CH-13-14 Contract Performance Breach and Remedies – Essentials of the Legal Environment Today : Exam Guide

This Document Contains Chapters 13 to 14 Chapter 13 Contract Performance Breach and Remedies True/False 1. A material fact is a fact that a reasonable person would consider important when determining his or her course of action. A. True B. False Answer: True 2. A contract may not be enforceable if one party is aware that the other party made a mistake of fact. A. True B. False Answer: True 3. Voluntary consent may be lacking because of misrepresentation but not because of a mistake. A. True B. False Answer: False 4. Misrepresentation of a material fact can occur by words or action. A. True B. False Answer: True 5. Words or terms in contracts that are subject to more than one reasonable interpretation can lead to bilateral mistakes. A. True B. False Answer: True 6. Any party who does not receive what he or she considers a fair bargain can argue mistake. A. True B. False Answer: False 7. An innocent party does not need to suffer an injury to collect damages as a result of a misrepresentation. A. True B. False Answer: False 8. Duress is a defense to the enforcement of a contract, but not a ground for rescission of a contract. A. True B. False Answer: False 9. When the dominant party in a fiduciary relationship benefits from that relationship, a presumption of undue influence arises. A. True B. False Answer: True 10. As a general rule, contract duties can be delegated. A. True B. False Answer: True 11. Intended beneficiaries can sue to enforce a contract. A. True B. False Answer: True 12. In most contracts, promises of performance are not expressly conditioned. A. True B. False Answer: True 13. A condition is a qualification in a contract based on a future event that is certain to occur. A. True B. False Answer: False 14. When a party’s performance is perfect, it is said to be complete. A. True B. False Answer: True 15. A party who in good faith performs substantially all of the terms of a con-tract can enforce the contract against the other party. A. True B. False Answer: True 16. Most contracts need to be performed only to the satisfaction of a reasonable person unless they expressly state otherwise. A. True B. False Answer: True 17. Anticipatory repudiation discharges a contract. A. True B. False Answer: False 18. If no time for performance is stated in a contract, any time is acceptable. A. True B. False Answer: False 19. Any breach entitles the nonbreaching party to sue for damages. A. True B. False Answer: True 20. An innocent party to a contract is discharged when the other party materially alters the contract without consent. A. True B. False Answer: True 21. An occurrence or event that makes performance temporarily impossible operates to discharge the parties’ contractual duties. A. True B. False Answer: False 22. A contract will be discharged if supervening circumstances make it impossible to attain the purpose both parties had in mind when they made the contract. A. True B. False Answer: True 23. The standard measure of compensatory damages is the value of breaching party’s promised performance. A. True B. False Answer: False 24. Damages that compensate the nonbreaching party for the loss of a bargain are known as consequential damages. A. True B. False Answer: False 25. Compensatory damages compensate a party injured by a breach of contract by punishing the party that breached the contract. A. True B. False Answer: False 26. A party seeking to recover compensatory damages cannot also recover incidental damages. A. True B. False Answer: False 27. Ordinarily, the remedy for a seller’s breach of a contract for a sale of real estate is specific performance. A. True B. False Answer: True 28. Consequential damages are awarded for damage caused by special circumstances beyond a contract. A. True B. False Answer: True 29. A liquidated damages provision in a contract specifies a certain amount to be paid in the event of a default or breach of contract. A. True B. False Answer: False 30. Specific performance will not be granted unless the party’s legal remedy is inadequate. A. True B. False Answer: True 31. Rescission is an equitable remedy used when the parties have imperfectly expressed their agreement in writing. A. True B. False Answer: False 32. Reformation is an equitable remedy that allows a court to rewrite a contract to suit itself. A. True B. False Answer: False 33. A party who knowingly accepts defective performance of a contract waives the breach. A. True B. False Answer: True 34. A contract may include a clause stating that damages will be limited to a maximum amount. A. True B. False Answer: True 35. Whether a contract’s limitation-of-liability clause will be enforced depends on the type of breach that is excused by the provision. A. True B. False Answer: True Multiple Choice 36. Nora enters into a contract with Oceanic Transport, Inc., to insure and ship a painting from France to the United States for a certain price. But Oceanic makes a mistake in adding the costs, which results in a contract price that is $1,000 less than the true cost. Most likely, a court would A. allow the parties to rescind the contract. B. award damages to Nora for the mistake. C. award damages to Oceanic for the mistake. D. enforce the contract as is. Answer: A 37. Garth owns two all-terrain vehicles (ATVs), worth $1,000 and $500, respectively. Helen agrees to buy “Garth’s ATV” for $750. Garth