Ch22 Exam Questions Remedies For Breach Of Sales Contracts

Business Law, 17e (Langvardt)

Chapter 22 Remedies for Breach of Sales Contracts

1) The objective of the UCC in regards to remedies for contract breach is to punish the offending party.

2) Under the UCC, an injured party in a contract dispute cannot recover punitive damages.

3) Edna Boyle contracts with The Melonville Times to advertise her garage sale to be held this Saturday. The ad is to run in the Friday and Saturday morning edition. If the ad does not run on time, The Melonville Times agrees to pay Edna $50. This liquidated damages clause is most likely enforceable.

4) Under the UCC, a remedy limitation blocking recovery for personal injury caused by consumer goods is prima facie unconscionable.

5) Under the UCC, if a liquidated damages clause in a contract turns out to be unenforceable, the injured party can sue for special damages.

6) The UCC provides that a lawsuit for breach of a sales contract must be filed within a year after the breach occurs.

7) Under the UCC, the parties to a contract can shorten the statute of limitations on a breach of contract but cannot extend it longer than four years.

8) If the seller is in the process of manufacturing the goods when the buyer breaches the contract, one of the seller's options is to complete the manufacture of the goods and then resell them so long as this minimizes the loss to the seller.

9) Even if a buyer breaches a contract, the seller is accountable to the buyer for any profit that the seller makes on a resale.

10) If the buyer and seller have agreed to the manner in which the resale is to be made, the courts will enforce the agreement unless it is found to be unconscionable.

11) The seller is obligated to resell the goods in cases where the buyer refuses to accept goods that conform to the contract.

12) Even if the buyer has misrepresented his solvency to the seller in writing within three months before the delivery of the goods, the 10-day limitation on the seller's right to reclaim the goods still applies.

13) If the seller has justifiably withheld delivery of the goods because of the buyer's breach, the buyer may recover any money or goods he has delivered to the seller over and above the agreed amount of liquidated damages.

14) The UCC has incorporated the common law concept of rescission as a remedy available to a buyer in a breach of contract dispute.

15) If the seller fails or refuses to deliver the goods called for in the contract, the buyer can purchase substitute goods and recover as damages from the seller the difference between the contract price and the cost of the substitute goods.

16) Under UCC section 2-712, the buyer is required to seek cover during a breach of contract dispute.

17) The buyer cannot recover any incidental damages.

18) Consequential damages do not include an injury to a person or property caused by a breach of warranty.

19) If the seller delivers defective goods to the buyer, the buyer can recover the value of the goods as warranted minus the value of the goods received.

20) Because all goods are replaceable, specific performance is not available under the UCC.

21) Which of the following remedies would be unavailable to a buyer that could buy the same kind of goods from elsewhere?

A) Consequential damages

B) Incidental damages

C) Actual damages

D) Specific performance

22) What is the basic objective of the Code remedies for breach of contract?

A) To help the injured person recover consequential damages arising from the breach of contract.

B) To put in place a mechanism that allows for repeat performance of the contract on modified terms.

C) To help the injured person claim punitive damages arising from the breach of contract.

D) To put the injured person in the same position that he would have been in if the contract had been performed.

23) If the parties agree on a reasonable amount of damages that will be paid to the injured party, this amount is known as ________.

A) liquidated damages

B) unconscionable damages

C) punitive damages

D) unenforceable damages

24) Bart agreed to deliver fruits worth $1,000 to a retail store. Bart and the store owner agree that if delivery is not made on time, Bart will pay the store some amount as liquidated damages for the lost sales. Which of the following amounts would most likely be considered unconscionable if they settle for it?

A) $200

B) $5,000

C) $5

D) $400

25) Bart agreed to deliver fruits worth $1,000 to a retail store. Bart and the store owner agree that if delivery is not made on time, Bart will pay the store some amount as liquidated damages, for the lost sales. Which of the following amounts would most likely be considered penal if they settle for it?

A) $200

B) $25,000

C) $10

D) $650

26) Which of the following is a condition necessary for a liquidated damages agreement to be enforced?

A) If actual damages would be difficult to prove in the event of a breach of the contract

B) If the amount is large enough to be considered penal

C) If the amount is considered unconscionable

D) If there is no breach of the contract agreed upon by both parties

27) When would the amount of liquidated damages agreed to by both parties in a contract be considered unconscionable?

