1
Chapter 20
The Formation of
Sales and Lease Contracts
TRUE/FALSE QUESTIONS
B1. The UCC applies only to the extent that it has been adopted a state.
B2. The UCC views the entire commercial transaction for the sale and payment for
goods as a single legal occurrence.
B3. A contract for a sale of real property or services is a contract for a sale of
goods.
B4. Intangible property has conceptual existence and thus comes under Article 2.
B5. Goods associated with real estate often fall within the scope of Article 2.
2 TEST BANK B—UNIT FOUR: DOMESTIC & INT’L SALES & LEASE CONTRACTS
B6. In a limited number of instances, the UCC presumes that special business
standards ought to be imposed on merchants because of their relatively high
degree of commercial expertise.
B7. Article 2A of the UCC covers any transaction that creates a lease of goods or a
sublease of goods.
B8. A lessee is a party who transfers a right to the possession and use of goods
under a lease.
B9. Under a finance lease, the lessee can stop performing and making lease
payments if the leased equipment turns out to be defective.
B10. Under the UCC, good faith means honesty in fact and the observance of
reasonable commercial standards of fair dealing in the trade.
B11. When no delivery terms are specified in a contract for a sale of goods, there is
no basis for determining a remedy.
CHAPTER 20: FORMATION OF SALES AND LEASE CONTRACTS 3
B12. Under the UCC, a contract for a sale of goods that does not include the
quantity will not fail for indefiniteness.
B13. Under the UCC, a firm offer for a sale or lease of goods made by a merchant
without consideration can be revoked at any time before acceptance.
B14. Under the UCC, an offeree can accept an offer to buy goods by a prompt
shipment of conforming goods.
B15. Under the UCC, an offeror must be notified within a reasonable time that the
offeree has accepted.
B16. Under the UCC, an agreement modifying a contract needs no consideration to
be binding.
B17. All oral contracts are enforceable under the UCC.
B18. Under the UCC, the meaning of any agreement must be interpreted in light of
commercial practices.
4 TEST BANK B—UNIT FOUR: DOMESTIC & INT’L SALES & LEASE CONTRACTS
B19. An unconscionable sales contract is one that is so unfair and one sided that it
would be unreasonable to enforce it.
B20. The United Nations Convention on Contracts for the International Sale of
Goods (CISG) is the uniform international sales law of countries that account
for more than two-thirds of all global trade.
MULTIPLE CHOICE QUESTIONS
B1. Stop n’ Gas Convenience Stores, Inc., is an East Coast-based firm that does
business throughout the United States. With respect to this circumstance, the
UCC has been adopted by, and applies in,
a. all of the states, in whole or in part.
b. only the states on the Atlantic and Pacific coasts.
c. none of the states, to date.
d. only the lower forty-eight states—not Alaska or Hawaii.
B2. Refined Grains, Inc., is a Kansas-based firm that does business throughout the
world. Refined Grains manages retail and wholesale operations, buys and sells
commercial venues, undeveloped land, and agricultural products, and other
goods. Refined Grains has had to deal with employee and customer theft. With
respect to these circumstances, the Uniform Commercial Code (UCC) provides
a framework for
a. commercial transactions for the sale of and payment for goods.
b. international distribution agreements.
c. domestic and foreign transactions in real estate.
d. prosecuting crimes against business interests.
CHAPTER 20: FORMATION OF SALES AND LEASE CONTRACTS 5
B3. Over the course of a year, Suites & Sets Corporation sells household
furnishings to customers to whom it extends credit. Suites & Sets orders the
furnishings from The Storage Depot’s warehouse, from which the items are
shipped via common carrier to Suites & Sets customers. Article 2 of the UCC
governs
a. all of the parties’ sales of the goods.
b. Suites & Sets’ extension of credit.
c. The Storage Depot’s storage of the goods.
d. each company’s management of its operations.
B4. Great Gear, Inc., enters into a contract to sell sports clothing and equipment to
Healthways Workout store, which in turn sells a pair of bike shorts to Ilene, a
consumer. In comparison to standards that apply to consumers, the UCC
imposes on merchants
a. less strict legal standards.
b. special business standards.
c. stricter ethical standards.
d. the same overall standards.