believes, in good faith, that he is selling the $500 ATV. Helen believes, in good faith, that she is buying the $1,000 ATV. In this situation A. Garth is entitled to $750 for the $500 ATV. B. Helen is entitled to the $1,000 ATV for $750. C. Helen must buy both ATVs for $1,500. D. there is no contract. Answer: D 38. Byron agrees to sell to Charity, for $1,500, a remote parcel of land. They believe the land to be worthless, but beneath it is a gold mine. Byron can A. not rescind the contract. B. rescind the contract on the basis of fraud. C. rescind the contract on the basis of mistake. D. rescind the contract on the basis of undue influence. Answer: A Fact Pattern 13–1 (Questions 4–6 apply) Lewis, an employee of Silos, Inc., makes a substantial mathematical error in totaling the estimated costs for a project for which AgriCo-op is seeking bids. Consequently, Silos’s bid is significantly low. 39. Refer to Fact Pattern 13–1. Any contract with AgriCo-op that includes the mistake may be rescinded A. if AgriCo-op knew or should have known of the mistake. B. if Lewis’s supervisor did not know of the mistake. C. if Silos knew or should have known of the mistake. D. under no circumstances. Answer: A 40. Refer to Fact Pattern 13–1. Any contract with AgriCo-op that includes the mistake may be rescinded A. if the error was made inadvertently and without gross negligence. B. if the error was made intentionally or negligently. C. if the error was made intelligently but distractedly. D. under no circumstances. Answer: A 41. Refer to Fact Pattern 13–1. Any contract with AgriCo-op that includes the mistake may be rescinded A. if the mistake involves a material fact. B. if the mistake involves any fact. C. if the mistake is one of value or quality. D. under no circumstances. Answer: A 42. Kari, a real estate agent, assures Linc that a certain parcel of commercial property fronts on the most highly trafficked street in Metro City. Linc buys the property and then discovers that the street has no more traffic than any other in its vicinity. Linc is most likely a victim of A. opinion. B. fraud. C. mistake. D. nothing. Answer: B 43. Garland induces Jules to enter into a contract for the purchase of a Chef’s Burger House restaurant. Garland knowingly misrepresents a number of material features about the restaurant and the business. When Jules discovers the truth, he can A. not rescind the contract because Jules assumed the risk that the bargain would prove to be different from what he thought. B. rescind the contract on the basis of fraud. C. rescind the contract on the basis of mistake. D. rescind the contract on the basis of undue influence. Answer: B 44. Mona is induced by her guardian Newt to sign a contract to invest her student loan funds in Overseas Bank through Newt’s investment firm. Unknown to Mona, Newt realizes ongoing commissions from the investment. Most likely, Mona may A. not rescind the contract. B. rescind the contract on the basis of undue influence. C. rescind the contract on the basis of mistake. D. rescind the contract on the basis of fraud. Answer: B 45. Drake enters into a contract with Eve, who claims to have access to a stock-trading algorithm that will multiply an investment many times over. When the results do not match this promise, Drake learns that Eve does not have access to any unique software and files a suit against her, alleging fraud. Proof of an injury is required to A. recover damages. B. rescind the contract. C. undo Eve’s influence. D. punish the defendant. Answer: A 46. Seth offers to buy a house from Tia for less than Tia paid for it, stating that he would “hate to see anything bad happen to Tia or her house.” Tia agrees to sell. Regarding this agreement, a court would likely A. enforce it. B. not enforce it. C. reform it to reflect the true market value of the property. D. order the parties to renegotiate the price. Answer: B 47. Loren and Kendra enter into a contract for the distribution of Loren’s produce to local restaurants for which he agrees to pay Kendra. Kendra transfers her right to payment under the contract to County Bank. This transfer is A. a delegation. B. an assignment. C. a third party beneficiary contract. D. prohibited. Answer: B 48. Illya owes Jenny $1,000. In a separate deal, Kasey owes Illya $1,000. Illya unconditionally assigns his rights in the deal with Kasey to Jenny. Illya’s right to the $1,000 is then A. unchanged. B. extinguished. C. incidental. D. assigned to a court. Answer: B 49. App Developers, Inc. (ADI), enters into a contract with Carmen, the chief executive officer of SalesCorp, to create an app for the firm. To fulfill the contract, ADI hires Max and ten other student interns. With respect to the contract between ADI and Carmen, Max is A. an intended beneficiary. B. an incidental beneficiary. C. a delegate. D. an assignee. Answer: B 50. Emil enters into a contract to buy Foley’s cultivated bottomland and hill and bench acreage if County AgriCredit will lend Emil the funds to pay for the land. Emil’s duty to perform is A. absolute. B. conditional. C. manifest. D. irresolute. Answer: B 51. Dharma enters into a contract to manage the operations of Esther’s dental office for one year, renewable for subsequent one-year terms. If this contract is discharged like most contracts, it will be A. canceled. B. breached. C. altered. D. performed. Answer: D 52. CrossCountry Trucking & Transport enters into a contract with Discount Outlet Stores to