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McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 13: Special Contracts: Sale of Goods
True/False Questions
1) Because of the need for commercial certainty, it generally is not possible for the parties
to a sale of goods contract to exclude the terms implied by the Sale of Goods Act.
a. True
b. False
2) On May 1, Sheila entered into a contract with Brian. She promised to pay $500 to him
on June 1 and he promised to deliver a television to her on the same day. Since the Sale of
Goods Act only applies to sales, the parties' agreement will not be governed by the statute
until June 1.
a. True
b. False
3) Marianna agreed to rent a generator to Denzel for a six-month period. The Sale of Goods
Act will apply to the parties' agreement as long as Denzel actually takes possession of the
generator.
a. True
b. False
4) Although the Sale of Goods Act does not apply to land, it does apply to every form of
personal property.
a. True
b. False
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 13: Special Contracts: Sale of Goods
5) Helene operates a beauty salon. She cut Bentley's hair in exchange for the payment of
$25. She also gave him a small bottle of shampoo as a gift sampler. The parties' transaction
regarding the shampoo is governed by the Sale of Goods Act.
a. True
b. False
6) Sunni purchased a stereo system from an electronics store. The total purchase price was
$3000. He paid $2000 with a cheque and $1000 with a credit card. That transaction is
governed by the Sale of Goods Act.
a. True
b. False
7) Marlene agreed to purchase a specific dress from Julian's shop. Although she paid the
total price of $750 immediately, she insisted that Julian raise the hemline one inch before
delivering it to her house. He agreed to that arrangement. Julian altered the dress as
requested. However, before he could deliver the garment to Marlene, the dress was stolen
by a thief. Marlene suffers the loss because the risk passed to her as soon as the hemline
was raised.
a. True
b. False
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 13: Special Contracts: Sale of Goods
8) Jana entered into an arrangement with Chauds Refrigerators Inc. It delivered a freezer to
her restaurant so that she could determine whether or not it was appropriate for her needs.
The parties agreed that she would pay $4000 for the freezer if she kept it. Jana used the
freezer for six months, but never bothered to communicate with Chauds. The unit was then
stolen. Jana probably suffers the burden of that theft because property and risk had already
passed to her.
a. True
b. False
9) Merckx Cycle displayed five identical bicycles in its front window. Eddie looked at the
five bikes and said, "I'll take one for $750. Pick one and set it aside for me. I'll collect it
from you next week." He then paid the entire purchase price and left. The owner of the
shop picked one of the five bikes and moved it to a backroom. Two days later, the bike was
stolen. Eddie certainly suffers the burden of that theft because property and risk has passed
to him.
a. True
b. False
10) Dawn wanted to buy 10 cricket bats to use to teach the game of cricket to her students.
She visited Bradman's Cricket Manufacturing's factory and was shown several types of
bats. She selected one of the models and asked Bradman's to send ten copies of that model
to her house. The company's representative asked her if she wanted to test that model, but
she said, "No, I'm in too much of a hurry." When the bats arrived at Dawn's house,
however, she immediately noticed that the handles were manufactured in a way that made
them impossibly painful to use. The model that she chose at Bradman's factory suffered
from the same defect. Dawn would have noticed that defect if she had tested it. She
nevertheless is entitled to reject the bats.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 13: Special Contracts: Sale of Goods
a. True
b. False
11) Pavel bought a widget from Anna. The widget was both unmerchantable and unfit for
its intended purpose. However, if Anna did not normally deal in widgets, Pavel could
succeed in a claim on the basis of the widget's lack of merchantability, but not on the basis
of its lack of fitness for its intended purpose.
a. True
b. False
12) Elin agreed to buy 100 cartons of widgets from Eldrick at a price of $100 000. He
actually delivered 110 cartons of widgets. Elin is entitled to keep that entire shipment, as
long as she pays the contract price of $100 000.
a. True
b. False
13) There is a common element to the seller's right to exercise a lien, a stoppage in transit,
or a repossession. In each case, the remedy is available only if the buyer is insolvent or
bankrupt.
a. True
b. False
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 13: Special Contracts: Sale of Goods
14) Chuck agreed to sell a widget to Tawny. Under the terms of that contract, she was
required to pay $50 000 on May 1 and he was required to deliver the widget to her by June
1. The contract also stated that, regardless of possession, property in the widget would not
pass to Tawny until she paid the full price. Tawny failed to pay $50 000 on May 1.
