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Chapter 15:

The Formation of
Sales and Lease Contracts

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WHAT THIS CHAPTER IS ABOUT
This chapter introduces two parts of the Uniform Commercial Code: Article 2, which covers sales of goods, 
and Article 2A, which covers leases. The chapter also includes a section on contracts for an international sale of 
goods.

CHAPTER OUTLINE
I. THE SCOPE OF THE UCC
The UCC provides rules to deal with all phases of a commercial sale: Articles 2 and 2A cover contracts for 
sales or leases of goods; Articles 3, 4, and 4A cover payments by checks, notes, and other means; Article 7 
covers warehouse documents; and Article 9 covers transactions that involve collateral.

II. THE SCOPE OF ARTICLE 2—SALES
Article 2 governs contracts for sales of goods.

A. WHAT IS A SALE?
A sale is “the passing of title from the seller to the buyer for a price” [UCC 2–106(1)]. The price may be 
payable in money, goods, or services.

B. WHAT ARE GOODS?
Goods are tangible and movable. Legal disputes concern the following—

1. Goods Associated with Real Estate
Goods include minerals or the like and structures, if severance from the land is by the seller (but not 
if the buyer is to do it); growing crops or timber to be cut; and other “things attached” to realty but 
capable of severance without material harm to the land [UCC 2–107].

2. Goods and Services Combined

a. General Rule
Services are not included in the UCC. If a transaction involves both goods and services, a court 
determines which aspect is dominant.

b. Special Cases
Serving food or drink is a sale of goods [UCC 2–314(1)]. Other goods include unborn animals and 
rare coins.

C. WHO IS A MERCHANT?
UCC 2–104:  Special rules apply to those who (1) deal in goods of the kind involved; (2) by occupation, 
hold themselves out as having knowledge and skill peculiar to the practices or goods involved in the 
transaction; (3) employ a merchant as a broker, agent, or other intermediary.

III. THE SCOPE OF ARTICLE 2A—LEASES
Article 2A governs contracts for leases of goods.

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A. DEFINITION OF A LEASE AGREEMENT
A  lease   agreement  is  the   lessor  and  lessee’s   bargain,  in their  words  and deeds,  including   course   of 
dealing, usage of trade, and course of performance [UCC 2A–103(k)].

B. CONSUMER LEASES
Special provisions apply to leases involving (1) a lessor who regularly leases or sells, (2) a lessee who 
leases for a personal, family, or household purpose, and (3) total payments of less than $25,000 [UCC 2A–
103(1)(e)].

C. FINANCE LEASES
A finance  lease involves a lessor (financier)  who buys or leases goods from a supplier  and leases or 
subleases them to a lessee [UCC 2A–103(g)]. The lessee must perform, whatever the financier does [UCC 
2A–407].

IV. THE FORMATION OF SALES AND LEASE CONTRACTS
The following summarizes how the UCC changes the common law of contracts.

A. OFFER
An agreement sufficient to constitute a contract can exist even if verbal exchanges, correspondence, and 
conduct do not reveal exactly when it became binding [UCC 2–204(2), 2A–204(2)].

1. Open Terms
A sales or lease contract will not fail for indefiniteness even if one or more terms are left open, as long 
as (1) the parties intended to make a contract and (2) there is a reasonably certain basis for the court 
to grant an appropriate remedy [UCC 2–204(3), 2A–204(3)].

a. Open Price Term

1) If the parties have not agreed on a price, a court will determine “a reasonable price at the 
time for delivery” [UCC 2–305(1)].

2) If either the buyer or the seller is to determine the price, the price is to be fixed in good faith 
[UCC 2–305(2)].

3) If a price is not fixed through the fault of one party, the other can cancel the contract or fix a 
reasonable price [UCC 2–305(3)].

b. Open Payment Term
When parties do not specify payment terms—

1) Payment is due at the time and place at which the buyer is to receive the goods [UCC 2–
310(a)].

2) The buyer can tender payment in cash or a commercially acceptable substitute (a check or 
credit card) [UCC 2–511(2)].

c. Open Delivery Term
When no delivery terms are specified—

1) The buyer normally takes delivery at the seller’s place of business [UCC 2–308(a)]. If the 
seller has no place of business, the seller’s residence is used. When goods are located in some 
other place and both parties know it, delivery is made there.
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2) If the time for shipment or delivery is not clearly specified, a court will infer a “reasonable” 
time [UCC 2–309(1)].

d. Duration of an Ongoing Contract
A party who wishes to terminate an indefinite but ongoing contract must give reasonable notice 
to the other party [UCC 2–309(2), (3)].
e. Options and Cooperation Regarding Performance

1) When   no   specific   shipping   arrangements   have   been   made   but   the   contract   contemplates 
shipment of the goods, the seller has the right to make arrangements [UCC 2–311].

2) When   terms   relating   to   an   assortment   of   goods   are   omitted,   the   buyer   can   specify   the 
assortment [UCC 2–311].

f. Open Quantity Term
If parties do not specify a quantity, there is no basis for a remedy. Exceptions include [UCC 2–
306]—

1) Requirements Contract
The buyer agrees to buy and the seller agrees to sell all or up to a stated amount of what the 
buyer needs or requires. There is consideration:   the buyer gives up the right to buy from 
others.

