Chapter 21 Performance and Breach of Sales and Lease Contracts. All Answers

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N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows. N A question new to this edition of the Test Bank. + A question modified from the previous edition of the Test Ban... k. = A question included in the previous edition of the Test Bank. A1. The duties and obligations under the terms of a contract include those specified by custom. T PAGE: 400 TYPE: N NAT: AACSB Analytic AICPA Legal A2. The UCC’s good faith provision can never be disclaimed. T PAGE: 400 TYPE: N NAT: AACSB Analytic AICPA Legal A3. A shipment contract requires a seller to deliver goods at a particular destination. F PAGE: 401 TYPE: N NAT: AACSB Analytic AICPA Legal A4. If goods or tender of delivery fail in any respect to conform to a contract, the buyer or lessee loses the right to accept the goods. F PAGE: 402 TYPE: + NAT: AACSB Analytic AICPA Legal A5. Once the time for performance under a contract has expired, the seller or lessor loses the right to cure. F PAGE: 402 TYPE: N NAT: AACSB Analytic AICPA Legal A6. With an installment contract, a buyer or lessee cab reject an installment on any pretext. F PAGE: 403 TYPE: N NAT: AACSB Analytic AICPA Legal A7. Occurrences unforeseen by either party when a contract was made may make performance commercially impracticable, but the perfect tender rule still applies. T PAGE: 405 TYPE: N NAT: AACSB Analytic AICPA Legal A8. Unless the parties agree otherwise, the buyer or lessee has an absolute right to inspect the goods before making payment. T PAGE: 406 TYPE: N NAT: AACSB Analytic AICPA Legal A9. If some of the goods delivered do not conform to a contract and the seller or lessor has failed to cure, the buyer or lessee can make a partial acceptance. T PAGE: 407 TYPE: N NAT: AACSB Analytic AICPA Legal A10. If, before the time for contract performance, one party clearly communicates to the other the intention not to perform, such an action is a breach of the contract. T PAGE: 408 TYPE: + NAT: AACSB Analytic AICPA Legal A11. If a buyer breaches a contract and the seller resells the goods to another party, the seller cannot hold the breaching buyer liable for any loss. F PAGE: 409 TYPE: = NAT: AACSB Analytic AICPA Legal A12. If a lessee breaches a contract, the lessor can choose to simply cancel the contract. T PAGE: 409 TYPE: + NAT: AACSB Analytic AICPA Legal A13. If a buyer repudiates a contract, the seller cannot recover damages. F PAGE: 410 TYPE: = NAT: AACSB Analytic AICPA Legal A14. If a lessee is insolvent, a lessor can stop a carrier or bailee from delivering the goods regardless of the quantity shipped. T PAGE: 410 TYPE: N NAT: AACSB Analytic AICPA Legal A15. When a lessor refuses to deliver the goods, a lessee can obtain specific performance only if the goods are not unique. F PAGE: 411 TYPE: N NAT: AACSB Analytic AICPA Legal A16. A buyer may reject a seller’s goods only if they fail to conform to a mate¬rial term of the contract. F PAGE: 414 TYPE: = NAT: AACSB Analytic AICPA Legal A17. Revocation of acceptance is not effective until notice is given to the seller or lessor. T PAGE: 414 TYPE: N NAT: AACSB Analytic AICPA Legal A18. If the parties to a sales contract state that a certain remedy is exclusive, then it is the sole remedy. T PAGE: 415 TYPE: = NAT: AACSB Analytic AICPA Legal A19. A buyer or lessee who has accepted nonconforming goods may keep the goods and recover for any loss resulting in the ordinary course of events. T PAGE: 415 TYPE: N NAT: AACSB Analytic AICPA Legal A20. Under the UCC, parties to a contract cannot limit or exclude consequential damages. F PAGE: 416 TYPE: N NAT: AACSB Analytic AICPA Legal MULTIPLE CHOICE QUESTIONS A1. Price-Cut Discount Stores are open to consumers. The UCC requirement of good faith imposes a. a higher duty on consumers than Price-Cut. b. a higher duty on Price-Cut than on consumers. c. no duty on either Price-Cut or consumers. d. the same duty on Price-Cut and consumers. B PAGE: 400 TYPE: = NAT: AACSB Reflective AICPA Legal A2. Rocky and Slim enter into a contract for a sale of five rowboats. Circumstances make it difficult for Rocky to perform, and the contract is breached. Slim looks for remedies. Unlike the common law, under the UCC, remedies are a. cumulative. b. exclusive. c. limited. d. unlimited. A PAGE: 400 TYPE: = NAT: AACSB Reflective AICPA Legal A3. Clear Day Company, which is based in Delaware, agrees to sell fifty windows, currently stored in Florida, to Great Vu, Inc., which is based in Hawaii. Absent an agreement to the contrary, the place of deliv¬ery is in