However, on May 2, she introduced Chuck to Brandi, who was willing to buy the same
widget for $45 000. Chuck insists that Tawny is still required to pay $50 000. Tawny, in
contrast, argues that she only has to pay $5000 and that Chuck is required to act reasonably
by selling the widget to Brandi for $45 000. Chuck's argument is correct and Tawny's
argument is incorrect.
a. True
b. False
15) James agreed to sell a widget to Claire for $10 000. She intended to use that item for
her personal use. Under the terms of the contract, James agreed to deliver the widget to her
on July 1 and Claire promised to pay the full price on the same day. James delivered the
widget to Claire, but she did not pay the price as promised. If Claire is insolvent, James is
entitled to either exercise a lien over the property or exercise the right of repossession under
the Bankruptcy and Insolvency Act.
a. True
b. False
Multiple Choice Questions
1) Because the sale of goods is subject to a codified statute,
a. the rules contained in the statute always apply to a sale of goods.
b. the courts cannot rely on cases that occurred before codification.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 13: Special Contracts: Sale of Goods
c. many business transactions can be more easily created.
d. the need for risk management is virtually eliminated.
e. the same statute applies in every common law province and territory.
2) Which of the following can be the subject of a "sale of goods"?
a. a cow
b. a house that has already been built
c. a debt
d. a haircut
e. a contract to rent a boat
3) Aidan gave a $100 watch to Marian as a birthday present. The watch was made of cheap
metal that gave Marian a rash. Which of the following statements is TRUE?
a. The Sale of Goods Act applies because a gift is a special type of contract.
b. The Sale of Goods Act applies because Marian expected that the watch would be of
merchantable quality.
c. Given the value of the watch, the Sale of Goods Act applies if, but only if, the transaction
was evidenced in writing.
d. The Sale of Goods Act does not apply because Marian did not pay a price for the goods
but the transaction was a gift.
e. The Sale of Goods Act applies as long as Marian is willing to pay $100 to Aidan.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 13: Special Contracts: Sale of Goods
4) The Sale of Goods Act may apply if you agree to
a. trade a motorcycle for a car.
b. fix a bicycle for a payment of $100 in cash.
c. receive a bicycle as a gift.
d. rent a bicycle for at least three months.
e. purchase one bicycle from among an inventory of fifty bicycles, even if your bicycle is
not identified at the outset.
5) Sigmund ordered and ate a meal at the Big Banana restaurant. Which of the following
statements is TRUE?
a. The Sale of Goods Act may apply in order to create a form of consumer protection.
b. The Sale of Goods Act will not apply if Sigmund's primary intention was to receive a
meal, rather than to enjoy the exceptional service for which the Big Banana is known.
c. The Sale of Goods Act will not apply if Sigmund paid for his meal with a credit card.
d. The Sale of Goods Act will not apply if Sigmund ate from a self-serve buffet at the Blue
Fez.
e. The Sale of Goods Act will apply even if the restaurant provided the meal to Sigmund
free of charge, as a way of improving its reputation.
6) In March, Nena entered into several transactions with Hakeem. She borrowed a boat
from him and promised that she would fix its engine before she gave it back. She purchased
a piece of land from him for $100 000, even though it was really only worth $75 000. She
received two bicycles from him as gifts and secretly intended to give him $500 on his next
birthday. She paid $250 for his advice regarding her investments. She promised to pay
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 13: Special Contracts: Sale of Goods
$1000 in June and he promised to deliver a widget to her in July. It is now April. The Sale
of Goods Act may apply to the transactions regarding
a. the widget and the boat, but not the others.
b. the land and the investment advice, but not the others.
c. the bicycles and the widget, but not the others.
d. the boat and the bicycles, but not the others.
e. the widget, but not the others.
7) Which of the following transactions would not be decided under the Sale of Goods Act?
a. Marco sold a bicycle to Tara. Although she received the bike immediately, she did not
pay any money. She promised to pay $400 in cash within six months.
b. Marco sold a bicycle to Tara. Although she received the bike immediately, she did not
pay any money. She gave a cheque to Marco for $400.
c. Marco sold a bicycle to Tara. Although she received the bike immediately, she did not
pay any money. She allowed Marco to charge $400 to her credit card.
d. Marco sold a bicycle to Tara. Although she received the bike immediately, she did not
pay any money. She gave her old bike to Marco and promised that she would pay $100
within six months.
e. Marco promised to make a gift of a bike to Tara, but he changed his mind and did not
give the bike to Tara.