2) Output Contract
The seller agrees to sell and the buyer agrees to buy all or up to a stated amount of what the 
seller   produces.     Because   the   seller   forfeits   the   right   to   sell   goods   to   others,   there   is 
consideration.

3) The UCC Imposes a Good Faith Limitation
The   quantity   under   these   contracts   is   the   amount   of   requirements   or   output   that   occurs 
during a normal production year.

2. Merchant’s Firm Offer
If   a   merchant   gives   assurances   in   a   signed   writing   that   an   offer   will   remain   open,   the   offer   is 
irrevocable, without consideration, for the stated period, or if no definite period is specified, for a 
reasonable period (neither to exceed three months) [UCC 2–205, 2A–205].

a. The offer must be written and signed by the offeror. When a firm offer is contained in a form 
contract prepared by the offeree, a separate firm­offer assurance must be signed as well.

b. The other party need not be a merchant.

B. ACCEPTANCE

1. Any Reasonable Means
When an offeror does not specify a means of acceptance, acceptance can be by any reasonable means 
[UCC 2–206(1), 2A–206(1)].

2. Promise to Ship or Prompt Shipment

a. Promise or Shipment of Conforming Goods
An offer to buy goods for current or prompt shipment can be accepted by a promise to ship or by 
a prompt shipment [UCC 2–206(1)(b)].

b. Shipment of Nonconforming Goods
Prompt shipment of nonconforming goods is both an acceptance and a breach, unless the seller 
(1) seasonably notifies the buyer that it is offered only as an accommodation and (2) indicates 
clearly that it is not an acceptance.

3. Communication of Acceptance
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To accept a unilateral offer, the offeree must notify the offeror of performance if the offeror would not 
otherwise know [UCC 2–206(2)].
4. Additional Terms
If the offeree’s response indicates a definite acceptance of the offer, a contract is formed, even if the 
acceptance includes terms in addition to, or different from, the original offer [UCC 2–207(1)]. This is 
contrary to the common law mirror image rule.

a. Not Conditioned on the Offeror’s Assent
Does the contract include the additional terms?

1) When the Seller or Buyer Is a Nonmerchant
Additional terms are considered proposals and not part of the contract.  The contract is on 
the offeror’s terms [UCC 2–207(2)].

2) When Both Parties Are Merchants
Additional terms are part of the contract unless (1) the offer expressly states no other terms; 
(2) they materially alter the original contract; or (3) the offeror objects to the modified terms 
in a timely fashion [UCC 2–207(2)].

b. Conditioned on the Offeror’s Assent
If the additional terms are conditioned on the offeror’s assent, the offeree’s response is not an 
acceptance.

c. Additional Terms May Be Stricken
Regardless of what parties write down, they have a contract according to their conduct [UCC 2–
207(3)]. If they do not act in accord with added terms, the terms are not part of a contract.

C. CONSIDERATION
An agreement modifying a sales or lease contract needs no consideration to be binding [UCC 2–209(1), 
2A–208(1)].

1. Modification Must Be Sought in Good Faith [UCC 1–203]

2. When a Modification Must Be in Writing to Be Enforceable

a. Contract prohibits changes except by a signed writing.

b. If a consumer (nonmerchant) is dealing with a merchant, and the merchant’s form prohibits oral 
modification, the consumer must sign a separate acknowledgment [UCC 2–209(2), 2A–208(2)].

c. Any modification that brings a sales contract under the Statute of Frauds must be in writing to be 
enforceable [UCC 2–209(3)].

D. STATUTE OF FRAUDS
To be enforceable, a sales contract must be in writing if the goods are $500 or more and a lease if the 
payments are $1,000 or more [UCC 2–201, 2A–201].

1. Sufficiency of the Writing 
A writing is sufficient if it indicates the parties intended to form a contract and is signed by the party 
against whom enforcement is sought. A sales contract is not enforceable beyond the quantity stated. 
A lease must identify and describe the goods and the lease term.

2. Transactions between Merchants 
The writing requirement is met if one merchant sends a signed written confirmation to the other.

a. Contents of the Confirmation
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The confirmation must indicate the terms of the agreement, and the merchant receiving it must 
have reason to know of its contents.
b. Objection within Ten Days
Unless   the   merchant   who   receives   the   confirmation   objects   in   writing   within   ten   days,   the 
confirmation is enforceable [UCC 2–201(2)].

3. Exceptions 
An oral contract for a sale or lease that should otherwise be in writing will be enforceable in cases of 
[UCC 2–201(3), 2A–201(4)]—

a. Specially Manufactured Goods
The   seller   (or   lessor)   makes   a   substantial   start   on   the   manufacture   of   the   goods,   or   makes 
commitments for it, and the goods are unsuitable for resale to others in the ordinary course of the 
business.

b. Admissions
The   party   against   whom   enforcement   of   a   contract   is   sought   admits   in   pleadings   or   court 
proceedings that a contract was made.

c. Partial Performance
Some payment has been made and accepted or some goods have been received and accepted 
(enforceable to that extent).

E. PAROL EVIDENCE

1. The Rule
If the parties to a contract set forth its terms in a writing intended as their final expression, the terms 
cannot be contradicted by evidence of any prior agreements or contemporaneous oral agreements.