A) If the amount is reasonable.

B) If the amount of losses was easy to estimate while drafting the contract.

C) If the amount were too small compared to the possible losses.

D) If the amount were too big to be considered penal.

28) Liability for consequential damages resulting from a breach of contract may also be limited or excluded by agreement. Will this limitation or exclusion be always enforced?

A) Yes, it will always be enforced.

B) No, it will not be enforced if it would be unconscionable.

C) Yes, if both parties agreed to it in the contract.

D) Yes, it will be enforced in case of injury caused to a person by consumer goods.

29) Any attempt to limit consequential damages for injury caused to a person by consumer goods is considered prima facie ________.

A) unconscionable

B) reasonable

C) punitive

D) penal

30) "Tool For You" (TFY) is a company that sells power tools to consumers. The sales contract of TFY states that it will not be liable for any consequential damages that the consumer suffers as a result of using power tools purchased from them. Harry purchased a table saw from TFY for use in his hobby of woodworking. Harry was injured when the saw blade flew off. He wants to sue TFY but is not sure whether the contract provision limiting consequential damages will be enforced and seeks your opinion. Will TFY prevail?

A) No, because this was a sale of a potentially dangerous product.

B) No, because Harry is a consumer.

C) Yes, because Harry agreed to this provision in the contract of sale.

D) Yes, because the UCC allows parties to agree to limitations on damages.

31) The statute of limitation provision of the UCC holds that for contracts for the sale of goods (in the absence of contractual agreement to the contrary), the period of time within which a lawsuit must be commenced is:

A) one year.

B) two years.

C) three years.

D) four years.

32) Which of the following is true of the period during which parties can file a lawsuit for breach of a sales contract?

A) The parties can extend it for a period longer than six years after the breach occurs.

B) The parties to a contract may shorten this period to one year after the breach occurs.

C) The parties are free to determine the period during which the lawsuit can be filed.

D) The lawsuit must be filed within two years after the breach occurs.

33) Russ purchases a new television set from Trista's TVs. The television set carries a four-year express warranty. It was purchased on November 1, 2002, and delivered on November 3, 2002. On February 3, 2007, after four years and three months of service, the set collapsed due to a defect covered by the warranty. Russ discovered this defect on November 5, 2002, when he turned the television set on for the first time. When did the Code's statute of limitations begin to run?

A) November 1, 2002

B) November 3, 2002

C) November 5, 2002

D) February 3, 2007

34) Which section of the UCC governs statute of limitations in contract disputes?

A) 2-703

B) 1-102

C) 2-725

D) 2-301

35) Which of the following is a common way in which a buyer may breach a contract?

A) By wrongfully returning goods

B) By agreeing to an extension of the credit period

C) By delivering a faulty product

D) By refusing to accept goods which are obviously damaged

36) Which of the following is not one of the seller's remedies, once the buyer breaches a contract for the sale of goods?

A) Canceling the contract

B) Recovering the profit the seller would have made on the sale

C) Recovering the purchase price of the goods delivered to or accepted by the buyer

D) Recovering the purchase price of goods rejected

37) In case of resale of goods arising out of a breach of contract, if the seller sets aside goods intended for the contract or completes the manufacture of such goods, he is:

A) not obligated to try to resell the goods to someone else.

B) obligated to try to resell the goods to someone else.

C) obligated to enter into future contracts with the buyer.

D) obliged to destroy the goods.

38) S agrees to sell B 10,000 widgets at a price of $1 per widget. After B breaches the contract, S resells the widgets for $0.90 per widget. As a result of selling the widgets at a lower price, S loses $100 in sales commissions. What amount can S recover from B?

A) Nothing

B) $100

C) $1,100

D) $1,000

39) S agrees to sell B 10,000 widgets at a price of $1 per widget. After B breaches the contract, S resells the widgets for $0.90 per widget. As a result of selling the widgets at a lower price, S loses $100 in sales commissions. S saved $200 in shipping costs as the new customer was located closer to its factory. What amount can S recover from B?

A) $900

B) $100

C) $1,100

D) $1,000

40) S agrees to sell B 10,000 widgets at a price of $1 per widget. After B breaches the contract, S resells the widgets for $1.10 per widget in a public sale. S also saved $200 in shipping costs. What amount does S owe B?