8) Which of the following statements is TRUE as a general rule?
a. Property passes under an unconditional contract for the sale of specific goods in a
deliverable state only once the buyer pays the price.
b. Property passes under a contract that requires the seller to modify the goods in order to
put them into a deliverable state only when the goods are delivered to the buyer.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 13: Special Contracts: Sale of Goods
c. Property passes under a contract that requires the seller to do something to ascertain the
price of the goods as soon as the price is determined.
d. Property passes under a contract "on sale or return" only if the buyer pays the price.
e. Property passes under a contract that requires the seller to test the goods as soon as the
seller does so and notifies the buyer.
9) Which of the following statements is TRUE?
a. The passing of property is important for the purposes of insurance because risk usually
passes with property.
b. The Sale of Goods Act does not apply until property has passed from the seller to the
buyer.
c. Property in goods is always held by the person who has possession of the goods.
d. Although the passing of property is important for some reasons, it does not affect the
remedies that may be available to a seller.
e. Property never passes under a sale of goods until the buyer has paid the price.
10) Juan bought a lawn mower at Raija's garage sale. He gave her a cheque for $100 and
explained that he would collect the lawn mower later the same afternoon when he had use
of his friend's pickup truck. Juan then asked Raija to leave the lawn mower near her garage.
When Juan came to collect the lawn mower two hours later, he discovered that it had been
stolen from the place where he had told Raija to leave it. Which of the following statements
is TRUE?
a. Juan is entitled to a refund of $100 because he is not required to pay for a stolen lawn
mower.
b. Property and risk did not pass to Juan because he had not taken possession of the lawn
mower.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 13: Special Contracts: Sale of Goods
c. Property and risk did not pass to Juan unless Raija cashed his cheque before the theft
occurred.
d. Even if the transaction occurred in a jurisdiction that considers some oral contracts to be
unenforceable, the agreement between Juan and Raija did not have to be evidenced in
writing because the price had already been paid.
e. Since the transaction dealt with used goods, the Sale of Goods Act does not apply and it
is therefore unnecessary to determine if property passed.
11) Fenna bought a specific widget from Maurice. The total price was $1000. She paid
$400 immediately and promised to pay the remainder within one month. Since the widget
was a floor model, Maurice agreed to clean and lubricate it for Fenna within one week.
Under the terms of the contract, once he had done so, he would leave the widget behind his
store and call her to pick it up. The widget was stolen before Fenna acquired possession of
it. Which of the following statements is TRUE?
a. Property did not pass to Fenna unless she paid the remainder of the price to Maurice
before the theft occurred.
b. Fenna will bear the burden of the loss if the theft occurred after Maurice had cleaned and
lubricated the widget, and after he called her to collect the widget.
c. If the risk passed to Fenna, she will not be entitled to recover her $400 payment, but she
also will not be required to pay the remainder of the price.
d. If property passed to Fenna, Maurice should use the remedy of repossession to demand
payment of the remainder of the price.
e. Even if property passed to Fenna, the risk of loss must have remained with Maurice until
Fenna actually took possession of the widget.
12) Kasper bought a truckload of gravel from Gita. The parties agreed that the price would
be at least $500. Kasper therefore paid that amount later the same day. He promised to pay
the remainder (which the parties estimated to be $200) after Gita weighed the gravel in
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 13: Special Contracts: Sale of Goods
order to determine its exact price. Gita returned with the truckload of gravel to her supply
yard, weighed the gravel, and determined that the total contract price should be $675.
Unfortunately, the gravel was stolen before Kasper actually took possession of it. Which of
the following statements is TRUE?
a. Risk passed to Kasper because he paid part of the price.
b. Although property passed to Kasper when he paid part of the price, the risk remained
with Gita until she weighed the gravel.
c. Kasper will bear the burden of the theft if Gita notified him of the total price after the
theft occurred.
d. Property passed to Kasper as soon as the contract was created because the agreement was
concerned with specific goods that were already in a deliverable condition.
e. The Sale of Goods Act applies to the facts even though the subject matter of the contract
is gravel, which is a substance that must be taken from land.
13) Meena offered to sell a widget to Thor for use in his factory. He hesitated to accept that
offer because he was not sure that the widget would be compatible with the rest of his
equipment. The parties therefore agreed that Thor would take possession of the widget for
the purpose of testing it at his factory. Which of the following statements is TRUE?
a. Risk will pass to Thor if he keeps the widget for an unreasonably long time, even if he
does not intend to purchase it.
b. Since property follows possession, the risk passed to Thor as soon Meena gave the
widget to him.
c. Risk will not pass to Thor unless he notifies Meena that he intends to keep the widget.
d. This transaction falls under Rule 5.
e. In this type of case, the issue of risk is irrelevant.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 13: Special Contracts: Sale of Goods
14) Yossuf is a carpenter who manufactures furniture. Among other things, he specializes
in carving chairs out of a single block of wood. He then personalizes each chair by carving
the owner's name into the backrest. Yossuf's store contains a number of such chairs.
