Chapter 08 Contracts for the Sale of Goods

SHORT ANSWER QUESTIONS

1) A is one that is regularly engaged in the sale of a particular good.

2) In a destination contract, the bears risk of loss until the goods reach the destination.

3) Abbreviations published by the International Chamber of Commerce that are meant to avoid
confusion in international business transactions are called .

4) If terms are left open in a sales contract, the UCC will complete the contract by inserting
to make the contract enforceable.

5) An irrevocable offer made by one merchant to another is called a .

6) A significant change or deviation from the terms of a contract is called a change.

7) When a buyer rejects nonconforming goods and purchases the appropriate goods from a different
seller, the buyer is said to be .

8) is the legal term for the right of ownership in goods.

9) Goods that exactly meet the specifications of a contract are called goods.

10) If one party to a contract has reasonable grounds to believe that the other party will not or cannot
perform the contract, that party has the right to demand from the other party concerning
performance.

MULTIPLE CHOICE QUESTIONS

11) Your cousin, who is a CPA, calls you and says that a client paid him in diamonds and he's selling
them. If you purchase one of those diamonds, at the time of the sale your cousin would be
considered a merchant of those diamonds.
A) True
B) False

12) Johnson Builders is selling a newly built home to Sheila. JRK Realtors is handling the transaction.
This sale is covered under Article 2 of the UCC.
A) True
B) False

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13) If goods are to be picked up at the seller's place of business by the buyer and the seller is a
merchant, the seller retains risk of loss until the buyer takes possession of the goods.
A) True
B) False

14) Shovels R Us sends a purchase order to Acme Snow Shovel Inc. for 500 shovels to be delivered by
September 30, 2017, in time for the winter season. Acme returns an acknowledgment form
indicating that the shovels will be delivered on March 1, 2018. The acknowledgment letter forms a
valid contract.
A) True
B) False

15) As in common law, the UCC recognizes the concept of anticipatory repudiation, allowing a breach
to be declared prior to performance being due.
A) True
B) False

16) If a merchant sells goods to a buyer who is not a merchant, Article 2 of the UCC will not apply.
A) True
B) False

17) UCC risk of loss provisions will govern the terms of a contract even if the parties have specified
risk allocation in the contract.
A) True
B) False

18) Every state has adopted all (or substantially all) of Article 2 of the UCC.
A) True
B) False

19) Some courts have determined that the inclusion of an arbitration clause in an acceptance as a
means of dispute resolution constitutes a material alteration of the offer in a merchant transaction.
A) True
B) False

20) UCC gap fillers will not be used and are not applicable to contracts when the contract clearly
specifies a contract term or condition.
A) True
B) False

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21) If two companies enter into a sales contract and the shipping terms are omitted from the
agreement, the contract will automatically become a shipping contract.
A) True
B) False

22) If a seller has delivered nonconforming goods that have been rejected, upon notice of an intent to
cure, the seller automatically then has 15 days to deliver conforming goods.
A) True
B) False

23) While the common law recognizes commercial impracticability as a means to terminate a contract,
the UCC rejects and does not recognize commercial impracticability.
A) True
B) False

24) The UCC was written, published, and enacted by Congress.

A) True
B) False

25) Article 2 rules for acceptance of offers are more rigid than common law rules.
A) True
B) False

26) If the seller ships conforming goods, the buyer has a duty to accept them and may not reject the
goods.
A) True
B) False

27) Wrongfully revoking an acceptance will constitute a breach of contract by the buyer.
A) True
B) False

28) Jones Corp. is set to deliver goods ordered by Smith, Inc. and calls to confirm that the goods will
be delivered the next day. Smith, Inc. on the phone, notifies Jones Corp. that it has found the same
goods available cheaper from another seller and will not accept delivery. In order for Smith, Inc. to
officially be in breach of contract, Jones Corp. must deliver and tender conforming goods and have
Smith, Inc. wrongfully reject them.
A) True
B) False

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29) If a party has been delivered nonconforming goods and has rejected them and is then forced to
cover in order to maintain business operations, the party may sue the seller for the difference in
price plus consequential damages.
A) True
B) False

30) If a buyer knowingly accepts nonconforming goods, the buyer may still sue the seller for monetary
damages based on the nonconformity.
A) True
B) False