A) $1,200

B) $1,300

C) $1,000

D) Nothing

41) S agrees to specially manufacture a machine for B. After S finishes the job, B breaches the contract. Knowing that there is no market for the machine, S does not try to resell it. Instead, S sues B for the price of the machine. Which of the following is true? Assume that there truly was no market for the machine.

A) S can recover only the input price invested in making the machine.

B) No recovery, because S was obligated to make an effort to resell the partially completed machine for scrap.

C) No recovery, because S was obligated to sue B for his lost profit on the deal.

D) S can recover the price of the machine from B.

42) Ace Computers (AC) is a manufacturer. It entered into a contract with a retailer, Reliable Computer (RC) for the sale of 100 new XYZ model computers at $1,000 each, for delivery in six months. AC would thus make a profit of $50,000. Six months later however, the XYZ model has become almost obsolete; its market price is only $100 at that time. RC refuses to accept or pay for those computers. If AC sues, how much should it be entitled to in damages? (Ignore any incidental expenses or cost savings to AC.)

A) Nothing; when the XYZ model became almost obsolete, this excused RC from the contract.

B) $50,000, the profit AC would have made had RC not breached the contract.

C) $90,000, the difference between market price and contract price.

D) $140,000, the lost profit plus the difference between market price and contract price.

43) Ace Computers (AC) is a manufacturer. It entered into a contract with a retailer, Reliable Computer (RC) for the sale of 100 new XYZ model computers at $1,000 each, for delivery in six months. AC would thus make a profit of $50,000. Six months later however, the XYZ model has become almost relatively obsolete; its market price is only $600 at that time. RC refuses to accept or pay for those computers. If AC sues, how much should it be entitled to in damages? (Ignore any incidental expenses or cost savings to AC.)

A) Nothing; when the XYZ model became almost obsolete, this excused RC from the contract.

B) $50,000, the profit AC would have made had RC not breached the contract.

C) $40,000, the difference between market price and contract price.

D) $90,000, the lost profit plus the difference between market price and contract price.

44) Which of the following is true about the seller's right to reclaim goods from an insolvent buyer?

A) This right is superior to the rights of a good faith purchaser for value of the goods.

B) The seller must make a demand for the goods within ten days of their receipt by the buyer.

C) The seller must physically repossess the goods within ten days of their receipt by the buyer.

D) The buyer must have misrepresented his solvency to the seller in writing within three months before delivery of the goods.

45) If the buyer has misrepresented his solvency to the seller in writing within three months before the delivery of the goods:

A) the 10-day limitation on the seller's right to reclaim the goods does not apply.

B) the seller should actually repossess the goods within the 10-day period.

C) the seller's right to reclaim the goods is not subject to the rights of prior purchasers in the ordinary course of the buyer's business.

D) the seller's right to reclaim the goods is not subject to the rights of creditors with a perfected lien on the buyer's inventory.

46) If the seller discovers that the buyer is insolvent, he has:

A) no right to stop the delivery of any goods that he has shipped to the buyer.

B) the right to stop the delivery of any goods that he has shipped to the buyer.

C) the right to ask the buyer to pay double compensation.

D) no right to do anything against the buyer.

47) If the seller has justifiably withheld delivery of the goods because of the buyer's breach, the buyer may:

A) not recover any money or goods he has delivered to the seller.

B) not recover the goods.

C) recover only goods that he has not delivered.

D) recover any money or goods he has delivered to the seller over and above the agreed amount of liquidated damages.

48) Which section of the UCC, governs liquidated damages in a contract dispute?

A) 2-718

B) 1-102

C) 3-103

D) 2-745

49) Which of the following is a common way in which sellers breach contracts?

A) Indicating that he does not intend to fulfill the obligations under the contract

B) Failing to confirm their intent to accept the goods at least five days before the scheduled delivery

C) Agreeing to extended credit periods depending on the buyer's credit record

D) Failing to take delivery of the goods

50) If a seller fails to deliver goods called for in the contract, the buyer may purchase substitute goods and recover as damages the difference between the contract price and the cost of the substituted goods. This is known as:

A) cover.

B) action for the price.

C) specific performance.

D) incidental damages.