Krystelle saw the chairs, was impressed, and agreed to buy one for $1500. Unfortunately,
Yossuf's entire stock of chairs was destroyed in a fire before Krystelle could take
possession of her chair. Which of the following statements is TRUE?
a. Krystelle will be required to pay the price as long as Yossuf intended to carve her name
into a particular chair before the fire occurred.
b. Because the parties agreed on the price at the outset, the risk passed to Krystelle as soon
as the contract was created.
c. The facts demonstrate that the parties' contract contained a "retention of title clause."
d. This case will be decided under Rule 4.
e. Krystelle is entitled to recover any money that she paid to Yossuf as part of the price.
15) Which of the following statements is TRUE?
a. The basic distinction between conditions and warranties is the same under both the Sale
of Goods Act and the general law of contracts.
b. Although the parties are generally free to accept or reject parts of the Sale of Goods Act,
they cannot decide to treat a statutory condition as if it was a warranty.
c. If there is a breach of contract under the Sale of Goods Act, the plaintiff must use the
statutory remedies rather than the remedies that are generally available for a breach of
contract.
d. The Sale of Goods Act always imposes an implied condition that the goods are suitable
for the buyer's purpose.
e. The Sale of Goods Act now classifies a number of implied obligations as innominate
terms.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 13: Special Contracts: Sale of Goods
16) Alison bought a computer from Hugh. The parties never actually met. Alison saw a
selection of computers on Hugh's web site and ordered one by telephone. Alison will be
able to bring an action against Hugh on the basis of an implied condition that the goods
match their description
a. if the computer is delivered two weeks later than Hugh had promised.
b. only if she has already paid the purchase price.
c. if the computer is not of the same quality as she expected.
d. only if she intended to use the computer for personal, rather than business, purposes.
e. if her complaint deals with the identity of the goods, but not if her complaint deals with
the quality of the goods.
17) The Sale of Goods Act implies a term that goods will match their description. Which of
the following statements is TRUE with respect to that term?
a. That term is a warranty.
b. That term applies only if the seller is normally in the business of selling the type of
goods that the buyer has purchased.
c. That term does not apply if the buyer personally selected an item from a shelf.
d. That term is a codification of the phrase caveat emptor.
e. That term applies to the identity of goods, but not to the quality of goods.
18) On March 1, Giselle saw Harlan demonstrating a new type of widget at a trade show.
On April 1, she ordered one from him. Under the terms of that contract, Harlan was
required to deliver the widget on May 1 and Giselle was required to pay the entire purchase
price of $10 000 on June 1. Harlan did not deliver the widget until May 15. Although
Giselle accepted the item and agrees that it is in good working order, she is unhappy. The
late delivery caused her to lose $5000 in profits. She should sue Harlan on the basis of his
breach of an implied term
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 13: Special Contracts: Sale of Goods
a. concerning description.
b. dealing with samples.
c. of merchantable quality.
d. that requires fitness for purpose.
e. that is classified as a condition, rather than a warranty, under the Sale of Goods Act.
19) Lucy sells bulk foods to restaurants. Jean-Paul visited her warehouse and indicated that
he wanted to buy a barrel of peanuts for use at his diner, the Healthy Nut. Lucy went into a
back room and returned with a small bag of unsalted peanuts. Jean-Paul agreed to buy a
barrel of the same. Lucy went to a back room again and returned with a sealed barrel of
peanuts. She asked Jean-Paul if he wanted to inspect the goods, but he said, "No, I'm in too
much of a hurry. Just have them delivered to my restaurant this afternoon." The barrel was
delivered, but when Jean-Paul opened it, he discovered that the peanuts were salted. He
therefore insists that he is entitled to reject them. Which of the following statements is
TRUE?
a. Jean-Paul cannot reject the barrel because property passed to him when the contract was
created.
b. Jean-Paul cannot reject the barrel because he failed to use a reasonable opportunity to
inspect the goods.
c. Jean-Paul is entitled to reject the barrel because the goods are unmerchantable.
d. Jean-Paul is entitled to reject the barrel because the goods do not correspond to the
sample.
e. Jean-Paul can reject the barrel unless he is capable of mitigating his loss by reselling the
goods to a third party.