2. Exceptions [UCC 2–202, 2A–202]
A court may accept evidence of the following—

a. Consistent Additional Terms
Such terms clarify or remove ambiguities in a writing.

b. Course of Dealing and Usage of Trade
The   meaning   of   an   agreement   is   interpreted   in   light   of   commercial   practices   and   other 
surrounding circumstances [UCC 1–205].

c. Course of Performance
Conduct that occurs under the agreement indicates what the parties meant by the words in their 
contract [UCC 2–208(1), 2A–207(1)].

3. Rules of Construction
Express terms, course  of performance, course  of dealing, and usage of trade are  to be  construed 
together when they do not contradict one another. If that is unreasonable, the priority is: (1) express 
terms, (2) course of performance, (3) course of dealing, and (4) usage of trade [UCC 1–205(4), 2–
208(2), 2A–207(2)].

F. UNCONSCIONABILITY

1. What an Unconscionable Contract (or Clause) Is
An unconscionable contract or clause is a contract or clause so one­sided and unfair (at the time it 
was made) that enforcing it would be unreasonable.

2. What a Court Can Do
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A court can (1) refuse to enforce the contract, (2) enforce the contract without the unconscionable 
clause, or (3) limit the clause to avoid an unconscionable result [UCC 2–302, 2A–108].

V. CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS
The   1980   United   Nations   Convention   on   Contracts   for   the   International   Sale   of   Goods   (CISG)   governs 
contracts for the international sale of goods.

A. APPLICABILITY OF THE CISG
The CISG is to international sales contracts what UCC Article 2 is to domestic sales contracts (except the 
CISG does not apply to consumer sales). The CISG applies when the parties to an international sales 
contract do not specify in writing the precise terms of their contract.

B. A COMPARISON OF CISG AND UCC PROVISIONS

1. Irrevocable Offers
An offer is irrevocable if the offeror states that it is or if the offeree reasonably relies on it as being 
irrevocable. The offer is irrevocable even without a writing and consideration [Art. 16(2)].

2. Statute of Frauds
International contracts need not be in writing to be enforceable [Art. 11].

3. Price Term
Must be specified or be determinable from the contract.

4. Mirror Image Rule
The terms of the acceptance must mirror those of the offer.

5. Acceptance
When an acceptance is sent, an offer becomes irrevocable, but the acceptance is not effective until it is 
received. Acceptance by performance does not require notice to the offeror.

TRUE­FALSE QUESTIONS
(Answers at the Back of the Book)
        1. Article 2 of the UCC governs sales of goods.

        2. Under the UCC, a sale occurs when title passes from a seller to a buyer for a price.

        3. The UCC governs sales of services and real estate.

        4. Under the UCC, an agreement modifying a contract needs new consideration to be binding.

        5. If a contract for a sale of goods is missing a term, it will not be enforceable.

        6. An unconscionable contract is a contract so one­sided and unfair, at the time it is made, that enforcing it 
would be unreasonable.

        7. The CISG is to international sales contracts what Article 2 of the UCC is to domestic sales contracts.

        8. Under the UCC, an offer to buy goods can be accepted only by a prompt shipment of the goods.
        9. A lease agreement is the lessor and lessee’s bargain.

        10. No oral contract is enforceable under the UCC.

FILL­IN QUESTIONS
(Answers at the Back of the Book)
_________________________________________  (Course   of   dealing/Usage   of   trade)   is   a   sequence   of   conduct 
between the parties that occurred before their agreement and establishes a common basis for their understanding. 
___________________________________  (Course   of   dealing/Usage   of   trade)   is   any   practice   or   method   of   dealing 
having regularity of observance in a place, vocation, or  ______________ (deal/trade) so as to justify an expectation 
that it will be observed with respect to the transaction in question. The express terms of an agreement, the course of 
dealing, and the usage of trade will be construed to be _________________ (consistent/ inconsistent) with each other 
whenever   reasonable.   When   that   is   not   possible,   the  _____________________   _______________  (course   of 
dealing/usage of trade/terms in the agreement) prevail.

MULTIPLE­CHOICE QUESTIONS
(Answers at the Back of the Book)
        1. Adam pays Beta Corporation $1,500 for a notebook computer. Under the UCC, this is

a. a bailment.
b. a consignment.
c. a lease.
d. a sale.

        2. Alpha Electronics, Inc., sells computers and computer accessories to persons who order them. Alpha is a 
merchant with respect to

a. computers only.
b. computer accessories only.
c. computers and computer accessories.
d. none of the above.

        3. A­One Products Corporation and Best Manufacturing, Inc., enter into a contract for a sale of goods that 
does not include a price term. In a suit between A­One and Best over the price, a court will

a. determine a reasonable price.
b. impose the lowest market price for the goods.
c. refuse to enforce the agreement.
d. return the parties to the positions they held before the contract.

        4. Coastal Sales Corporation sends its purchase order form to Delta Products, Inc., for sixty display stands. 
Delta responds with its own form. Additional terms in Delta’s form automatically become part of the 
contract unless

a. Coastal objects to the new terms within a reasonable period of time.
110 UNIT THREE: SALES AND LEASE CONTRACTS

b. Coastal’s form expressly required acceptance of its terms.
c. the additional terms  materially alter the original contract.
d. any of the above.