51) Wonder Widgets agrees to sell Bill Buyer 10,000 of its "Grade A" widgets at a price of $3 per widget. After Wonder breaches the contract by failing to deliver, Bill buys substitute widgets at a price of $3.20 per widget. Bill also incurs $200 in reasonable expenses associated with the purchase. Bill then sues Wonder for $2,200. What, if anything, can Bill actually recover?

A) Nothing

B) $200

C) $2,000

D) $2,200

52) Wonder Widgets agrees to sell Bill Buyer 10,000 of its "Grade A" widgets at a price of $3 per widget. After Wonder breaches the contract by failing to deliver, Bill buys substitute widgets at a price of $3.20 per widget. For this purchase, Bill incurs $200 in reasonable expenses and saves $100 in shipping expenses. Bill then sues Wonder for $2,200. What, if anything, can Bill actually recover?

A) Nothing

B) $200

C) $2,100

D) $2,200

53) Which section of the UCC indicates that upon breach of a contract, a buyer can purchase substitute goods, which is referred to as cover?

A) 2-712

B) 3-301

C) 1-102

D) 2-450

54) ________ include expenses that the buyer incurs in receiving, inspecting, transporting, and storing goods shipped by the seller that do not conform to those called for in the contract.

A) Unconscionable damages

B) Incidental damages

C) Punitive damages

D) Consequential damages

55) ________ include any reasonable expenses or charges that the buyer has to pay in obtaining substitute goods in case of a breach of contract on the part of the seller.

A) Incidental damages

B) Unconscionable damages

C) Punitive damages

D) Consequential damages

56) A buyer claiming lost profits caused by the seller's breach of contract is claiming for ________.

A) incidental damages

B) unconscionable damages

C) Punitive damages

D) consequential damages

57) Which of the following is an example of a consequential damage?

A) An expense that a buyer incurs in receiving and inspecting goods shipped by the seller that do not conform to those called for in the contract

B)   A charge that the buyer has to pay in obtaining substitute goods

C) An injury to a person caused by a breach of warranty

D) An expense that a buyer incurs in storing nonconforming goods shipped by the seller

58) Joe agreed on April 1 to sell and deliver 1,000 bushels of wheat to a grain elevator on June 1 for $10 per bushel. He then refused to deliver on June 1 because the market price was then $15 per bushel. How much can the grain elevator recover in damages from Joe?

A) Nothing

B) $5,000

C) $1,000

D) $1,500

59) Sue delivers defective widgets to Boz. The widgets were not as warranted. In seeking to recover damages from Sue, Boz:

A) does not have to give Sue notice of the defect.

B) cannot recover because he accepted the goods.

C) would never be entitled to consequential or incidental damages.

D) may recover the difference between the value of the goods received and the value of the goods as warranted.

60) In the eventuality of nondelivery by the seller, which of the following would be reduced from the amount of damages claimed from the seller?

A) The difference between the contract price of the goods and their market price at the time he learns of the seller's breach

B) Incidental damages

C) Expenses saved

D) Consequential damages

61) Which of the following means that the buyer can require the seller to give the buyer the exact goods covered by the contract?

A) Specific performance

B) Trade usage

C) Implicit guarantee

D) Trade warranty

62) In which of the following transactions is the buyer most likely to be entitled to specific performance of the contract?

A) A contract for the purchase of a tanker of crude oil

B) A contract for the purchase of 1,000 tons of wheat

C) A contract for the purchase of 100,000 light bulbs

D) A contract for the purchase of a Picasso painting

63) In which of the following transactions is the buyer most unlikely to be entitled to specific performance of the contract?

A) A contract for the purchase of a historical artifact

B) A contract for the purchase of 10,000 tons of wheat

C) A contract for the purchase of a Rembrandt painting

D) A contract for the purchase of a 1910 Ford

64) A buyer is entitled to the remedy of specific performance when:

A) the contract is between merchants.

B) the contract is for unique goods.

C) the contract is for goods where the price is $500 or more.

D) the contract requires delivery in installments.

65) Which of the following statements about consequential damages is false?

A) Any attempt to limit consequential damages for injury caused to a person by consumer goods is considered unconscionable per se.

B) Liability for consequential damages resulting from a breach of contract may be limited by agreement.

C) Liability for consequential damages resulting from a breach of contract may be excluded by agreement.