load, transport, deliver, and unload the cargo that Discount designates. CrossCountry’s offer to perform, when the company is ready, willing, and able to do so, is A. complete. B. substantial. C. tender. D. absolute. Answer: C 53. Water Rites, LLC, enters into a contract to site and dig a well for Rancho Verde. Water Rites completely performs. Rancho Verde is entitled to A. a discount. B. rescission. C. novation. D. nothing more. Answer: D 54. Carpets n’ Rugs, Inc., agrees to carpet Downtown Realty’s offices, using a particular brand of durable carpet. Carpets n’ Rugs completes the job but uses a different brand of wear- and weather-resistant carpeting. This is most likely A. a good-faith reason for Downtown Realty to rescind the contract. B. a material breach. C. complete performance. D. substantial performance. Answer: D 55. Ed’s Electric substantially performs its contract with Forest Hills Apartments, Inc., to deliver and install an alarm system and parking lot lighting. Forest Hills is entitled to A. damages. B. nothing more. C. to be excused from performance. D. suspend performance. Answer: A 56. Business Computer Solutions Education Service enters into a contract to employ Chandra as an instructor for two years to begin June 1. One month before the term begins, Business Computer is underbid by a competitor and loses a major client, Debt Consolidation Corporation. Business Computer now refuses to hire Chandra. Business Computer’s repudiation of its contract to employ Chandra is most likely A. a material breach. B. a minor breach. C. a condition subsequent. D. not a breach. Answer: A 57. Drainage & Irrigation Equipment, Inc., contracts to sell its assets to Earth & Sky Aquatic Corporation. Before either party has performed, rescission of this con-tract requires A. a mutual agreement to rescind. B. an accord and satisfaction. C. a novation. D. a settlement agreement. Answer: A 58. Gliding Light, LLC, and Hang Gliders, Inc., are parties to a contract. They subsequently agree that High Riders Inc. should take Gliding Light’s place and assume all of its rights and duties under the contract. This is A. a mutual agreement to rescind. B. an accord and satisfaction. C. a novation. D. a settlement agreement. Answer: C 59. Dondi contracts to buy a custom espresso maker from Caffee Specialties, Inc., for $4,500, but Caffee fails to deliver. Dondi buys the appliance else-where for $5,500. Dondi’s measure of damages is A. $1,000. B. $1,000 plus incidental damages. C. incidental damages only. D. $0. Answer: B 60. Nogales Ceramics pays Omar $15,000 to propose an online marketing campaign. Two days later, Omar tells Nogales that he has accepted a job in Silicon Valley and cannot plan the campaign. As compensatory damages, Nogales can recover A. $150,000. B. $15,000. C. $1,500. D. $0. Answer: B 61. Damon contracts to repair the turf on a soccer field for Carousel Sports Park. Damon knows that without the repair, Carousel will have to cancel an upcoming game. Damon does not perform as promised. As consequential damages, Carousel can recover A. the cost of new turf. B. the difference between Damon’s price and the actual cost of repair. C. the loss of profit from the canceled game. D. nothing. Answer: C 62. Builders, Inc., agrees to construct an office building for Champion Hotels. The project proceeds according to plan, but before it is done, Champion tells Builders to quit. Builders may recover A. the contract price less costs of materials and labor. B. the contract price. C. the costs needed to complete construction. D. profits plus the costs incurred up to the time of the breach. Answer: D 63. Ambrose enters into a contract to buy 350 acres from Belle Vista Farms to cultivate grapes and open a winery. If Ambrose breaches the contract, Belle Vista’s remedy would most likely be A. a certain ratio of the amount that Ambrose expected to invest in the project. B. a percentage of Ambrose’s unrealized profit. C. the difference between the land’s contract and market prices. D. specific performance. Answer: D 64. Dry Gulch Farms hires Elliot to repair its irrigation system on site on a certain date for $2,500, but Elliot does not show up as agreed. Dry Gulch hires Fernando to do the job for $2,000. Dry Gulch may recover from Elliot A. nothing. B. compensatory damages. C. consequential damages. D. nominal damages. Answer: D 65. SFX Paintball Games, Inc., and Truck & Trailer Delivery Corporation sign an agreement that provides for the payment of “$1,000 by whichever party commits a material breach of the contract that creates damages difficult to estimate but approximately $1,000.” This is A. a liquidated damages clause. B. a mitigation of damages clause. C. a nominal damages clause. D. a penalty clause. Answer: A 66. Rural Power Utility, Inc., enters into a contract with Shovel Excavation Service to dig up, replace, and rebury Rural’s cables in a certain location. Rural advances Shovel 10 percent of its cost. The parties rescind the contract. Shovel’s refund of the payment is A. a penalty. B. liquidated damages. C. restitution. D. a breach of contract. Answer: C 67. Ira orally agrees to buy a unique collection of sports memorabilia for $1,000 from Janet and sends her $250 as a down payment. When Ira sends her the rest of the price, Janet refuses to ship Ira the collection. Ira should seek A. damages. B. reformation. C. rescission. D. specific performance. Answer: D 68. Resourced Minerals Inc. agrees to deliver