        5. Mountain Boots, Inc., and National Shoe Company orally agree to a sale of 100 pair of hiking boots for 
$5,000. National gives Mountain a check for $500 as a down payment. At this point, the contract is

a. enforceable to at least the extent of $500.
b. fully enforceable because it is for specially made goods.
c. fully enforceable because it is oral.
d. none of the above.
        6. Apex   Corporation   sells   two   construction   cranes   to   Baker   Company,   which   leases   one   crane   to 
Construction, Inc., and gives the other crane to Equipment, Inc.  Article 2A of the UCC applies to

a. the gift only.
b. the lease only.
c. the sale only.
d. the gift, the lease, and the sale.

        7. Britney   and   Carl   dispute   the   interpretation   of   an   ambiguous   clause   in   their   contract.   In   a   suit   to 
determine the meaning of the clause, the court may accept evidence of

a. consistent additional terms only.
b. consistent additional terms and contradictory terms.
c. contradictory terms only.
d. anything extrinsic to the contract.

        8. Eve enters a contract with Fancy Furniture, Inc. In a later suit, Eve claims that a clause in the contract is 
unconscionable. If the court agrees, it may

a. enforce, limit, or refuse to enforce the contract or the disputed clause.
b. enforce the contract without the disputed clause only.
c. limit the application of the disputed clause only.
d. refuse to enforce the contract only.

        9. Digital Products, Inc., agrees to buy an unspecified quantity of microchips from Excel Corporation. Excel 
breaches the contract. Digital can probably

a. enforce the agreement to the amount of a reasonable quantity.
b. enforce the agreement to the amount of Digital’s requirements.
c. enforce the agreement to the amount of Excel’s output.
d. not enforce the agreement.

        10. Lyle in Great Britain orally agrees to sell 100 VCRs at $100 each to Maria in Mexico. Britain and Mexico 


have adopted the CISG. Lyle fails to deliver. With respect to the deal, Maria can

a. enforce it.
b. not enforce it  because it is not in writing.
c. not enforce it because it is not supported by consideration.
d. not enforce it because the price term is not specified.

SHORT ESSAY QUESTIONS
1. For purposes of UCC Article 2, what is a sale? What are goods?

2. Who, for the purposes of UCC Article 2, is a merchant?

ISSUE SPOTTERS
(Answers at the Back of the Book)
112 UNIT THREE: SALES AND LEASE CONTRACTS

1. Ace Autos, a car dealer, writes to Beth, “I have a 1999 Honda Civic that I will sell to you for $4,000. This offer 
will be kept open for one week.” Six days later, Carl tells Beth that Ace sold the car that morning for $5,000. Did Ace 
breach any contract?

2. E­Design, Inc., orders 150 computer desks. Fine Supplies, Inc., ships 150 printer stands. Is this an acceptance of 
the offer or a counteroffer? If it is an acceptance, is it a breach of the contract? What if Fine told E­Design it was 
sending printer stands as “an accommodation”?

3. Truck Parts, Inc. (TPI), often sells supplies to United Service Company (USC), which services trucks. Over the 
phone, they negotiate for the sale of eighty­four sets of tires. TPI sends a letter to USC detailing the terms and two 
weeks later ships the tires. Is there an enforceable contract between them?

STARBUCKS COFFEE COMPANY
INTERNATIONAL SALES CONTRACT
APPLICATIONS
(Answers at the Back of the Book)
The following hypothetical situation and multiple­choice questions relate to your text’s fold­out exhibit of the 
international sales contract used by Starbucks Coffee Company.  In that contract, Starbucks orders five hundred tons 
of coffee at $10 per pound from XYZ Co.

        1. Starbucks and XYZ would have an enforceable contract even if they did not state in writing 

a. the amount of coffee ordered.
b. the price of the coffee.
c. both a and b.
d. none of the above.

        2. If Starbucks and XYZ did not include a “DESCRIPTION” of the coffee as “High grown Mexican Altura,” 
then the delivered coffee must meet

a. Starbuck’s subjective expectations of their quality.
b. Starbuck’s description of the goods in ads, on labels, and so on.
c. XYZ’s description of the goods in ads, on labels, and so on.
d. XYZ’s subjective belief in their quality.

        3. Starbucks’s incentive to pay on time, according to the terms of this contract, is the clause titled

a. CLAIMS.
b. GUARANTEE.
c. PAYMENT.
d. PRICE.

        4. XYZ’s incentive to deliver coffee that conforms to the contract is the clause titled

a. CLAIMS.
b. GUARANTEE.
c. PAYMENT.
d. PRICE.

        5. Until the coffee is delivered to its destination, the party who bears the risk of loss is
a. Bonded Public Warehouse.
b. Green Coffee Association
c. Starbucks.
d. XYZ.

Textbook quiz

The Uniform Commercial Code (UCC) is which type of law?

a. Statutory law

b. Common law

c. Case law

d. Criminal law
status: incorrect (0.0)
correct: a
your answer: c
feedback: Incorrect. The UCC is statutory law, although there is a body of case law that interprets
various provisions of the UCC.
2 The Uniform Commercial Code (UCC) attempts to provide which of the following:

a. guidelines for making common law contracts that deal with the sale of land.

b. guidelines for all international contracts for the sale of securities.


a consistent and integrated framework of rules to deal with all aspects of commercial
c. transactions.
a consistent body of rules for dealing with criminal violations of the law that involve either
d. securities or government bonds.
status: correct (1.0)
correct: c
your answer: c
feedback: Correct. The UCC attempts to provide a logical legal framework for these kinds of
commercial transactions that applies throughout the states.
3 In order for the rules contained in the UCC to apply to a contract for the sale of goods, the goods
must:

a. be for retail use only.

b. consist of some unique personal service.