D) If a limit as to consequential damages is found to be unconscionable, it will not be enforced.

66) In the case in the text, Helena Chemical Co. v. Williamson, the court considered many factors in determining whether Williamson was able to seek consequential damages. Which of the following was not one of those factors?

A) Whether the contract provision was unconscionable

B) Whether the contract provision failed its essential purpose

C) Whether Williamson negligently cared for the crops

D) Whether a mere refund would be adequate

67) If a liquidated damages clause is unenforceable because a court deems it to be unconscionable, the injured party can still recover ________.

A) actual damages suffered.

B) punitive damages.

C) special damages.

D) reasonable attorney's fees.

68) For warranties that cover the future performance of goods, a breach of warranty occurs:

A) at the time of contract.

B) when the goods are delivered.

C) at the time the buyer actually discovered the defect in the good.

D) at the time the buyer should have discovered the defect in the good.

69) Normally, a breach of warranty is considered to have occurred:

A) at the time the buyer should have discovered the defect in the good.

B) at the time the buyer actually discovered the defect in the good.

C) at the time of contract.

D) when the goods are delivered.

70) On October 1, 2009, Dave purchased four new tires for his truck. Each tire came with a four year or 40,000 mile warranty. After driving on the tires for exactly 3 years and 25,000 miles, he discovered a defect. Assuming Dave discovered the defect in a reasonable amount of time, when would he need to bring his claim for breach of warranty?

A) Within four years from October 1, 2009

B) Within four years from October 1, 2012

C) Within four years from October 1, 2013

D) Dave is already too late to bring his claim

71) If a seller who learns of the buyer's breach decides to stop manufacturing the goods, she must:

A) sell the goods for their scrap or salvage value.

B) hold on to the goods for 14 days just in case the buyer changes his mind.

C) finish the manufacturing of the goods to prevent waste.

D) try to find a replacement buyer for the finished goods.

72) When deciding what to do with the unfinished goods after a buyer breaches a contract, the seller must follow a reasonable course of action to ________ her damages.

A) mitigate

B) realize

C) maximize

D) actualize

73) Spokes Bicycles has a contract with Trail Parts, Inc. that requires Spokes to buy 200 bicycle gears from Trail at a price of $50 per gear. For an unknown reason, Spokes cancels the contract after Trail has already finished manufacturing all 200 gears. Trail offers the gears to ACE Bikes for $20 each. ACE is shocked by the great deal because these types of gears normally retail for $50. ACE agrees to purchase the gears. Trail then sues Spokes for its lost profits. Which of the following is true?

A) ACE bikes must pay Trail $50 per gear.

B) Trail is not entitled to damages because it was able to resell the goods.

C) Trail's damages will be limited because its resale was not in good faith and in a commercially reasonable manner.

D) Trail will be able to recover damages for the difference between the resale price and the price the buyer agreed to pay in the contract.

74) A buyer breaches a contract with a seller. If the contract states the manner in which resale of the goods is to be made, which of the following statements is false?

A) The courts will enforce the agreement unless it is found to be unconscionable.

B) The seller should make it clear that the goods he is selling are those related to the broken contract.

C) The buyer must assist the seller in finding a new buyer.

D) The resale must be made in good faith and in a commercially reasonable manner.

75) If goods from a breached contract are resold at a private sale, the seller must:

A) give the buyer 7 days' notice of its intention to resell the goods.

B) hold the sale at a usual place or market for private sales if one is reasonably available.

C) give the buyer notice of the time and place of the resale.

D) give the buyer reasonable notification of his intention to resell the goods.

76) If goods from a breached contract are resold at a public sale, the seller must:

A) give the buyer reasonable notification of its intention to resell.

B) hold the sale at a usual place or market for public sales if one is reasonably available.

C) give the buyer notice only if the goods are perishable.

D) give the buyer notice only of the public sale's location.

77) A contract requires Jim, a farmer, to ship 1,000 dozen eggs to Tim, a grocer. The shipment states "FOB Jim's Farm." If the eggs are lost or damaged:

A) Tim is still responsible for paying Jim for them.

B) Tim is no longer responsible for paying Jim for them.

C) Jim bears the risk of loss.

D) The parties split the risk of loss.

