser of $500 and 20% of the contact value

To recover consequential damages, a buyer must be able to show that

the seller knew or should have known at the time the contract was made that the buyer would suffer special damages if the seller did not perform

True or false: If a seller's capacity is only partially affected, the seller may allocate production among his or her customers.

true

An event is commercially impracticable if it was

unforeseen by a party. uncontrollable by a party.

In a dispute between the seller and the buyer, the court will consider the particular warranty exclusion or modification and refuse to enforce it if the court finds the exclusion or modification to be

unreasonable; unconscionable

Damages for defective goods are based on the difference between the

value of the goods received and the value the goods would have had if they had been as warranted

If the parties know that the goods are in a place other than the seller's place of business, the goods are to be delivered

where the goods are located

Goods sold "as is" or "with all faults" are sold

without the implied warranty of merchantability and the implied warranty of fitness for a particular purpose