Total review 2.2
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
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 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
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
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.
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.
Bond fraudulently induced Teal to make a note payable to Wilk, to whom Bond was indebted. Bond delivered the note to Wilk. Wilk negotiated the instrument to Smith, who purchased it with knowledge of the fraud and after it was overdue. If Wilk qualifies as a holder in due course, which of the following statements is true?
Smith has the standing of a holder in due course through Wilk.
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.
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
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, 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
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.
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.
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
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
Which of the following instruments is subject to the provisions of the Negotiable Instruments Article of the UCC?
A certificate of deposit.
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.
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).
A $5,000 promissory note payable to the order of Neptune is discounted to Chill Bane by blank endorsement for $4,000. Brutus King steals the note from Bane and sells it to Melinda Ott, who promises to pay King $4,500. After paying King $3,000, Ott learns that King stole the note. Ott makes no further payment to King. Ott is
A holder in due course to the extent of $3,000.
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.
Al Martin, a wholesale distributor, made a contract for the purchase of 10,000 gallons of gasoline from the Wilberforce Oil Company. The price was to be determined in accordance with the refinery price as of the close of business on the delivery date. Credit terms were net/30 after delivery. Under these circumstances, which of the following statements is true? A. Although the price has some degree of uncertainty, the contract is enforceable. B. The contract being silent on the place of delivery, Martin has the right to expect delivery at his place of business. C. If Martin pays upon delivery, he is entitled to a 2% discount. D. Because the goods involved are tangible, specific performance is a remedy available to Martin.
A. Although the price has some degree of uncertainty, the contract is enforceable.
Unless the parties to a sale of goods have agreed otherwise, the UCC states that A. If the seller demands payment in cash, (s)he must give any reasonably necessary extension of time. B. The buyer must pay before the seller has an obligation to deliver. C. When the seller is to ship the goods on credit, the credit period runs from the time of receipt. D. Payment is due at the time and place at which the goods are to be shipped.
A. If the seller demands payment in CASH, (s)he must give any reasonably necessary extension of time.
Webstar Corp. orally agreed to sell Northco, Inc., a computer for $20,000. Northco sent a signed purchase order to Webstar confirming the agreement. Webstar received the purchase order and did not respond. Webstar refused to deliver the computer to Northco, claiming that the purchase order did not satisfy the UCC Statute of Frauds because it was not signed by Webstar. Northco sells computers to the general public and Webstar is a computer wholesaler. Under the UCC Sales Article, Webstar's position is A. Incorrect because it failed to object to Northco's purchase order. B. Incorrect because only the buyer in a sale-of-goods transaction must sign the contract. C. Correct because the purchase price of the computer exceeded $500. D. Correct because it was the party against whom enforcement of the contract is being sought.
A. Incorrect because it failed to object to Northco's purchase order.
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. On May 29, Parco mailed an acceptance of Lace's offer. Lace received the acceptance June 2. Which of the following statements is true if Lace sent Parco a telegram revoking its offer, and Parco received the telegram on May 25? A. Lace's revocation was ineffective because the offer could not be revoked before June 1. B. Lace's revocation effectively terminated its offer on May 25. C. No contract was formed because Lace received Parco's acceptance after June 1. D. A contract was formed on May 2.
A. Lace's revocation was ineffective because the offer could not be revoked before June 1.
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.
Edward Carlson wrote "pay to the order of Robert Rose" on the back, endorsed the instrument, and delivered it to Rose.
All defenses, real and personal, are assertable by Wallace against Rose
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. Which of the following statements concerning the shipment is true? A. Ram's shipment is an acceptance of Handy's offer. B. Handy's order must be accepted by Ram in writing before Ram ships the socket sets. C. Handy's order can be accepted only by Ram's shipping conforming goods. D. Ram's shipment is a counteroffer.
A. Ram's shipment is an acceptance of Handy's offer.
Which of the following statements DOES NOT apply to a written contract governed by the provisions of the UCC Sales Article? A. The contract must involve the sale of goods for a price of $500 or more. B. The obligations of the parties must be performed in good faith. C. The obligations of a nonmerchant may be different from those of a merchant. D. The contract may involve the sale of personal property.