a. California. b. Delaware. c. Florida. d. Hawaii. C PAGE: 401 TYPE: = NAT: AACSB Reflective AICPA Legal A4. Hydraulic Leasing Corporation (HLC) and Dockside Offloading Company enter into a contract for a lease of ten hydraulic lifts. Under the perfect tender rule, HLC must ship or tender goods to the lessee that a. approximately conform to the contract description. b. entirely conform to the contract description in most ways. c. conform to the contract description in every way. d. substantially conform to the contract description. C PAGE: 401 TYPE: + NAT: AACSB Reflective AICPA Legal A5. Recycle Packaging, Inc., agrees to sell 50,000 6-ounce yogurt containers to Organic Dairy Company. Recycle can obtain only 20,000 of the 6-ounce contain¬ers, but also ships 30,000 more expensive 8-ounce containers for the same price. Organic rejects the 8-ounce containers. With time for performance not yet expired, Recycle can a. attempt to cure the defect. b. cancel the contract. c. recover the purchase price plus incidental damages. d. resell or dispose of the goods and hold Organic liable for any loss. A PAGE: 402 TYPE: N NAT: AACSB Reflective AICPA Legal A6. Screen Perfect, Inc., and Vibrant View Stores enter into a contract for a sale of 3D HD TVs with certain specifications. Screen Perfect ships TVs that are not 3D but otherwise meet the specifications. Vibrant View a. cannot reject the entire shipment. b. can reject the entire shipment. c. must accept the entire shipment. d. must reject the entire shipment. B PAGE: 402 TYPE: + NAT: AACSB Reflective AICPA Legal A7. Primo Pools Company and Aquatic Recreation, Inc., enter into a contract for a sale of prefabricated swimming pools. Under either a shipment contract or a destination contract, the seller must a. allow the buyer to reject the goods for any reason. b. deliver the goods to a particular destination. c. place the goods into the hands of a carrier. d. provide the buyer with any necessary documents of title. D PAGE: 402 TYPE: = NAT: AACSB Reflective AICPA Legal A8. Mitch and Nadine enter into a contract for a sale of seventy-six specially made motion detectors. When Nadine does not deliver within a reasonable time after the agreed delivery date, Mitch files a suit for breach. Nadine asserts the doctrine of commercial impracticability. This doctrine extends only to problems that are a. foreseen. b. preventable. c. unforeseen. d. ordinarily assumed by a seller or lessor. C PAGE: 403 TYPE: N NAT: AACSB Reflective AICPA Legal Fact Pattern 21-A1 (Questions A9-A10 apply) Internet Cafés, Inc., contracts to buy all of its requirements for coffee, at a minimum of 1 million pounds per year, from Java Corporation for six years. After three years, Internet tells Java that it plans to sell its assets to Bagel Bistros, Inc. Bagel Bistros refuses to assure Java that it will continue Internet’s contract. A9. Refer to Fact Pattern 21-A1. Bagel Bistros’s refusal is a. a justified response based on Bagel Bistros’s relation to the contract. b. an assignment of Internet’s rights under the contract. c. a reasonable suspension of performance under the contract. d. a repudiation of the contract. D PAGE: 408 TYPE: = NAT: AACSB Reflective AICPA Legal A10. Refer to Fact Pattern 21-A1. Java can a. assign its rights under the contract but cannot terminate it. b. terminate the contract and seek damages. c. suspend performance under the contract until Java is fully paid. d. do nothing. B PAGE: 409 TYPE: = NAT: AACSB Reflective AICPA Legal A11. Richman Manufacturing Company contracts to sell sweaters to Sweet Sweaters store. Before the sweat¬ers are delivered, Sweet Sweaters indicates that it will not be able to pay. Richman can a. force Sweet Sweaters to accept and pay for the sweaters. b. require Sweet Sweaters to find a buyer for the sweaters. c. resell the sweaters and recover any damages from Sweet Sweaters. d. do nothing. C PAGE: 409 TYPE: N NAT: AACSB Reflective AICPA Legal A12. Amble Country Stables contracts to buy 1,000 horseshoes from Burleigh Blacksmith, Inc., for $1 per shoe. When the market price decreases to 50 cents per shoe, Amble refuses to go through with the deal. Burleigh can recover a. $1,500. b. $1,000. c. $500. d. $0. C PAGE: 410 TYPE: = NAT: AACSB Reflective AICPA Legal A13. Double D Ranch and Esau enter into a contract on August 1 for the sale of 200 cattle. Esau cancels the con¬tract ten days later. Double D is unable to sell the cattle to another buyer. Double D can a. force Esau to accept the cattle and pay for them. b. recover the contract price from Esau but must hold the cattle for him. c. recover the contract price from Esau and keep the