ten tons of coal to Static Energy Corporation. The agreement states that delivery is to be within “9” days, although the parties intend “90” days. Resourced Minerals cannot convince Static Energy to amend the contract. Resourced Minerals should seek A. damages. B. reformation. C. rescission. D. specific performance. Answer: B 69. Rikki agrees to sell her Sunrise Breakfast Café to Tia. As part of the deal, Rikki signs a covenant not to open a competing business within a hundred-mile radius for ten years. If this covenant is later determined to be unreasonable, the appropriate remedy is most likely A. damages. B. reformation. C. rescission. D. specific performance. Answer: B 70. River Vista Inc. enters into a contract with Stable Realty Management to manage and maintain River Vista’s commercial real estate. Their contract provides that neither party can recover damages for a non-fraudulent or unintentional breach. This is A. a limitation-of-liability clause. B. an exculpatory clause. C. a liquidated damages clause. D. a quasi contract. Answer: A Essay 71. Lucy contracts to buy six cases of vintage wine from Mountainside Vineyards for $1,200. The contract states that delivery is to be made at Lucy’s residence "on or before June 1, to be used for niece’s wedding reception on June 2." On June 1, Mountainside’s delivery vehicle is involved in an accident, and no wine is delivered to Lucy. On the morning of June 2, Lucy buys the wine from Nature’s Vintner. That afternoon, just before the reception, Mountainside tenders delivery of the wine at Lucy’s residence. Lucy refuses tender. Mountainside sues Lucy for breach of contract. How is the court most likely to rule? Answer: In most courts, the decision will rest on whether the inclusion of the contract clause “to be used for niece’s wedding reception on June 2” created an ex-press condition rendering the time of performance vital to the purpose of the contract. If the time stated is of the essence, the time for performance must be strictly complied with. Any failure of full performance constitutes a material breach and discharges any duty or liability of the other party. If the time for performance is not of the essence, a reasonable time for performance is allowed. A late performance in such a case does not constitute a material breach, but the party rendering late performance is liable for damages caused by the de-lay. In this problem, although June 2 would ordinarily be a reasonable time for performance, the inclusion of the phrase giving the use of the wine and date of the reception would render the time vital to performance and would require strict compliance. Mountainside’s failure to deliver on June 1 is a material breach releasing Lucy from any liability under the contract. 72. Lunch Trucks, Inc., contracts to deliver and serve Meals Catering Service’s products to its clients for $5,000 per event, payable in advance. Meals Catering pays the money, but Lunch Trucks fails to perform. Can Meals Catering rescind the contract? Can Meals Catering also obtain restitution? What does it mean to “rescind” a contract? How is a contract rescinded? What is restitution? How is restitution accomplished? Explain. Answer: Yes, Meals Catering can rescind the contract and obtain restitution. A breach of contract by a failure to perform entitles the nonbreaching party to rescind, or cancel, the contract, and the parties must make restitution, which is the returning of whatever benefit they conferred on each other. These remedies are particularly available when the breaching party would otherwise be unjustly enriched, as in this question. Rescission is an action to cancel a contract—to re-turn the parties to the positions they were in before the transaction. It is also available in cases involving fraud, mistake, duress, or failure of consideration. To rescind, a nonbreaching party must give prompt no-tice to the breaching party. Both parties must then make restitution to each other by returning what-ever was conveyed in execution of their contract. If the goods or property conveyed can be returned, they must be. If the actual items cannot be re-turned, an equivalent amount in money must be paid. Chapter 14 Sales Leases and Product Liability True/False 1. The parties to sales or lease contracts are free to agree to terms different from those stated in the UCC. A. True B. False Answer: True 2. The common law requirements for a valid contract are not applicable to sales contracts. A. True B. False Answer: False 3. Whenever a conflict arises between a common law contract rule and the state statutory law based on the UCC, the common law controls. A. True B. False Answer: False 4. If the subject matter of a contract dispute is services, the common law applies. A. True B. False Answer: True 5. A sale is the passing of title from the seller to the buyer for a price. A. True B. False Answer: True 6. Real estate is included within the scope of UCC Article 2. A. True B. False Answer: False 7. The UCC imposes special business standards on casual and inexperienced sellers and buyers. A. True B. False Answer: False 8. Merchants are held to a higher standard of performance or duty than are nonmerchants. A. True B. False Answer: True 9. Under the UCC, a sales or lease contract will fail for indefiniteness if one or more terms are left open. A. True B. False Answer: False 10. If the parties to a contract for a sale of goods have not agreed on a price, a court will determine