A. The contract must involve the sale of goods for a price of $500 or more.
The status of a holder in due course as opposed to a mere holder of a negotiable instrument
Allows the holder in due course to overcome certain defenses that cannot be overcome by a mere holder.
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
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
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.
On May 2, Mason orally contracted with Acme Appliances to pay $480 for a washer and dryer for household use. Mason and the Acme salesperson agreed that delivery would be made on July 2. On May 5, Mason telephoned Acme and requested that the delivery date be moved to June 2. The Acme salesperson agreed to this request. On June 2, Acme failed to deliver the washer and dryer to Mason because of an inventory shortage. Acme advised Mason that it would deliver the appliances on July 2 as originally agreed. Mason believes that Acme has breached its agreement with Mason. Acme contends that its agreement to deliver on June 2 was not binding. Acme's contention is A. Incorrect, because Acme's agreement to change the delivery date is a firm offer that cannot be withdrawn by Acme. B. Incorrect, because the agreement to change the delivery date was binding. C. Correct, because Mason is not a merchant and was buying the appliances for household use. D. Correct, because the agreement to change the delivery date was not in writing.
B. Incorrect, because the agreement to change the delivery date was BINDING.
Silver Corp. sold 20 tons of steel to River Corp. with payment to be by River's check. The price of steel was fluctuating daily. Silver requested that the amount of River's check be left blank so that Silver could fill in the current market price. River complied with Silver's request. Within 2 days, Silver received River's check. Although the market price of 20 tons of steel at the time Silver received River's check was $80,000, Silver filled in the check for $100,000 and negotiated it to Hatch Corp. Hatch took the check in good faith, without notice of Silver's act or any other defense, and in payment of an existing obligation. River will
Be liable to Hatch for $100,000.
Under the negotiable instruments article of the UCC, in a nonconsumer transaction, which of the following are real defenses available against a holder in due course?
Material Alteration: Yes Discharge in Bankruptcy: Yes Breach of Contract: No
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.
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.
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
Cookie Co. offered to sell Distrib Markets 20,000 pounds of cookies at $1.00 per pound, subject to certain specified terms for delivery. Distrib replied in writing as follows: "We accept your offer for 20,000 pounds of cookies at $1.00 per pound, weighing scale to have valid city certificate." Under the UCC, A. No contract was formed because Distrib included the weighing scale requirement in its reply. B. No contract was formed because Distrib's reply was a counteroffer. C. A contract was formed between the parties. D. A contract will be formed only if Cookie agrees to the weighing scale requirement.
C. A contract was formed between the parties.
Article 2 of the UCC applies to the sale of A. Goods only if the seller is a merchant and the buyer is not. B. Real estate by a merchant for $500 or more. C. Consumer goods by a nonmerchant. D. Goods only if the seller and buyer are both merchants.
C. Consumer goods by a nonmerchant.
To satisfy the UCC statute of frauds regarding the sale of goods, which of the following must generally be in WRITING? A. Delivery terms. B. Warranties to be made. C. Quantity of the goods. D. Designation of the parties as buyer and seller.
C. Quantity of the goods.
Doral, Inc., wished to obtain an adequate supply of lumber for its factory extension to be constructed in the spring. It contacted Ace Lumber Company and obtained a 75-day written option (firm offer) to buy its estimated needs for the building. Doral supplied a form contract that included the option. Ace signed at the physical end of the contract but did not sign elsewhere. The price of lumber has risen drastically, and Ace wishes to avoid its obligation. Which of the following is Ace's best defense against Doral's assertion that Ace is legally bound by the option? A. The option is not supported by any consideration on Doral's part. B. Such an option is invalid if its duration is for more than 3 months. C. The promise of irrevocability was contained in a form supplied by Doral and was not separately signed by Ace. D. Doral is not a merchant.
C. The promise of irrevocability was contained in a form supplied by Doral and was not separately signed by Ace.
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
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.
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
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
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
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.
To satisfy the UCC statute of frauds, a written agreement for the sale of goods must A. Be signed by both buyer and seller. B. Contain payment terms. C. Refer to the time and place of delivery. D. Indicate that a contract for sale has been made.