31) The United Nations Convention on Contracts for the International Sale of Goods does not
recognize a formal writing requirement similar to the UCC statute of frauds requirement.
A) True
B) False

32) In a shipping contract, the seller is obligated to deliver the good into the "hands" of the buyer.
A) True
B) False

33) In an installment contract, the buyer may reject an installment if the nonconformity substantially
impairs the value of that installment or the nonconformity cannot be cured.
A) True
B) False

34) The UCC permits a contract to be considered formed entirely by the parties' conduct even if no
definite time of formation can be determined.
A) True
B) False

35) Beata is moving to New Mexico and offers to sell her television to Ariana. Ariana is not sure if she
can afford it and asks for a week to decide. If Beata agrees to hold the offer open for a week and
makes the promise in writing, Beata has given Ariana a firm offer.
A) True
B) False

36) The mirror image rule is not enforced under UCC standards.
A) True
B) False

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37) Uncle Phineas has lent you $10,000 to pay tuition and other school-related costs. You've now
graduated, and Uncle Phineas is asking about repayment terms. The loan was never evidenced in
writing. This transaction falls under the UCC statute of frauds.
A) True
B) False

38) The UCC permits terms to be added into a contract or filled in as gap fillers; however, a contract
between merchants cannot be enforced unless the parties have agreed to and specified a price in
their agreement.
A) True
B) False

39) A party holds title to goods when the goods have come into existence and the goods are identified
to the contract.
A) True
B) False

40) On February 1, Fari's Fedora Manufacturers sent an offer to Henri's Hattery by letter with all price,
quality, quantity, and delivery terms clearly stated, indicating that the offer to sell Fari's fedoras
would remain open until October 1. On September 1, Henri's sent an acceptance of the offer to
Fari's with no material alterations to any of the stated terms in the offer. The acceptance made the
contract valid and enforceable.
A) True
B) False

41) The only state that has not adopted the UCC is
A) California. B) Louisiana. C) Texas. D) Arizona.

42) Which of the following would not be considered tangible?

A) A car. B) Oxygen.
C) The right of ownership. D) The pen or pencil you are using.

43) With regard to consideration in a sales contract, the UCC differs from the common law in that
A) terms of a sales contract may be modified without additional consideration.
B) consideration exchanged must be equal or very closely equal in sales contracts.
C) consideration is not required in sales contracts.
D) terms in a sales contract may be modified as long as additional consideration is provided.

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44) For a writing to satisfy statute of frauds requirements under the UCC, it must include each of the
following except
A) price.
B) quantity.
C) the signature of the party against whom enforcement is sought.
D) language that a reasonable person would believe constitutes an intent to form a contract.

45) If Continental Tires agreed to purchase all of the rubber that a particular Brazilian rubber
plantation could produce, this would be
A) an output contract. B) an input contract.
C) a requirements contract. D) a necessities contract.

46) In the case of Rosenfeld v. Basquiat, Basquiat sold several paintings to Rosenfeld and provided
him with a written receipt. Unfortunately, Basquiat died before delivery, and Basquiat's heirs
challenged the enforceability of the agreement. The court determined that
A) because the written agreement was completed in crayon on a scrap of brown packing paper,
the writing did not meet the formality of a proper contract.
B) because the written agreement did not contain the terms of delivery, the writing was too
vague to form a contract.
C) because the writing contained the names of the paintings, the price paid, and Basquiat's
signature, the paper was sufficient to evidence a contract.
D) because the writing was not signed by Rosenfeld, the paper was not sufficient to evidence a
contract.

47) In a shipping contract, the risk of loss passes to the buyer when
A) the contract is signed or finalized.
B) the goods are delivered to the carrier.
C) the goods are delivered to the buyer.
D) the goods are en route and at least halfway to the buyer.