a reasonable price at the time for delivery. A. True B. False Answer: True 11. Under the UCC, a firm offer for a sale or lease of goods made by a merchant can be revoked at any time before acceptance. A. True B. False Answer: False 12. Acceptance of an offer to buy, sell, or lease goods generally may be made in any reasonable manner and by any reasonable means. A. True B. False Answer: True 13. If goods in every respect conform to a contract, the buyer or lessee does not have a right to reject the goods. A. True B. False Answer: True 14. Until the time for performance under a contract expires, the seller or lessor has a right to cure. A. True B. False Answer: True 15. If, before the time for contract performance, one party clearly communicates to the other the intention not to perform, such an action is not a breach of the contract. A. True B. False Answer: False 16. If either the goods or their tender fails to conform to the contract in any respect, the buyer or lessee must reject all of the goods. A. True B. False Answer: False 17. A buyer’s failure to cover will bar him or her from using any other remedies available under the UCC. A. True B. False Answer: False 18. A buyer who rightfully rejects nonconforming goods may obtain cover or cancel the contact, but may not seek damages. A. True B. False Answer: False 19. The parties to a sales or lease contract can expressly provide for remedies in addition to those provided in the UCC. A. True B. False Answer: True 20. A warranty of good title means that a seller warrants that he or she has valid title to the goods and that transfer of the title is rightful. A. True B. False Answer: True 21. In most sales, sellers warrant that they have good and valid title to the goods sold. A. True B. False Answer: True 22. Statements of fact made during the bargaining process are express warranties. A. True B. False Answer: True 23. An expression of opinion will usually create a warranty. A. True B. False Answer: False 24. Goods must be of the highest quality possible to be merchantable. A. True B. False Answer: False 25. Every sale or lease by a merchant who deals in goods of the kind sold or leased automatically gives rise to an implied warranty of merchantability. A. True B. False Answer: True 26. Generally, the implied warranties of merchantability and fitness for a particular purpose cannot be disclaimed. A. True B. False Answer: False 27. Merchants are not required to warrant that the goods they sell are fit for their ordinary purpose. A. True B. False Answer: False 28. Due care must be exercised in designing a product. A. True B. False Answer: True 29. A manufacturer’s duty of care does not extend to the inspection and testing of products bought to incorporate in the final product. A. True B. False Answer: False 30. Misrepresentation on a label is not enough to show an intent to induce the reliance of anyone who may use the product. A. True B. False Answer: False 31. To support the imposition of strict product liability, a product must be mishandled between the time it is sold and the time an injury occurs. A. True B. False Answer: False 32. Sellers or lessors are liable only for products that are reasonably dangerous. A. True B. False Answer: False 33. An action in strict product liability requires that the product not be in a defective condition when the defendant sells it. A. True B. False Answer: False 34. The types of product defects that have traditionally been recognized in product liability law include inadequate warnings. A. True B. False Answer: True 35. A seller must take steps to guard against the foreseeable misuse of a product. A. True B. False Answer: True Multiple Choice 36. Over the course of a year, Discount Market Company sells goods from its inventory and also sells one of its warehouses. In exchange, Discount receives checks, which Discount uses to repay a loan from Evermore Credit Inc. Article 2 of the UCC governs A. the checks. B. the payment of the loan. C. the sale of the buildings. D. the sale of the goods. Answer: D 37. Canyon Creek Corporation is a Delaware-based firm that does business throughout the United States. With respect to this circumstance, the UCC has been adopted by, and applies in, A. a few of the states. B. all of the states, in whole or in part. C. half of the states. D. none of the states, to date. Answer: B 38. Ferris is refinishing his kitchen floor and needs a floor sander to complete the job. Ferris’s neighbor Gerda suggests that he call Home Repair Rentals, Inc. Home Repair leases Ferris a floor sander. In this transaction, the lessor is A. Ferris. B. Gerda. C. Home Repair. D. none of the parties. Answer: C 39. Danko sells new and used sports equipment to persons who come into his store, Eyes on the Prize. One afternoon, Danko sells a used display shelf to Felipe. At a garage sale at his home, Danko sells a used flat-screen TV to Faye. Under the UCC, Danko is a merchant of A. sports equipment only. B. sports equipment and display shelves only. C. sports equipment, display shelves, and flat-screen TVs. D. anything that he chooses to sell. Answer: A 40. Quality Metals Company and Superior Fabrication, Inc., enter into a contract under which Quality Metals agrees to deliver a certain quantity of sheet metal to Superior Fabrication each month. The contract does not include a price term. In a suit between the parties over the price, a court will A. determine a reasonable price. B. impose the lowest market