D. Indicate that a contract for sale has been made.
EG Door Co., a manufacturer of custom exterior doors, verbally contracted with Art Contractors to design and build a $2,000 custom door for a house that Art was restoring. After EG had completed substantial work on the door, Art advised EG that the house had been destroyed by fire and Art was canceling the contract. EG finished the door and shipped it to Art. Art refused to accept delivery. Art contends that the contract cannot be enforced because it violated the statute of frauds by not being in writing. Under the Sales Article of the UCC, is Art's contention true? A. Yes, because the contract was not in writing. B. Yes, because the contract cannot be fully performed due to the fire. C. No, because the cancelation of the contract was not made in writing. D. No, because the goods were specially manufactured for Art and cannot be resold in EG's regular course of business.
D. No, because the goods were specially manufactured for Art and cannot be resold in EG's "regular course of business."
Under the UCC Sales Article, which of the following conditions most likely will prevent the formation of an enforceable sale of goods contract? A. Open quantity. B. Open delivery. C. Open price. D. Open acceptance.
D. Open acceptance.
On October 1, Baker, a wholesaler, sent Clark, a retailer, a written, signed offer to sell 200 pinking shears at $9 each. The terms were FOB Baker's warehouse, net 30, late payment subject to a 15% per annum interest charge. The offer indicated that it must be accepted no later than October 10, that acceptance would be effective upon receipt, and that the terms were not to be varied by the offeree. Clark sent a telegram, which arrived on October 6, and accepted the offer expressly subject to a change of the payment terms to 2/10, net/30. Baker phoned Clark on October 7 to reject the change of payment terms. On the phone, Clark then indicated it would accept the October 1 offer in all respects and expected delivery within 10 days. Baker did not accept Clark's oral acceptance of the original offer. Which of the following is true? A. Baker's original offer is a firm offer, hence irrevocable. B. The statute of frauds would preclude the formation of a contract in any event. C. Clark actually created a contract on October 6. The modifications were merely proposals and did not preclude acceptance. D. There is no contract. Clark's modifications effectively rejected the October 1 offer, and Baker never accepted either of Clark's proposals.
D. There is no contract. Clark's Modifications Effectively Rejected the October 1 offer, and Baker never accepted either of Clark's proposals.
Under Article 2 of the UCC, which of the following statements is true concerning a contract involving a merchant seller and a nonmerchant buyer? A. The contract may not involve the sale of personal property with a price of $500 or more. B. Only the seller is obligated to perform the contract in good faith. C. The contract will be either a sale or return or a sale on approval contract. D. Whether UCC Article 2 is applicable does not depend on the price of the goods involved.
D. Whether UCC Article 2 is applicable does not depend on the price of the goods involved.
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.
Cynthia purchased a machine from VCR, Inc., for use in her home. She gave a small down payment and executed a promissory note for the balance. VCR negotiated the note to the Finley Company, which gave value, acted in good faith, and had no notice of any defense against or claim to the note. Subsequently, Cynthia was able to assert a defense of failure of consideration against VCR. If the note did not contain the notice required by the FTC,
Finley will prevail against Cynthia.
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.
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.
Alfredo promises to rebuild the engine in Ernesto's Maserati in exchange for Ernesto's negotiation to him of a promissory note in the amount of $5,000.00. If Alfredo never rebuilds the engine,
He cannot qualify as a holder in due course.
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.
Jean bought a radio for $280 from Ace Appliances. Jean signed a promissory note (that stated the holder is subject to all defenses of the maker) and a purchase contract to cover the entire purchase price. The television proved defective so Jean returned it to Ace. One week later, Moe Finance Company demanded the first payment on the promissory note, which it had purchased from Ace without any knowledge that the television was defective.
Jean cannot be held liable on the promissory note even if Moe Finance qualifies as a holder in due course under Article 3 of the UCC.
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.
To the extent that a holder of a negotiable promissory note is a holder in due course, (s)he takes the note free from which of the following defenses?
Nonperformance of a condition precedent.
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.
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.
A purchaser of a negotiable instrument payable on demand would least likely be a holder in due course if, at the time of purchase, the instrument is
Overdue by 3 weeks.
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.
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.
For a person to be a holder in due course of a promissory note,
The note must be negotiable.
To negotiate an instrument payable to bearer, one must
Transfer possession of the instrument.
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.