B5. Ferris is refinishing his kitchen floor and needs a floor sander to complete the
job. Ferris’s neighbor Gerda suggests that he call Home Repair Rentals, Inc.
Home Repair leases Ferris a floor sander. In this transaction, the lessor is
a. Ferris.
b. Gerda.
c. Home Repair.
d. none of the parties.
6 TEST BANK B—UNIT FOUR: DOMESTIC & INT’L SALES & LEASE CONTRACTS
B6. Savannah and Tim enter into a sales contract for orchids. With respect to the
specific contractual provisions set out in the UCC, Savannah and Tim may
a. agree to different terms only to a reasonable extent.
b. agree to different terms unless they “get caught.”
c. agree to whatever terms they wish.
d. not agree to different terms.
B7. American Coffee Company and Beans Brokers, Inc., enter into a contract for
the sale of a certain quality and quantity of coffee beans, with Beans Brokers to
determine the price. The price must be set according to
a. the concept of good faith.
b. the principle of fair trade.
c. the predominant-factor test.
d. the doctrine of unconscionability.
B8. La-Z Days Motels, Inc., and Beds R Us Corporation enter into a contract that
does not specify the payment terms. Payment may be made in
a. any commercially normal or acceptable means except credit card.
b. cash only.
c. any commercially normal or acceptable means.
d. cash or check only.
CHAPTER 20: FORMATION OF SALES AND LEASE CONTRACTS 7
B9. Perfect Poultry Company agrees to sell chicken, turkey, and other meats to
Quik Markets, Inc., to sell to its customers. Normally, their contract would not
be enforceable unless it includes
a. the duration of the deal.
b. the price of the goods.
c. the quantity of the goods.
d. the shipping arrangements.
B10. Diet & Health Food stores orders 1,000 boxes of granola bars from Energy
Products, Inc., but fails to specify the varieties. The granola bars are delivered
in an assortment of varieties. Diet & Health may
a. accept all of the granola bars “as is” only.
b. accept all of the granola bars “as is” or reject the entire shipment only.
c. accept only the granola bars that it wants and reject the rest.
d. reject the entire shipment only.
B11. Fresh Dairy, Inc., is the offeror and Gelato Ice Cream Company is the offeree
under a unilateral sales contract in which Hector’s Helado Corporation is also
interested. Gelato is not notified of Fresh Dairy’s performance within a reason-
able time. Gelato
a. may treat the offer as having lapsed.
b. must assume that Fresh Dairy has started to perform.
c. must contact Fresh Dairy.
d. must notify Hector’s.
8 TEST BANK B—UNIT FOUR: DOMESTIC & INT’L SALES & LEASE CONTRACTS
B12. County Dentists Clinic offers to buy from Dental & Medical Supplies Company
a certain quantity of floss and other items for a certain price. Dental & Medical
can accept the offer by
a. a material alteration of the terms within a reasonable time.
b. a promise to ship or a prompt shipment of the goods.
c. a prompt shipment of the goods only.
d. a shipment of nonconforming goods with a notice of accommodation.
B13. Nature’s Products, Inc., sends its standard order form to Omni Distribution
Corporation to evidence a sale of packing materials. Omni responds with its
own standard purchase order form. Additional terms in the purchase order
automatically become part of the contract unless
a. the terms materially alter the original contract.
b. the original offer expressly limited acceptance to its terms.
c. the offeror objects to the new terms within a reasonable time.
d. any of the choices.
B14. Downtown Contractors and Equipment Rental Corporation are parties to an
oral agreement for a one-year lease of a crane with payments totaling more
than $10,000. They may satisfy the Statute of Frauds by
a. mutually agreeing not to commit fraud.
b. repeating the terms in a phone call.
c. setting out the terms in a memo.
d. shaking hands on the deal.
CHAPTER 20: FORMATION OF SALES AND LEASE CONTRACTS 9
B15. iSharp, Inc., and Jenene, the owner of a Kitchen Time shop, orally agree to a
sale of knives and other utensils for $12,000. Jenene gives iSharp a check for
$4,000 as a partial payment. This contract is
a. enforceable to the extent of $4,000.
b. fully enforceable because it is for specially selected goods.
c. fully enforceable because it is oral.
d. not enforceable.