price. C. impose the highest market price. D. return the parties to the positions they held before the contract. Answer: A 41. Car n’ Truck Body & Paint Company orders custom paint from Diverse Hues Inc., but Diverse does not deliver. Car n’ Truck will probably be unable to enforce the agreement if the parties omitted A. a price term. B. a payment term. C. a quantity term. D. shipping arrangements. Answer: C 42. Fresh Dairy, Inc., is the offeror and Gelato Ice Cream Company is the offeree under a unilateral sales contract in which Hector’s Helado Corporation is also interested. Gelato is not notified of Fresh Dairy’s performance within a reasonable time. Gelato A. may treat the offer as having lapsed. B. must assume that Fresh Dairy has started to perform. C. must contact Fresh Dairy. D. must notify Hector’s. Answer: A 43. Nature’s Products, Inc., sends its standard order form to Omni Distribution Corporation to evidence a sale of packing materials. Omni responds with its own standard purchase order form. Additional terms in the purchase order automatically become part of the contract unless A. the terms materially alter the original contract. B. the original offer expressly required acceptance of its terms. C. the offeror objects to the new terms within a reasonable time. D. any of the choices. Answer: D 44. iSharp, Inc., and Jenene, the owner of a Kitchen Time shop, orally agree to a sale of knives and other utensils for $12,000. Jenene gives iSharp a check for $4,000 as a partial payment. This contract is A. enforceable to the extent of $4,000. B. fully enforceable because it is for specially selected goods. C. fully enforceable because it is oral. D. not enforceable. Answer: A 45. Commercial Leasing Corporation and Quarry Construction Company enter into a contract for a lease of three excavators. Under the perfect tender rule, Commercial Leasing must ship or tender goods to the lessee that A. approximately conform to the contract description. B. entirely conform to the contract description in most ways. C. conform to the contract description in every way. D. substantially conform to the contract description. Answer: C 46. 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. Fuel Connector’s place of business. B. Go-Flo’s place of business. C. the current location of the hose couplings and fittings. D. the commercial carrier office nearest to Go-Flo’s place of business. Answer: A 47. Mantas Moderno Company, which is based in New York, agrees to sell fifty woven carpets, imported from Mexico and currently stored in New Jersey, to NuDecor, Inc., which is based in Connecticut. If the contract does not indicate where the goods will be delivered, the place of delivery is A. New York. B. Mexico. C. New Jersey. D. Connecticut. Answer: C 48. On July 10, Pet Supply Store orders fifty small dog collars from Quality Collars, Inc. to be delivered by July 15. On July 13, Quality Collars tenders fifty large dog collars. Pet Supply rejects the shipment. Quality Collars has A. no right to cure. B. until July 15 to cure. C. until the end of the business day on July 13 to cure. D. unlimited time to cure. Answer: B 49. Sweet Fruits contracts with Fresh2U, Inc. for a delivery of two hundred pounds of strawberries to be delivered by Keep Kool Trucking, a trucking company with refrigerated trucks. On the day of delivery, the refrigeration units on Keep Kool’s trucks are not working. Fresh2U A. may ship the goods to Sweet Fruits using another trucking company with refrigerated trucks. B. must refund Sweet Fruits’ money and cancel the contract. C. must wait to ship the strawberries until Keep Kool has fixed its trucks. D. must ship the goods through a different carrier and pay Sweet Fruits incidental damages. Answer: A 50. Beef Burgers, Inc. contracts to buy five hundred steers from Fattening Feedlots. Before Fattening Feedlots can deliver the steers, there is an outbreak of disease in the feedlot, and all the cattle are quarantined. In this case the perfect tender rule A. applies to both parties. B. does not apply. C. applies only to Beef Burgers. D. applies only to Fattening Feedlots. Answer: B 51. Shane’s Auto Parts orders twenty tires from Tough Tires, Inc. The truck delivering the tires to Shane’s is in an accident and ten of the tires are damaged. Shane’s Auto Parts A. cannot reject the entire shipment. B. must still pay for all twenty tires at the original contract price. C. may inspect the tires and accept the shipment with a reduction in price. D. must reject the entire shipment. Answer: C 52. Coffee Roasters, Inc., sells whole bean and ground coffee to Delicioso Deli under an existing contract. When the cost of coffee beans increases, Delicioso agrees to a price increase, but later wants to cancel the contract. Delicioso may A. cancel the contract immediately. B. cancel the contract only after accepting a final shipment. C. cancel the contract only on reasonable notice. D. not cancel the contract. Answer: D 53. Fruit of the Plant, Inc., agrees to sell a certain quantity of a high-quality grain seed to Grange Co-op. Fruit of the Plant can obtain only half of the quantity ordered, so the seller also ships a lesser quality seed in twice the amount of the remainder of the order for the same price. Grange Co-op rejects the lesser quality seed. With time for performance not yet expired, Fruit of the Plant can A. attempt to cure the defect. B. cancel the contract. C. recover the purchase price plus incidental damages. D. resell or dispose of the goods and hold Grange Co-op liable for any loss. Answer: A Fact Pattern 14-1 (Questions 19-20 apply) Daily Bread Bakeries, Inc., contracts to buy all of its ingredient requirements for bread making, at a certain minimum per year, from Enriched Flour & Grain Corporation for six years. After three years, Daily Bread tells Enriched that it plans to sell its assets to Flat Bread Shops, Inc. Flat Bread refuses to assure Enriched that it will continue Daily Bread’s contract. 