cattle. d. recover the contract price from Esau but must destroy the cattle. B PAGE: 410 TYPE: + NAT: AACSB Reflective AICPA Legal A14. Field Gardens and Gourmet Restaurant, Inc., enter into a con¬tract for a sale of lettuce. When Field learns that Gourmet is insolvent, Field can stop delivery of the goods in transit a. only if the quantity is at least a carload. b. only if the quantity is at least a planeload. c. only if the quantity is at least a truckload. d. regardless of the quantity. D PAGE: 410 TYPE: = NAT: AACSB Reflective AICPA Legal A15. Consuelo and Gabriela enter into a contract for a sale of saxophones and other brass instruments. Consuelo delivers, but Gabriela does not pay. Consuelo can normally recover as damages a. any profit lost minus any loss avoided. b. whatever amount the seller wishes to claim. c. the purchase price plus incidental damages. d. the market price at the place at which the seller delivered the goods. C PAGE: 411 TYPE: N NAT: AACSB Reflective AICPA Legal A16. Cheesy Pizza Company contracts to sell 1,000 cases of frozen pizzas to Roller Rinks, Inc., but refuses to deliver. Due to a spice shortage, Roller Rinks cannot obtain pizza elsewhere. Roller Rinks’s right to recover the goods from Cheesy is the right of a. cover. b. cure. c. replevin. d. specific performance. C PAGE: 413 TYPE: = NAT: AACSB Reflective AICPA Legal A17. Owen and Pablo enter into a contract for a sale of fifty Western saddles. Owen does not deliver. Pablo can normally recover as damages the difference between a. any loss avoided and any profit gained. b. the actual price and the hoped-for price. c. the contract price and the market price. d. the current prices in the parties’ locations. C PAGE: 413 TYPE: = NAT: AACSB Reflective AICPA Legal A18. Bayou Boats, Inc., contracts for the sale of seven swamp boats to Tidal Flats Fishing Tours. Bayou repudiates the contract. Tidal Flats’s recovery of damages is measured at the time a. Bayou advertised the goods. b. Tidal Flats ordered the goods. c. Tidal Flats learned of the breach. d. Bayou knew that it would repudiate the contract. C PAGE: 413 TYPE: N NAT: AACSB Reflective AICPA Legal A19. Nature’s Foods, Inc., orders “Grade A” oil from Olive Grove Farms to process and sell to Pic ‘N Pay Grocers. Olive Grove ships “Grade B” oil, which Nature’s Foods accepts. To recover damages for the nonconformity, Nature’s Foods must give notice of the breach within a reasonable time to a. Olive Grove. b. Pic ‘N Pay. c. no one. d. the appropriate government agency. A PAGE: 415 TYPE: + NAT: AACSB Reflective AICPA Legal A20. Nash buys a car under a warranty from Rough Ride Motors. Nash soon discovers that the car has a defect that significantly affects its value and use. In all states and the District of Columbia, Nash may have remedies under a. a lemon law. b. a letter of credit. c. Article 74 of the CISG. d. the Automobile Dealers’ Day in Court Act. A PAGE: 416 TYPE: + NAT: AACSB Reflective AICPA Legal ESSAY QUESTIONS A1. Midstates Utility Corporation contracts with North American Energy Company to buy 50,000 gallons of heating oil. North American agrees to deliver the oil in five equal installments between October 1 and the follow¬ing March 15. The winter is the warmest on record, however, and after the last agreed delivery, Midstates has accepted only 30,000 gallons of the oil. When North American tenders the rest of the oil, Midstates refuses to take it, citing the weather and claiming to be acting in good faith. Will North American succeed in a suit against Midstates for breach of contract? A2. Signal Sets Company contracts to deliver one hundred 55-inch 3D HD television sets to a new retail customer, Tuner TV Store, on May 1, with payment to be made on delivery. Signal tenders delivery in its own truck. Tuner’s manager notices that some of the cartons have scrape marks. Tuner’s owner phones Signal’s office and asks whether the sets might have been damaged as they were being loaded. Signal assures Tuner that the sets are in perfect condition. Tuner tenders Signal a check, which Signal refuses, claiming that the first delivery to new customers is always for cash. Tuner promises to pay the cash within two days. Signal leaves the sets with Tuner, which stores them in its warehouse pending its "Grand Opening Sale" on May 15. Two days later, Tuner’s stocker opens some of the cartons and discovers that a number of the sets are damaged beyond ordinary repair. Signal claims Tuner has accepted the sets and is in breach by not paying on delivery. Will Signal succeed on these claims? Explain. [Show More]

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