Fact Pattern 20-B1 (Questions B16–B18 apply)
Ripe Produce, Inc., and Southeast Asian Bistro & Market enter into a contract for the
delivery of locally grown fruits and vegetables. The parties use a standard Ripe
Produce form that contains some of the terms the parties agree on but not others.
Some of the produce spoils before it can be cooked, served, and eaten, or sold.
Southeast Asian refuses to pay for the spoiled goods.
B16. Refer to Fact Pattern 20-B1. Ripe Produce responds that it did not waive
payment for spoiled goods in the parties’ previous transactions. Ripe Produce
is arguing that the court should take into account
a. the course of dealing.
b. the course of performance.
c. the usage of trade.
d. a rule of construction.
B17. Refer to Fact Pattern 20-B1. Ripe Produce files a suit against Southeast Asian,
claiming that the buyer assumed the risk of the spoilage of the unsold goods.
The court may allow evidence of this term if it finds that the parties’ contract is
a. fully integrated.
b. not fully integrated.
c. not supported by consideration.
d. a complete and final statement of their agreement.
10 TEST BANK B—UNIT FOUR: DOMESTIC & INT’L SALES & LEASE CONTRACTS
B18. Refer to Fact Pattern 20-B1. Southeast Asian contends that the practice in the
trade with respect to payment for spoiled produce justifies its refusal to pay.
Southeast Asian is arguing that the court should take into account
a. the course of dealing.
b. the course of performance.
c. the usage of trade.
d. a rule of construction.
B19. Global Outfitters Outlet and Hyacinth, a consumer, enter into a contract for a
sale of ultra-weather camping gear. If the contract includes a clause that is
perceived as grossly unfair to Hyacinth, its enforcement may be challenged
under
a. the mirror image rule.
b. the principle of fair trade.
c. the predominant-factor test.
d. the doctrine of unconscionability.
B20. Toro, S.A., a company based in Mexico, enters into a contract for the purchase
of portable livestock fencing from United Fencing Company, which is based in
the United States. This contract is governed by
a. Mexican law.
b. the provisions in the laws of both countries that are similar.
c. the Uniform Commercial Code.
d. the United Nations Convention on Contracts for the International Sale of
Goods.
CHAPTER 20: FORMATION OF SALES AND LEASE CONTRACTS 11
ESSAY QUESTIONS
B1. On May 1, Newtown Motors, a used-car dealer, wrote a letter to O’Reilly, which
stated, “We have a 1969 Pontiac Firebird in mint condition that we will sell you
for $12,500 at any time before June 1. [Signed] Newtown Motors.” By May 15,
having heard nothing from O’Reilly, Newtown Motors sold the Firebird to
another party. On May 25, O’Reilly told Newtown Motors that he accepted the
offer and tendered $12,500. When Newtown Motors told O’Reilly it had sold the
car to another party, O’Reilly claimed Newtown Motors had breached their
contract. Is Newtown Motors in breach? Explain.
B2. NationPoints Trucking, Inc., has a requirements contract with Oil & Gas
Corporation that obligates Oil & Gas to supply NationPoints with all the
gasoline it needs for its vehicles for one year at $2.30 per gallon. A clause
inserted in small print in the contract by NationPoints, and not noticed by Oil &
Gas, states, “The buyer reserves the right to reject any shipment for any
reason without liability.”
For six months, NationPoints orders and Oil & Gas delivers under the
contract without any controversy. Then, because of a war in the Middle East,
the price of gasoline to Oil & Gas increases substantially. Oil & Gas tells
NationPoints it cannot possibly fulfill their contract unless NationPoints agrees
to pay $2.50 per gallon. NationPoints, in need of the gasoline, agrees in writing
to modify the contract.
Later that month, NationPoints learns it can buy gasoline at $2.40 per
gallon from Purified Fuel Company. NationPoints refuses delivery of its most
recent order from Oil & Gas, claiming, first that the contract allows it to do so
without liability, and second, that it is required to pay only $2.30 per gallon if it
accepts the delivery. Discuss NationPoints’s contentions.
12 TEST BANK B—UNIT FOUR: DOMESTIC & INT’L SALES & LEASE CONTRACTS