78) Under the Convention on Contracts for the International Sale of Goods, an aggrieved seller has five potential remedies when the buyer breaches the contract. Which of the following is not one of the remedies available?

A) Suspension of the seller's performance

B) Reclamation of the goods in the buyer's possession

C) Avoidance of the contract

D) Replevin of the contract

79) Under the Convention on Contracts for the International Sale of Goods, ________ is commonly utilized by buyers because the initial performance called for in contracts typically rests with the seller.

A) specific performance

B) reclamation of goods

C) suspension of performance

D) avoidance of contract

80) In Jewish Federation of Greater Des Moines v. Cedar Forrest Products Co., the case in the text, the court held that:

A) CFP was entitled to lost profits because Jewish Federation did not act in good faith.

B) CFP, as a lost volume seller, was entitled to lost profits.

C) CFP was not entitled to lost profits because it used the materials for another customer.

D) CFP was not entitled to lost profits because there was no meeting of the minds.

81) Which of the following statements about a buyer's damages for defective goods is false?

A) The buyer must give the seller notice of the defect within a reasonable amount of time after the buyer discovers the defect.

B) The buyer can recover the difference between the value of the goods received and the value of the goods in the industry.

C) The buyer can only recover damages if he gave proper notice.

D) The buyer may recover incidental and consequential damages.

82) In the case in the text, Beer v. Bennett, the trial court ordered Beer to hold the Fiat for Bennett until Bennett made shipping arrangements. On review, the court held that this requirement:

A) was proper under the UCC and Beer must hold the Fiat with reasonable care.

B) was proper under the UCC and Beer was responsible for any additional expenses.

C) was improper under the UCC because this placed an undue burden on Beer.

D) was improper under the UCC because Beer was willing to make arrangements to send the Fiat to Bennett.

83) As demonstrated in the case in the text, Green Wood Industrial Company v. Forceman International Development Group, problems appear with allowing damages based on a third-party claim. This is because:

A) each party has varying bargaining power and expertise.

B) there is no privity of contract between all parties.

C) damages could be subject to unfair manipulation.

D) a third-party claim is unforeseeable.

84) Tire Depot sells Jake a tire for his car, warranting it to be four-ply construction. Jake unintentionally drives over a nail, which punctures the tire. The tire goes flat and Jake discovers that the tire is really only two-ply. Jake promptly notifies Tire Depot of the breach. Which of the following is the likely result?

A) Jake cannot recover because the difference between two-ply and four-ply tires is immaterial for the purpose of his purchase.

B) Jake is entitled to a new four-ply tire.

C) Jake has to give the tire back and is entitled to a refund from Tire Depot.

D) Jake is entitled to keep the tire and recover from Tire Depot the difference in value between a two-ply and a four-ply tire.

85) Cahaba Disaster Recovery v. Rogers, the case in the text, demonstrates the requirement that a buyer notify a seller of defective goods within ________ after he discovers the defect.

A) 14 days

B) 48 hours

C) a reasonable time

D) 7 days.

86) On May 1, 1999, S contracts to sell B a toaster that it warrants for five years. On May 5, 1999, S delivers the toaster to B. The toaster self-destructs on April 30, 2000, but B does not discover this until May 3, 2000. However, B does not sue S until May of 2003. Has B sued within the time period permitted by UCC statute of limitations? Why or why not?

87) Ralf breaches a contract with Smith whereby Smith agreed to make Ralf 1,000 sport goggles in exchange for $2,000. Smith decided to resell them to diminish his losses. Luckily, there was a huge market for sports goggles and he collected a huge profit. The amount was far more than the contracted price with Ralf. However, now Ralf is demanding a share of the profit. Will Ralf succeed?

88) On May 1, S sells B 100 widgets on credit at a price of $1 per widget. S did so based on an April 10 letter from B asserting B's solvency. On May 7, B learns that S was insolvent when it received the widgets on May 1. On May 13, S demands the return of the goods from B. Is B obligated to return the goods to S?

89) On May 1, S sells goods to B. B immediately resells the goods to C, who buys in good faith and pays cash. On May 2, S learns that B was insolvent when it accepted the goods. On May 3, S demands return of the goods from B. B says: "Sorry about that, but I sold them to C." Can S recover the goods from C?

90) Explain the concept of a buyer's right to cover.