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48) Josh's Futbol World ordered 500 U.S.A. replica soccer jerseys from Victory Apparel, a sports
apparel manufacturer. The jerseys were to be delivered to Josh's place of business. When the
shipment arrived, Josh's discovered that it has received 500 pairs of U.S.A. replica shorts but no
jerseys. Before Josh's could notify Victory and return the shorts, a fire destroyed Josh's building
along with the shipment of shorts. Which of the following statements is true?
A) This was a destination contract, and since the shorts were tendered to the destination, Josh's
bears risk of loss until they can be returned.
B) This was a destination contract, and the shorts were nonconforming goods, so Victory did not
complete performance and retained risk of loss.
C) This was a shipment contract, and Josh's assumed risk of loss when Victory delivered the
goods to the carrier.
D) This was a shipment contract, and Victory retained risk of loss until the goods were tendered
to Josh's at Josh's establishment.

49) The UCC will permit an incomplete or slightly ambiguous contract to be enforced using each of
the following criteria except:
A) past commercial conduct.
B) industry standards or norms.
C) judicial input of any terms necessary to maintain fairness.
D) correspondence or verbal exchanges between the parties.

50) Your department secretary has called a local office supply company and ordered 100 reams of
copy paper. The agreement is that the paper will be delivered to the department office and a check
for payment will be given on delivery. On the way to make the delivery, the truck is in a crash, and
the paper is destroyed in a fire resulting from the accident. Which of the following statements is
true?
A) This is a shipment contract, and the office supply company bears risk of loss.
B) This is a shipment contract, and your school bears risk of loss because the paper had been set
aside and tendered.
C) This is a destination contract, and because delivery had been initiated, the school bears the
risk of loss.
D) This is a destination contract, and since the goods were never properly tendered, the office
supply company bears the risk of loss.

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51) In Sons of Thunder v. Borden, it was alleged that Borden breached its contract with the owners of
Sons of Thunder by not purchasing the required quantity of clams. The court found that
A) because Borden willfully tried to circumvent its contractual obligations to plaintiff, who had
taken out a significant loan and purchased two specialty boats in order to fulfill the contract,
Borden had breached the duty of good faith when it purchased fewer clams from plaintiff and
instead went to a competitor.
B) Borden had breached an output contract by not buying all of the plaintiff's clams and buying
from competitors.
C) the purchase of larger boats by the plaintiff was a business decision for which Borden could
not be held responsible.
D) Borden had breached a requirements contract by buying from competitors when the plaintiff
still had available clams to sell to Borden.

52) Commercially reasonable means

A) getting the highest price possible for goods without violating the law.
B) charging a fair price for goods and not taking advantage of others in the industry.
C) observing industry standards and practices that may be unique to the particular industry.
D) observing industry standards and practices that are generally accepted throughout various
industries as proper business practices.

53) Two merchants agree to a sale of goods to be shipped by boat from Maine to Florida. No other
shipping terms are indicated. If the boat sinks during the trip and all the goods are destroyed
A) the buyer may sue the seller, but not the carrier, for its loss.
B) the seller may sue the carrier because the seller maintained risk of loss and the right to sue for
losses.
C) the buyer may sue both the seller and the carrier for its loss.
D) the buyer may sue the carrier, but not the seller, for its loss.

54) Absent specific agreements between the parties, the reasonableness requirement of the UCC
governing delivery of goods requires each of the following except
A) the goods must be delivered in one shipment.
B) the goods must be delivered at a reasonable hour.
C) the goods must be delivered on a weekday.
D) the goods must be delivered in a reasonable manner.

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55) Two merchant companies have entered into a contract for the sale of goods but have had no prior
dealings that would establish a course of conduct between them. The UCC will allow gap fillers to
apply to their contract regarding missing terms in each of the following situations except when
A) they have failed to specify when payment for the goods is to be made.
B) they have failed to specify where delivery of the goods is to be made.
C) they have failed to specify the quality or grade of the goods to be delivered.
D) they have failed to specify the price of the goods to be delivered.

56) In the absence of a specific contract provision regarding the details of payment, the UCC provides
that payment be made in full
A) at the time and place that delivery occurs.
B) within 10 days of the time and place that delivery occurs.
C) within 20 days of the time and place that delivery occurs.
D) within 30 days of the time and place that delivery occurs.

57) UCC rules on acceptance of goods and payment in regard to installment contracts mandate that
A) acceptance is not made until all shipments are received and then payment is made.
B) acceptance is made separately for each shipment, but payment is not due until the final
shipment is received.
C) payment must be made in advance, and acceptance occurs after all shipments are received.
D) acceptance is made separately for each shipment, and payment for each shipment is due on
delivery of that shipment.