114 UNIT THREE: SALES AND LEASE CONTRACTS

c. be tangible, that is, have physical existence.

d. be considered real property.


status: correct (1.0)
correct: c
your answer: c
feedback: Correct. The goods sold must be tangible, unlike stocks or bonds.
4 If Jim sells Smith copper that he removed from land that he owns in Colorado, this contract:

a. will be covered by Article 2 of the UCC.

b. will be covered by Article 2A of the UCC.

c. will be covered by Article 3 of the UCC.

d. will be covered by the common law.


status: correct (1.0)
correct: a
your answer: a
feedback: Correct. Jim is selling a good that he has separated from the land.
5 If you sublease your automobile to a friend, this contract is covered by:

a. Article 2 of the UCC.

b. Article 2A of the UCC.

c. Article 6 of the UCC.

d. the common law because it involves an intangible good.


status: correct (1.0)
correct: b
your answer: b
feedback: Correct. Article 2A covers leases and subleases.
6 To qualify as a consumer lease, three elements must exist. Which of the following is not one of
those elements?

a. The lessor must regularly engage in the business of leasing or selling.

b. The total lease payments must be less than a dollar amount set by state statute.

c. The lessee must lease the goods "primarily for a personal, family, or household purpose."
d. The lessee must agree to have a third party finance the lease.
status: correct (1.0)
correct: d
your answer: d
feedback: Correct. This arrangement need not exist for a consumer lease to arise.
7 Suppose that Frank, who is in the business of selling antiques, agrees to sell Keith an antique chest
of drawers worth more than $2,500. Keith agrees to buy the chest and signs a contract for the
purchase. The price of the chest, however, is left out of the contract. In this situation:

a. there is a contract as long as the court can determine a reasonable price at the time of delivery.

b. there is a contract only if Frank refuses to name a price.

c. there is a contract only if Keith is able to produce evidence that Frank defrauded him.

d. there is no contract because parties cannot leave the price term out of the contract.
status: incorrect (0.0)
correct: a
your answer: d
feedback: Incorrect. The parties almost certainly do have a contract, because it would not be difficult
for a court to determine a reasonable market price for the drawers.
8 Pam, who sells specialty foods and kitchen equipment in her store, sends Martin a signed letter
offering to sell him, and only him, all her stock of high-quality kitchen knives and indicates that her
offer will remain open for ten days. This is known as:

a. an output contract.

b. a requirement contract.

c. a firm offer.

d. a revocable offer.
status: correct (1.0)
correct: c
your answer: c
feedback: Correct. This is a firm offer that Pam gives Martin.
116 UNIT THREE: SALES AND LEASE CONTRACTS

9 The UCC has Statute of Frauds provisions governing:

a. the sale of land.

b. the sale of interests in land, such as rights-of-way.

c. the sale of intangible property.

d. the sale of goods priced at more than $500.


status: correct (1.0)
correct: d
your answer: d
feedback: Correct. The UCC has Statute of Frauds provisions that require a contract for the sale of
goods priced at more than $500 to be in writing.
10 If Edward, who paints signs for a living and is located in Seattle, Washington, sells a sign worth
$2,000 to Claire, who lives in Aix-en-Provence, France, this contract would be governed by:

a. the Convention on Contracts for the International Sale of Goods.

b. the UCC for the State of Washington.

c. the UCC for Canada.

d. the common law.


status: correct (1.0)
correct: a
your answer: a
feedback: Correct. Contracts for the sale of goods between individuals or firms located in different
countries are governed by this 1980 international agreement.
Article 2 of the Uniform Commercial Code (UCC) governs:

a. contracts for the sale of land.

b. contracts for the sale of goods.

c. negotiable instruments.

d. bulk sales.
status: not answered ()
correct: b
your answer:
2 Daniel contracts with Mary to provide him with expert legal advice on the sale of his business.
Daniel's contract with Mary is governed by:

a. Article 2 of the UCC.

b. Article 6 of the UCC.

c. Article 2A of the UCC.

d. the common law of contracts.


status: not answered ()
correct: d
your answer:
3 In order for the rules contained in the UCC to apply to a contract for the sale of goods, the goods
must:

a. be for retail use only.

b. consist of some unique personal service.

c. be tangible--that is, have physical existence.

d. be considered real property.


status: not answered ()
correct: c
your answer:
4 If Jim sells Smith copper that he removed from land that he owns in Colorado, this contract:

a. will be covered by Article 2 of the UCC.

b. will be covered by Article 2A of the UCC.

c. will be covered by Article 3 of the UCC.

d. will be covered by the common law.


status: not answered ()
correct: a
your answer:
118 UNIT THREE: SALES AND LEASE CONTRACTS

5 When merchants are involved in commercial transactions that involve the sale of goods, they are
held to certain standards. When casual (nonmerchant or consumer) buyers or sellers are involved:

a. they are held to less rigorous standards than merchants.

b. they are held to more rigorous standards than merchants.

c. they are treated exactly like merchants.

d. their transactions are not covered by the UCC.


status: not answered ()
correct: a
your answer:
6 If you lease an automobile from an automobile dealer, this contract is covered by:

a. Article 2 of the UCC.

b. Article 2A of the UCC.

c. Article 6 of the UCC.

d. the common law, because it involves an intangible good.


