225
Chapter 19
The Formation of
Sales and Lease Contracts
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 Bank.
= A question included in the previous edition of the Test Bank.
TRUE/FALSE QUESTIONS
A1. Article 2 of the UCC governs contracts for sales of goods.
A2. Under the UCC, a sale is the passing of title from a seller to a buyer for a price payable
in cash, goods, or services.
A3. To be characterized as a “good” under the UCC, an item of property must be movable.
226 TEST BANK A—UNIT 4: DOMESTIC AND INT’L SALES & LEASE CONTRACTS
A4. Goods associated with real estate never fall within the scope of UCC Article 2.
A5. If a contract in which goods and services are combined is primarily a goods contract,
any dispute over it will be decided under the UCC.
A6. UCC Article 2 applies to sales transactions between all buyers and sellers.
A7. The UCC imposes special business standards on casual and inexperienced sellers and
buyers.
A8. A lessor is a party who acquires a right to the possession and use of goods under a
lease.
A9. Certain provisions of UCC Article 2A apply only to consumer leases.
A10. Under the UCC, a sales or lease contract will fail for indefiniteness if one or more
terms are left open.
CHAPTER 19: THE FORMATION OF SALES AND LEASE CONTRACTS 227
A11. If the parties to a contract for a sale of goods have not agreed on a price, a court will
determine a reasonable price at the time for delivery.
A12. The UCC imposes a good faith limitation on requirements contracts.
A13. When an offeror does not specify a means of acceptance, acceptance can be made by
any means of communication that is reasonable.
A14. In a contract between merchants, additional terms in the parties’ separate standard
forms always automatically become part of the contract.
A15. Under the UCC, an agreement modifying a contract needs no consideration to be
binding.
A16. No oral contract is enforceable under the UCC.
A17. The terms of a fully integrated contract can be contradicted only by evidence of any
prior agreements.
228 TEST BANK A—UNIT 4: DOMESTIC AND INT’L SALES & LEASE CONTRACTS
A18. In interpreting a commercial agreement, a court will assume that the course of
dealing between the parties was taken into account.
A19. If a court deems any clause in a contract to have been unconscionable at the time it
was made, the court can limit its application.
A20. Whenever the parties to an international transaction fail to specify in writing the
precise terms of the contract, the United Nations Convention on Contracts for the
International Sale of Goods (CISG) will be applied.
MULTIPLE CHOICE QUESTIONS
A1. Bild-Rite, Inc., is a Colorado-based firm that does business with clients throughout
North America. Bild-Rite oversees construction projects, and buys and sells
commercial buildings, undeveloped land, and construction supplies and other goods.
Bild-Rite has had to deal with work-site theft and vandalism. 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 construction contracts.
c. domestic and foreign transactions in real estate.
d. prosecuting crimes against business interests.
CHAPTER 19: THE FORMATION OF SALES AND LEASE CONTRACTS 229
A2. Omni Corporation is a Pennsylvania-based firm that does business throughout the
United States. With respect to this circumstance, the UCC has been adopted by, and
applies in,
a. a few of the states.
b. all of the states, in whole or in part.
c. half of the states.
d. none of the states, to date.
A3. Over the course of a year, Retail Market, Inc., sells goods from its inventory and one of
its warehouses. In exchange, Retail receives checks and other items that substitute for
cash, which Retail uses to repay a loan from Savers Bank. Article 2 of the UCC governs
a. the checks.
b. the payment of the loan.
c. the sale of the buildings.
d. the sale of the goods.
A4. Trina pays Urban Edge Electronics store $1,500 for a laptop computer. Under the UCC,
this is
a. a gift.
b. a lease.
c. a sale.
d. a crime.
230 TEST BANK A—UNIT 4: DOMESTIC AND INT’L SALES & LEASE CONTRACTS
A5. In a dispute over a sale involving a bicycle, Dain argues that as to this deal Emory’s
Hobby Shop, where Dain bought the bike, is a merchant. A court may determine
whether Emory’s is a merchant by assessing whether
a. it has sold any bikes within the last year.
b. it holds itself out by occupation as having knowledge or skill unique to the bike
in the transaction.
c. its owner enjoys biking.
d. it subscribes to Bike, a biweekly trade magazine.