54. Refer to Fact Pattern 14-1. Flat Bread’s refusal is A. a justified response based on Flat Bread’s relation to the contract. B. an assignment of Daily Bread’s rights under the contract. C. a reasonable suspension of performance under the contract. D. a repudiation of the contract. Answer: D 55. Refer to Fact Pattern 14-1. Enriched can A. assign its rights under the contract but cannot terminate it. B. terminate the contract and seek damages. C. suspend performance under the contract until Enriched is fully paid. D. do nothing. Answer: B 56. Hydro Source Company contracts to sell pumps, tanks, and water storage systems to Inflo Irrigation, Inc. Before the goods are delivered, Inflo indicates that it will not be able to pay. Hydro Source can A. force Inflo to accept and pay for the goods. B. require Inflo to find a buyer for the goods. C. resell the goods and recover any damages from Inflo. D. do nothing. Answer: C 57. Precious Stones, Inc., and Sparkling Jewelry stores enter into a contract for a sale of gemstones. Precious Stones does not deliver. The buyer can normally recover as damages the difference between A. any loss avoided and any profit gained. B. the actual price and the hoped-for price. C. the contract price and the market price. D. the current prices in the parties’ locations. Answer: C 58. Construction Products Company and Dante enter into a contract for a sale of bricks and stones. Construction Products knows the purpose for which Dante will use the goods. Under the UCC, an implied warranty of fitness of a particular purpose arises A. if the buyer is relying on the seller to select suitable goods. B. if the buyer asks for it. C. if the seller is a merchant who deals in goods of the kind sold. D. in conjunction with lease contracts, not sales contracts. Answer: A 59. Arnold buys a backhoe from Big Dig Equipment Inc. Arnold is unaware that Credit Collection Company holds a lien against the backhoe when he buys it. If Credit Collection repossesses the backhoe, Arnold can A. recover from Big Dig for breach of warranty. B. do nothing. C. file criminal charges against Big Dig and Credit Collection. D. recover damages from Credit Collection for breach of warranty. Answer: A 60. Riverside Ranch is a horse breeding facility. Steed Stables is a customer looking for a new stallion for its breeding program. Riverside’s representative Tomas shows Steed a stallion that he says is very fertile and can easily breed twenty mares per year. This statement is A. an express warranty. B. an implied warranty. C. a warranty of title. D. puffery. Answer: A 61. Livestock Feedlot orders one hundred sacks of cattle feed from MegaNutrient Feed, Inc. Each sack is stamped with the phrase “Twenty percent protein.” This is A. an express warranty. B. an implied warranty. C. a warranty of title. D. puffery. Answer: A 62. Chord Guitars Inc. sells guitars and other stringed instruments to consumers. A Chord salesperson says to a potential customer, “This Chord is the best guitar you’ll find anywhere, even online.” This statement is A. an implied warranty of fitness for a particular purpose. B. an implied warranty of merchantability. C. an express warranty. D. none of the choices. Answer: D 63. Trucks & Trailers, Inc. (T&T), and United Delivery 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. automatically. B. only if the lessee asks for such a warranty. C. only if the lessor expresses such a warranty. D. only in conjunction with sales contracts, not lease contracts. Answer: A 64. Welding Systems, Inc. (WSI), makes welding torches, masks, and related products. A WSI product may be unreasonably dangerous due to A. a defect in its design. B. the expectations of its seller. C. the intentions of its distributor. D. the method of accounting of its maker. Answer: A 65. Green Glass Corporation makes glass bottles for food and beverage makers to package their products for wholesale distribution and retail sale. Liability may be imposed on Green Glass based on A. the “reasonableness” of the manufacturer’s quality control efforts. B. the type of the manufacturer’s insurance coverage. C. a manufacturing defect. D. the opinion and testimony of non-experts. Answer: C 66. Horizon Corporation makes cell phones. Gina files a product liability suit against Horizon, alleging a design defect. In deciding whether to hold Horizon liable, the court may consider the “reasonableness” of A. the manufacturer’s intentions. B. the seller’s method of accounting. C. the manufacturer’s quality control efforts. D. an available alternative design. Answer: D 67. Country Style, Inc., makes landscaping tools. Country could be liable for a warning defect if there is a foreseeable risk of harm posed by a product and A. the omission of a warning renders the product not reasonably safe. B. there is a reasonable alternative design. C. there is a lack of care in making of the product. D. there is insufficient insurance coverage. Answer: A 68. Pharma Company, Quitox Corporation, and Renal, Inc., are drug makers. Med Sales Company and National OTC, Inc., are drug distributors. In a suit against all of these parties in which market-share liability is imposed, most likely to be liable are A. neither the distributors nor the makers. B. the distributors and the makers. C. the distributors only. D. the makers only. Answer: B 69. Furious Toyz Corporation makes skateboards, which it sells to consumers, including Gitana. Gitana is injured due to a defect in the board that causes an accident in which Haley, a bystander, is also injured. In a product liability suit based on strict product liability, Furious Toyz may be liable to A. Gitana and Haley. B. Gitana only. C. Haley only. D. no one. Answer: A 70. Toyoda Company buys gas pedals and other parts from subcontractors and puts them in its vehicles without changing their composition. If the pedals or other parts are defective, strictly liable for any damage caused by the defects are A. neither Toyoda nor the subcontractors. B. Toyoda and the subcontractors. C. the subcontractors only. D. Toyoda only. Answer: B Essay 71. Key of G Products, Inc., offers to sell to Harmony Company one hundred MP3 players at $50 a piece, subject to certain specific delivery dates. Harmony replies with a signed purchase order that reads, “Accept your offer for 100 I-appliances at $50 each. Must be delivered to our ware-house.” Key of G does not respond or deliver the goods. Harmony files a suit for breach of contract, to which Key of G answers that there is no contract because Harmony’s purchase order contained additional terms and is not signed by Key of G. Can Harmony recover? Explain. Answer: Yes, Harmony can recover. Additional or different terms in an unconditional acceptance, which is otherwise definite and timely, are interpreted as proposals for additional terms to a contract, unless the contract is between merchants. In that situation, the terms become part of the contract unless (1) the offer expressly limits acceptance to its terms, (2) the additional terms materially alter the contract, or (3) the offeree objects to the additional terms within a reasonable time. Here, the offer did not expressly limit the acceptance, the extra terms did not materially change the contract, and Key of G did not object within a reasonable time. If either or both of the parties is not a merchant, a contract is formed according to the terms of the original offer. Thus, here, the additional term (delivery to Harmony’s warehouse) would have become part of the contract even if one or both parties had not been merchants. Key of G’s Statute of Frauds claim (that the purchase order was not signed by Key of G) also fails. For a con-tract for a sale of goods between merchants, when one party sends a written confirmation within a reasonable time after terms have been reached orally, the confirmation is binding unless the recipient objects within ten days of receipt. The merchant receiving the communication must have reason to know its contents, but it needs to be signed only by the party who sends it. Here, Key of G received the signed writing, but did not object within the ten days. 72. VuPlay Company contracts to deliver one hundred 60-inch UHD television sets to a new retail customer, Watchbox Store, on May 1, with payment to be made on delivery. VuPlay tenders delivery in its own truck. Watchbox’s manager notices that some of the cartons have scrape marks. Watchbox’s owner phones VuPlay’s office and asks whether the sets might have been damaged as they were being loaded. VuPlay assures Watchbox that the sets are in perfect condition. Watchbox tenders VuPlay a check, which VuPlay refuses, claiming that the first delivery to new customers is always for cash. Watchbox promises to pay the cash within two days. VuPlay leaves the sets with Watchbox, which stores them in its warehouse pending its "Grand Opening Sale" on May 15. Two days later, Watchbox’s stocker opens some of the cartons and discovers that a number of the sets are damaged beyond ordinary repair. VuPlay claims Watchbox has accepted the sets and is in breach by not paying on delivery. Will VuPlay succeed on these claims? Explain. Answer: VuPlay will lose on both claims. Acceptance of the goods by a buyer takes place when the buyer either signifies that the goods are conforming after inspection or fails to reject after a reasonable time for inspection or acts inconsistently with the seller’s ownership. Once the goods are accepted, the buyer loses the right to revoke acceptance of nonconforming goods unless acceptance was based on a reasonable assurance that the goods were conforming. In this question, although Watchbox accepted the goods, it did so on VuPlay’s assurance that the sets were in perfect condition. Thus, on discovery of the damaged sets, Watchbox can revoke acceptance on the basis of substantial im-pairment of value. In addition, although the contract called for payment on delivery, no method of payment was specified. Therefore, tender of payment is sufficient if it is by any means currently used in the ordinary course of business—a check is such a means. VuPlay does have a right to demand cash but must give Watchbox a reasonable extension of time in which to procure the cash. Thus, VuPlay’s claim of Watchbox’s breach for non-payment on delivery is not valid. Test Bank for Essentials of the Legal Environment Today Roger LeRoy Miller 9781305262676