20) If goods are sold by both description and sample, the goods must
a. match the description and the sample.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 13: Special Contracts: Sale of Goods
b. match the description, but not the sample.
c. match the sample, but not the description.
d. always be fit for their intended purpose.
e. always be of merchantable quality.
21) Which of the following statements is entirely TRUE with respect to the implied term
for a sale by sample and the implied term for description?
a. If the seller has breached one of those implied terms, it has always breached the other as
well.
b. The implied term regarding a sale by sample is only concerned with fitness for purpose,
and the implied term regarding description is only concerned with the identity of the goods.
c. Both types of implied terms are concerned only with the identity of goods.
d. Neither type of term applies unless the seller ordinarily is in the business of selling the
type of goods that the buyer purchased.
e. The implied term for a sale by sample may be ineffective if the buyer failed to reasonably
inspect the goods at the time of delivery, but the same is not true of the implied term for
description.
22) The general rule in sales is caveat emptor. Which of the following statements about that
concept is TRUE?
a. Caveat emptor is a Latin phrase that means that a person cannot sell more than he or she
actually owns.
b. Caveat emptor is a Latin phrase that means "let the seller beware."
c. Because of the concept of caveat emptor, the buyer normally must pay for goods as soon
as they are delivered.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 13: Special Contracts: Sale of Goods
d. The implied term regarding merchantability is an exception to the general rule of caveat
emptor.
e. Caveat emptor is a Latin phrase that means that, after the codification of the Sale of
Goods Act, judges should resolve disputes on the basis of the statute and not on the basis of
old cases.
23) Which of the following statements is TRUE with respect to the implied condition of
merchantability?
a. Although the buyer is not required to inspect the goods before purchase, the implied
condition of merchantability is entirely inapplicable if an inspection does occur.
b. Although the buyer is required to inspect the goods before purchase, the implied
condition of merchantability is applicable to defects that a reasonable person would not
have noticed during such an inspection.
c. Goods may be considered to be of merchantable quality even if they are defective in
some other way not affecting their merchantability.
d. The implied condition of merchantability applies only if the buyer purchased the goods
for personal use.
e. The implied condition of merchantability applies only if the buyer ordinarily deals in the
sorts of goods that it purchased from the seller.
24) Nigel was interested in a stereo system that he saw at Nikita's garage sale. She asked if
he wanted to take it inside to her basement to test it out, but he said "no" because he felt
uncomfortable with the idea of listening to music in a stranger's house. He nevertheless
bought it for $100. When he got it home, however, he noticed three problems. First, there
are several small scratches in the stereo's exterior finish. Second, he was disappointed to
discover that the stereo does not have a radio. Nikita had not said anything about a radio,
but he assumed that one was included in the unit. And third, Nigel is very upset that the CD
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 13: Special Contracts: Sale of Goods
player skips badly. Which of the following statements is TRUE with respect to the implied
term of merchantable quality?
a. Nigel cannot sue Nikita because he would have noticed all of the defects if he had
reasonably inspected the stereo unit before buying it.
b. Each of the problems that Nigel noticed prevents the stereo from satisfying the implied
term of merchantable quality.
c. Nigel cannot sue Nikita because the implied term of merchantable quality does not apply
to used goods.
d. Nigel cannot sue Nikita unless she normally is in the business of selling stereos.
e. Nigel cannot sue Nikita unless he relied upon her advice when he decided to buy the
stereo.
25) Cordelia visited Gord's paint store and explained that she wanted to paint the exterior of
her house a certain shade of blue. She gave him a piece of material to demonstrate the
colour that she had in mind. She also explained that she had never before painted anything,
and she asked Gord whether or not he thought that she was capable of doing the job. He
said, "No problem. I have 30 years of experience in this business. Just leave the details to
me and you'll be fine." Cordelia then bought six buckets of paint that Gord had mixed for
her in his back room. The next day, she asked her nephew to paint her house while she was
at work. When she returned home at the end of the day, she was disappointed to discover
that the colour was considerably different than the colour that she had given to Gord. She
also learned that the paint was intended for interior use only. Cordelia can sue Gord for
breach of
a. the implied term regarding description and the implied term regarding fitness for
purpose.
b. the implied term regarding description only.
c. the implied term regarding fitness for purpose only.
d. the implied term regarding description, the implied term regarding fitness for purpose,
and the implied term regarding merchantable quality.
e. the implied term of merchantable quality only if she relied on his advice in selecting the
paint.