status: not answered ()
correct: b
your answer:
7 The effect of open terms on a contract covered by the UCC is that:

a. the contract will be void because of the open terms.

b. the contract will be valid if it involves the sale of land.


the contract will be valid if the parties intended to form a contract and there is a reasonable
c. basis for a court to grant a remedy.

d. the contract will be valid as long as the parties expressed some interest in negotiating.
status: not answered ()
correct: c
your answer:
8 Pam, who sells specialty foods and kitchen equipment in her store, sends Martin a signed letter
offering to sell him, and only him, all of her stock of high-quality kitchen knives. Pam specifies that
her offer will be open for ten days only. Pam's offer is known as:

a. an output contract.

b. a requirements contract.

c. a merchant's firm offer.

d. a revocable offer.
status: not answered ()
correct: c
your answer:
9 Joe Allen, who is in the business of painting commercial signs, agrees over the telephone to paint a
sign for Miller's business. The sign will read "Miller's Mighty Muffin Shop." The cost of the sign
will be $1,000. After Allen paints the sign, Miller decides that he doesn't want it. In this case:

a. Allen is stuck with the sign.

b. the contract is invalid because it was oral.

c. the contract, even though it was oral, is enforceable.

d. the contract is unconscionable.


status: not answered ()
correct: c
your answer:
10 The UCC has Statute of Frauds provisions governing:

a. the sale of land.

b. the sale of interests in land, such as rights-of-way.

c. the sale of intangible property.

d. the sale of goods priced at more than $500.


status: not answered ()
correct: d
your answer:
120 UNIT THREE: SALES AND LEASE CONTRACTS

The Uniform Commercial Code (UCC) attempts to provide:

a. guidelines for making common law contracts that deal with the sale of land.

b. all international contracts for the sale of securities.


a consistent and integrated framework of rules to deal with all aspects of
c. commercial transactions.
a consistent body of rules for dealing with criminal violations of the law that
d. involve either securities or government bonds.
status: not answered ()
correct: c
your answer:
2 In order for the rules contained in the UCC to apply to a contract for the sale of goods,
the goods must:

a. be for retail use only.

b. consist of some unique personal service.

c. be tangible, that is, have physical existence.

d. be considered real property.


status: not answered ()
correct: c
your answer:
3 If Jim sells Smith copper that he removed from land that he owns in Colorado, this
contract:

a. will be covered by Article 2 of the UCC.

b. will be covered by Article 2A of the UCC.

c. will be covered by Article 3 of the UCC.

d. will be covered by the common law.


status: not answered ()
correct: a
your answer:
4 If you sublease your automobile to a friend, this contract is covered by:

a. Article 2 of the UCC.


Your AnswerCorrect?Correct AnswerDescription 1.ayes
Statutory law. 2.cyes
A consistent and integrated framework of rules to deal with all aspects of
commercial transactions. 3.dyes
by all states, in whole or in part. 4.byes
contracts for the sale of goods. 5.dyes
the common law. 6.cyes
be tangible, that is, have physical existence. 7.ayes
will be covered by Article 2 of the UCC. 8.dyes
will be covered by the common law. 9.dnoathey are not held to less rigorous
standards than merchants. 10.dnobwhether Ready was a merchant for
purposes of the UCC. 11.byes
Article 2A of the UCC. 12.cyes
a lessor. 13.dyes
The lessee must agree to have a third party finance the lease. 14.ayes
A finance lease. 15.cyes
the contract will be valid if the parties intended to form a contract and there
is a reasonable basis for a court to grant a remedy. 16.bnoathere is a
contract as long as the court can determine a reasonable price at the time of
delivery. 17.dyes
Keith would take delivery of the drawers at Frank's store. 18.dnocthey
probably do not have a contract at all. 19.byes
an output contract. 20.cyes
a firm offer. 21.bnocThey have a contract for the sofa only. 22.ayes
an agreement modifying a contract for the sale or lease of goods needs no
consideration to be binding. 23.dyes
the sale of goods priced at more than $500. 24.ayes
course of performance. 25.ayes
the Convention on Contracts for the International Sale of Goods.

Chapter 14
The Formation of Sales and Lease Contracts
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/sw /blaw /blt/blt6e 10 yes yes yes instructor Quiz Results for B

Quiz Results for B

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1. The Uniform Commercial Code (UCC) is which type of law?


122 UNIT THREE: SALES AND LEASE CONTRACTS

a. Statutory law.

b. Common law.

c. Case law.

d. Criminal law.
2. The Uniform Commercial Code (UCC) attempts to provide which of the following?

a. Guidelines for making common law contracts that deal with the sale of land.

b. All international contracts for the sale of securities.

c. A consistent and integrated framework of rules to deal with all aspects of commercial
transactions.

d. A consistent body of rules for dealing with criminal violations of the law that involve
either securities or government bonds.
3. The UCC has been adopted:

a. by approximately half of the states in the United States.

b. by the industrialized states of the Northeast and SW Legal.

c. by a few states.

d. by all states, in whole or in part.


4. Article 2 of the UCC governs:

a. contracts for the sale of land.

b. contracts for the sale of goods.

c. negotiable instruments.

d. bulk sales.
5. Daniel contracts with Mary to provide him with expert legal advice on the sale of his business.
Daniel's contract with Mary is governed by:

a. Article 2 of the UCC.

b. Article 6 of the UCC.

c. Article 2A of the UCC.

d. the common law.