58) The United Nations Convention on Contracts for the International Sale of Goods (UNCISG)
differs from the UCC in that under UNCISG,
A) acceptances are effective when mailed.
B) acceptances are effective when received.
C) written contracts are required for sales contracts of $1,000 or more rather than $500 or more.
D) industry practices and past dealings between parties are not recognized.

59) Which of the following is not true regarding firm offers?

A) A firm offer automatically occurs when an offer or promise is made by one merchant to
another.
B) Firm offers do not require consideration for the offer to remain open.
C) Firm offers occur only when the offeror is a merchant.
D) Firm offers must be in writing.

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60) Bryn's Department Store in New York sent a purchase order to Sami's Sweaters in California,
ordering 10,000 sweaters. The purchase order included a breakdown of sizes, styles, and colors,
and it stated that delivery was to be made to Bryn's in New York at Sami's cost. When Sami's sent
an acknowledgment form accepting the offer, certain terms were changed. Which of the following
changes would likely not automatically become part of the contract?
A) Sami's changed the quantity to 9,500 sweaters.
B) Sami's changed the price, raising the per-item cost by $.50 each.
C) Sami's omitted the order for 1,000 purple sweaters and allocates those 1,000 sweaters equally
among the other-color sweaters ordered.
D) Sami's changed the place of delivery to its factory in California and allocated the cost of
shipping to Bryn's in New York.

61) What is the United Nations Convention on Contracts for the International Sale of Goods rule with
regard to cure?
A) It does not recognize cover as a seller's remedy.
B) It follows the same cure rules as stated in the UCC.
C) It allows an absolute right and obligation for a seller to cure, and the buyer must allow the
seller to cure even if the time for performance is past due.
D) It requires that the seller apply to the International Court of Justice for the right to cure, and
the court will evaluate each case individually.

62) The International Chamber of Commerce abbreviation indicating that goods are to be picked up by
the buyer and not delivered is
A) EXW. B) FAS. C) FOB. D) FCA.

63) Acme Rocket Company is to ship 500 toy rockets by boat to Rockets R Us. Acme is located in
Miami, and Rockets R Us is located in Boston. Who bears the risk of loss if goods are to be
shipped FOB Miami?
A) Rockets R Us bears the risk of loss if the boat sinks on its way to Boston.
B) Rockets R Us bears the risk of loss once the shipment arrives in Boston.
C) Acme bears the risk of loss if the boat sinks on its way to Boston.
D) Acme bears the risk of loss until the goods are accepted by Rockets R Us.

64) Cat's Coaster Company uses cork in all of the protective drink coasters that it manufactures. If
Cat's enters into an agreement with a cork exporter from Portugal to purchase all of the cork it
needs to produce its products, this would be
A) an output contract. B) an input contract.
C) a requirements contract. D) a necessities contract.

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65) Jordan ordered encyclopedias and the contract specified that delivery was to be made to Jordan's
home. Instead, the encyclopedias were delivered to her post office box and she never received
them. She refuses to pay for them and the encyclopedia company sues her. How would a court
likely rule?
A) Jordan must pay because it was her post office box, delivery was close enough to be
substantial performance, and risk of loss passed to her.
B) Jordan must pay because she easily could have mitigated damages by going to her post office
box to pick up the encyclopedias.
C) Jordan does not have to pay because the goods were never tendered to her properly, so risk of
loss never passed.
D) Jordan does not have to pay because the UCC permits a nonmerchant to cancel contracts with
merchants at any time as a consumer protection.

66) Which of the following items would be properly subject to a UCC sales contract?
A) A house. B) A Christmas tree sold in a parking lot.
C) Rights to a patent. D) An employment contract.

67) Which of the following is true of open-price-term contracts?

A) The contract is void due to the failure to specify a required term of the contract.
B) The price becomes the reasonable price at the time the contract was entered into.
C) The price becomes the reasonable price at the time the goods are delivered.
D) The price is determined by the court's applying a reasonable price at whatever time the court
deems appropriate to reach a fair result.

68) Which of the following requires a written contract to be enforceable?

A) Jonah rents a luxury yacht for a month at a cost of $10,000.
B) Lindsay borrows $5,000 from Roberto to buy a car.
C) Stanton's pit bull has just had a litter, and he agrees to sell you a puppy for $500 when the
pups are weaned from their mother.
D) Philmont agrees to paint your house for $500.

69) Normally, the buyer's offer in a commercial transaction takes the form of
A) a personal letter.
B) a purchase order.
C) an acknowledgment form.
D) a phone call with the parties directly speaking with each other.

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 70) In a destination contract, risk of loss passes to the buyer when the goods
A) are tendered at the specific destination.
B) are delivered by the seller to the carrier.
C) begin the journey to the destination point.
D) have passed the halfway point to the destination.

ESSAY QUESTIONS

71) Explain how the UCC "battle of the forms" is resolved in nonmerchant and in merchant
transactions.

72) Anna agrees to purchase a television from Huge Buy, a merchant electronics seller. Her agreement
states that she will pick the television up on Friday at Huge Buy. On Friday morning Huge Buy
calls to verify that they have marked the television with her name and it is available for pickup.
Anna tells Huge Buy that she can't come until Saturday. Friday evening a huge storm damages the
Huge Buy facility, caving in the roof and destroying her television. Huge Buy demands payment
from Anna, claiming that it tendered the goods and if she had picked up the television on Friday as
originally agreed, there would not have been a loss. Does Anna have to pay? Why or why not.

73) Home Gardening Corp., a hardware and gardening chain, ordered 1,000 bags of red cedar mulch
from Mulch Masters, Inc. Delivery was to be made at the Home Gardening warehouse in Sioux
City, Iowa. When the goods arrived in Sioux City, Home Gardening discovered that Mulch
Masters had delivered 1,000 bags of black licorice mulch. What option or options does Home
Gardening have?

74) Veggie Time, Inc., is a distributor of canned vegetables. It has been dealing with Fresh Farmer for
10 years, purchasing Fresh Farmer's entire corn crop. Fresh Farmer's farm is so large and
productive that Veggie Time has exclusively bought all of its corn from Fresh Farmer alone. Once
again, Veggie Time has entered into a contract with Fresh Farmer to purchase its entire crop this
season and has no other corn sellers under contract. For the past 10 years, Fresh Farmer has
delivered 100,000 bushels of corn to Veggie Time. Unfortunately, due to an extraordinary amount
of rain, Fresh Farmer's fields are now flooded and most of its crop is destroyed. Fresh Farmer can
deliver only 10,000 bushels this season, and Veggie Time is about to suffer a huge loss. Does
Veggie Time have any rights against Fresh Farmer to recover for its losses? What could Veggie
Time do to mitigate its damages?

75) Plastic Enterprises sent a purchase order to Felt Industries to buy recycled soda bottles for delivery
at a town called Steven's Point, Wisconsin. Felt sent an acknowledgment form confirming all of the
terms in the purchase order but designating delivery to be at Johnson's Point, 2 miles down the
coast from Steven's Point. Do the parties have a contract, and where will the delivery be?

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76) Mackey Pharmacy Corp. ordered 5,000 cases of regular-strength aspirin from MAK
Pharmaceuticals. When the order was delivered, an inspection showed that while the delivery
conformed to the contract terms with regard to the quantity and quality of the aspirin, none of the
aspirin was in childproof bottles. The contract was silent regarding the packaging of aspirin in
childproof bottles. Mackey rejected the delivery, and MAK sued for breach of contract. How
should the courts analyze and resolve this matter?

77) The statute of frauds provides that certain sales contracts be evidenced by a written agreement.
What type of sales contract does this requirement apply to, and what constitutes a writing
sufficient to evidence an enforceable contract?

78) In what ways does the United Nations Convention on Contracts for the International Sale of Goods
differ from the UCC in terms of coverage and application?

79) Lon's GPS, Inc., orders 500 Class A widgets to be installed in GPS units it is manufacturing. When
delivery is made on Monday, the widgets delivered are Class B. Lon's signs a receipt accepting the
nonconforming shipment. The next day, Lon's installs some of the Class B widgets and finds that
they perform with half the accuracy of the Class A widgets. What, if any, options does Lon's have?

80) What is the underlying goal and function of the UCC, and why is it crucial to business?

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