6. In order for the rules contained in the UCC to apply to a contract for the sale of goods, the goods
must:

a. be for retail use only.

b. consist of some unique personal service.

c. be tangible, that is, have physical existence.

d. be considered real property.


7. If Jim sells Smith copper that he removed from land that he owns in Colorado, this contract:
a. will be covered by Article 2 of the UCC.

b. will be covered by Article 2A of the UCC.

c. will be covered by Article 3 of the UCC.

d. will be covered by the common law.


8. Now assume that Jim sells Smith the right to remove the copper, not the copper itself. In this case,
the contract:

a. will be covered by Article 2 of the UCC.

b. will be covered by Article 2A of the UCC.

c. will be covered by the land provisions of Article 4.

d. will be covered by the common law.


9. When merchants are involved in commercial transactions that involve the sale of goods, they are
held to certain standards. When casual buyers or sellers are involved:

a. they are not held to less rigorous standards than merchants.

b. they are held to more rigorous standards than merchants.

c. they are treated exactly like merchants.

d. their transactions are not covered by the UCC.


10. In the case of Ready Trucking, Inc. v. BP Exploration & Oil Co., the issue had to do with:

a. which UCC article--Article 2 or Article 2A--applied to the case.

b. whether Ready was a merchant for purposes of the UCC.

c. whether the UCC or the common law applied to the circumstances.

d. whether fuel was a good or a service.


11. If you sublease your automobile to a friend, this contract is covered by:

a. Article 2 of the UCC.

b. Article 2A of the UCC.

c. Article 6 of the UCC.

d. the common law because it involves an intangible good.


12. One who leases goods to another is called:

a. a lessee.

b. a bailee.

c. a lessor.

d. a bailor.
13. To qualify as a consumer lease, three elements must exist. Which of the following is not one of
those elements?

a. The lessor must regularly engage in the business of leasing or selling.

b. The total lease payments must be less than a dollar amount set by state statute.
124 UNIT THREE: SALES AND LEASE CONTRACTS

c. The lessee must lease the goods "primarily for a personal, family, or household purpose."

d. The lessee must agree to have a third party finance the lease.
14. Ellen wants to lease a large tent for use in her catering business. Unfortunately, Ellen doesn't have
the cash necessary to buy the tent. Instead, she convinces Lyn to buy the tent. Lyn then rents the tent
to Ellen. What kind of a lease has been created?

a. A finance lease.

b. A consumer lease.

c. A utility lease.

d. A trade usage lease.


15. The effect of open terms on a contract covered by the UCC is that:

a. the contract will be void because of the open terms.

b. the contract will be valid if it involves the sale of land.

c. the contract will be valid if the parties intended to form a contract and there is a
reasonable basis for a court to grant a remedy.

d. the contract will be valid as long as the parties expressed some interest in negotiating.
16. Suppose that Frank, who is in the business of selling antiques, agrees to sell Keith an antique
chest of drawers worth more than $2,500. Keith agrees to buy the chest and signs a contract for the
purchase. The price of the chest, however, is left out of the contract. In this case:

a. there is a contract as long as the court can determine a reasonable price at the time of
delivery.

b. there is a contract only if Frank refuses to name a price.

c. there is a contract only if Keith is able to produce evidence that Frank defrauded him.

d. there is no contract because parties cannot leave the price term out of the contract.
17. Assume that in the previous question, Keith and Frank do set a price of $3,150 for the drawers,
but they fail to specify when and where delivery will take place. Under the UCC, what happens?

a. Nothing, the open delivery term invalidates the contract.

b. Frank must deliver the drawers to his own home, where Keith will pick them up.

c. The drawers must be delivered to Keith's home.

d. Keith would take delivery of the drawers at Frank's store.


18. Now suppose that Keith doesn't purchase a chest of drawers from Frank, but instead buys "antique
silver candlesticks." In their sales contract, Frank and Keith do not specify just how many antique
silver candlesticks Keith will purchase. In this case:

a. they have a valid contract with an open delivery term.

b. they have valid contract with an open price term.

c. they probably do not have a contract at all.

d. they have an output contract.


19. If Lisa offers to sell all of the white chocolate macadamia nut brownies that she makes to Pam,
who needs them to sell in her specialty foods store, Lisa and Pam have created:

a. a requirements contract.

b. an output contract.

c. a void contract.

d. an invalid open quantity contract.


20. Pam, who sells specialty foods and kitchen equipment in her store, sends Martin a signed letter
offering to sell him, and only him, all her stock of high-quality kitchen knives and says that her offer
will remain open for ten days. This is known as:

a. an output contract.

b. a requirement contract.

c. a firm offer.

d. a revocable offer.
21. Suppose that Sally offers to sell her sofa to her friend Brian. Sally does not sell furniture for a
living. If, after Sally offers the sofa to Brian for $750, Brian says, "I'll take it and I want you to throw
in the coffee table along with it," under the UCC, what kind of contract do Sally and Brian have?

a. They have no contract because of the mirror image rule.

b. They have a contract for the sofa and coffee table.

c. They have a contract for the sofa only.

d. They have no contract.


22. Under the common law, the rule is that any agreement modifying a contract must be supported by
new consideration. Under the UCC:

a. an agreement modifying a contract for the sale or lease of goods needs no consideration
to be binding.

b. this rule is unchanged.

c. consideration need not exist for either a contract or a contract modification.

d. the concept of consideration has been largely replaced by the concept of title.
23. The UCC has Statute of Frauds provisions governing:

a. the sale of land.

b. the sale of interests in land, such as rights-of-way.

c. the sale of intangible property.

d. the sale of goods priced at more than $500.


24. Under the UCC, the terms of a written contract may be explained or supplemented by consistent
additional terms or by course of dealing, usage of trade, or:

a. course of performance.

b. what the offeree said to the offeror during contract negotiations.


126 UNIT THREE: SALES AND LEASE CONTRACTS

c. what the offeror said to the offeree during contract negotiations.

d. course of contractual duty.


25. If Edward, who paints signs for a living and is located in Seattle, Washington, sells a sign worth
$2,000 to Claire, who lives in Aix-en-Provence, France, this contract would be governed by:

a. the Convention on Contracts for the International Sale of Goods.

b. the UCC for the State of Washington.

c. the UCC for Canada.

d. the common law.


Submit your answ ers

Bottom of Form
Question
1 out of 1 points
1
Two parties' prior dealing may be considered to resolve an ambiguity in a contract between
them.
Selected Answer: True
Correct Answer: True

Question
1 out of 1 points
2
An oral contract may be enforceable under the UCC.
Selected Answer: True
Correct Answer: True

Question
1 out of 1 points
3
Rita, the manager of the State University (SU) soccer team, orally agrees to lease a certain
number of specially made SU banners from Top Banners, Inc. This lease is enforceable only
if Top has made a substantial start on making the banners and
Selected the banners are not suitable for others in the course of Top's
Answer: business.
Correct Answer: the banners are not suitable for others in the course of Top's
business.

Question
1 out of 1 points
4
The rules governing firm offers apply to certain merchants only.
Selected Answer: False
Correct Answer: False
Question
1 out of 1 points
5
A lessor is one who sells the right to the possession and use of goods under a lease.
Selected Answer: True
Correct Answer: True

Question
1 out of 1 points
6
US Products Company and Vital Manufacturing, Inc., enter into a contract for the sale of a
certain quantity of machine parts. The UCC reads into this contract is the concept of
Selected Answer: good faith.
Correct Answer: good faith.

Question
0 out of 1 points
7
Kelly offers to buy 1,000 gallons of oil from Jim for fifty cents per gallon. Jim believes
Kelly offers $1 per gallon and orally agrees to the sale. When the parties later dispute the
price in court, Jim's claim of $1 and Kelly's testimony that she offered fifty cents
Selected prevents the enforcement of any contract between these parties.
Answer:
Correct Answer: supports an enforceable contract for a price of fifty cents per gallon.

Question
1 out of 1 points
8
In effect, the United Nations Convention on Contracts for the International Sale of Goods
requires that the terms of the acceptance mirror those of the offer.
Selected Answer: True
Correct Answer: True

Question
1 out of 1 points
9
Under the UCC, an offer to buy goods can be accepted only by a prompt shipment of the
goods.
Selected Answer: False
Correct Answer: False

Question
1 out of 1 points
10
Overseas Corporation, an American firm, orally agrees to sell six large freezers to Pisa
Pizza, Ltd., in Italy. Overseas fails to deliver. Under the CISG, Pisa Pizza can
128 UNIT THREE: SALES AND LEASE CONTRACTS

Selected enforce the agreement.


Answer:
Correct Answer: enforce the agreement.

Question
1 out of 1 points
11
A contract for the sale of stock is subject to Article 2.
Selected Answer: False
Correct Answer: False

Question
1 out of 1 points
12
A court can refuse to enforce a contract that the court deems to have been unconscionable
at the time it was made.
Selected Answer: True
Correct Answer: True

Question
0 out of 1 points
13
Fine Coffee Company agrees to buy an unspecified quantity of coffee beans from Global
AgriCorp. Global breaches the contract. Fine can most likely
Selected enforce the agreement to the extent of a reasonable quantity.
Answer:
Correct Answer: not enforce the agreement.

Question
1 out of 1 points
14
Tasty Pastries, Inc., and other bakers refer to a "baker's dozen" as consisting of a collection
of thirteen baked goods. This is an example of
Selected usage of trade.
Answer:
Correct Answer: usage of trade.

Question
0 out of 1 points
15
Roy's Chick'n Shack orders chicken from Standard Food Supplier, but Standard does not
deliver. Roy's will probably be unable to enforce the agreement if the parties
Selected did not limit the duration of the deal.
Answer:
Correct Answer: did not specify a quantity term.

Question
1 out of 1 points
16
ABC Motors, Inc., sells the right to the possession and use of a motor vehicle under a lease.
As defined in the UCC, ABC is
Selected Answer: a lessor.
Correct Answer: a lessor.

Question
1 out of 1 points
17
When an offer does not specify a means of acceptance, it can be accepted by any means
reasonable under the circumstances.
Selected Answer: True
Correct Answer: True

Question
1 out of 1 points
18
Article 2A covers leases, but not subleases, of goods.
Selected Answer: False
Correct Answer: False

Question
1 out of 1 points
19
The UCC imposes a good faith limitation on output contracts.
Selected Answer: True
Correct Answer: True

Question
1 out of 1 points
20
A lease agreement is the lessor and lessee's bargain.
Selected Answer: True
Correct Answer: True