A6. Cleo sells kitchen appliances to persons who come into her store, Buy n’ Sell
Appliances. One afternoon, Cleo sells a used display shelf to Earline. At a garage sale
at her home, Cleo sells a used sofa to Flavia. Under the UCC, Cleo is a merchant of
a. kitchen appliances only.
b. kitchen appliances and display shelves only.
c. kitchen appliances, display shelves, and sofas.
d. none of the choices.
A7. Curtis enters into a contract with Drive-Away Lease Company for a three-year lease of
a car. This contract is subject to
a. Article 2 of UCC.
b. Article 2A of the UCC.
c. Article 11 of the CISG.
d. the common law only.
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A8. Rio Engineering Corporation pays PC Technologies, Inc., $1,000 to use a computer for
a month. For purposes of the UCC, this is
a. a crime.
b. a consignment.
c. a lease.
d. a sale.
A9. Rally Corporation enters into a contract to sell ski gear to SnoSportz Company, which
sells a pair of the skis to Tyra, a consumer, who later sells them to Uli, another
consumer. Article 2 of the UCC applies to the sales transactions between
a. all of the buyers and sellers.
b. Rally and SnoSportz only.
c. SnoSportz and Tyra only.
d. Tyra and Uli only.
A10. Sunny Glass Company and Collision Repair Center enter into a contract under which
Sunny agrees to deliver a certain quantity of auto glass to Collision Repair each
month. The contract does not include a price term. In a suit between the parties over
the price, a court will
a. determine a reasonable price.
b. impose the lowest market price.
c. impose the highest market price.
d. return the parties to the positions they held before the contract.
232 TEST BANK A—UNIT 4: DOMESTIC AND INT’L SALES & LEASE CONTRACTS
A11. Five Star Flooring orders carpet from Textile Mills Corporation, but Textile does not
deliver. Five Star will probably be unable to enforce the agreement if the parties
omitted
a. the duration of the deal.
b. a payment term.
c. a quantity term.
d. shipping arrangements.
A12. Fresh Harvest, Inc., agrees to sell to Gina’s Bed & Breakfast Inn a certain amount of
locally grown produce each week but no mention is made of where the goods are to
be delivered. In general, the UCC requires that the delivery take place at
a. a neutral place of business halfway between the parties’ locations.
b. a “reasonable” place of delivery.
c. Fresh Harvest’s place of business.
d. Gina’s place of business.
A13. Pressing Music, Inc., offers to buy from Digital Media Corporation (DMC) one million
blank CDs of a certain quality. Without notifying Pressing, DMC timely ships CDs of a
different quality. With respect to the offer and a possible contract, this shipment is
a. an acceptance and a breach.
b. an acceptance and an accommodation.
c. an acceptance and complete performance.
d. a rejection and a counteroffer.
CHAPTER 19: THE FORMATION OF SALES AND LEASE CONTRACTS 233
A14. Valley Farms offers to sell Whole Harvest Bakeries, Inc., five hundred bushels of
wheat. Whole Harvest responds, “We agree to buy five hundred bushels only if the
wheat is Grade A quality.” This statement is
a. a breach.
b. a counteroffer.
c. a confirmation.
d. an acceptance.
A15. Pop Culture Clothiers, Inc., sells t-shirts to Trendwell Stores, Inc., under an existing
contract. When textile costs increase, Trendwell agrees to a price increase, but later
wants to cancel the contract. Trendwell may
a. cancel the contract immediately.
b. cancel the contract only after accepting a final shipment.
c. cancel the contract only on reasonable notice.
d. not cancel the contract.
A16. Quinn enters into a series of agreements with Reba involving a sale of a Suite Dreams
Motel, including the land, building, furnishings, shares of stock in Suite Dreams
Company, and a contract with Trudy to create an ad campaign. Reba suspects that
Quinn may be misrepresenting the facts. The UCC Statute of Frauds governs the sale
of
a. any of the property evidenced by a writing.
b. any of the property that may involve fraud.
c. the furnishings priced at $500 or more.
d. the land and the building.
234 TEST BANK A—UNIT 4: DOMESTIC AND INT’L SALES & LEASE CONTRACTS
A17. Sweet Tooth Pastries, Inc., and other bakers refer to a “baker’s dozen” as consisting of
a collection of thirteen baked goods. This is an example of
a. course of dealing.
b. course of performance.
c. square dealing.
d. usage of trade.
Fact Pattern 19–A1 (Questions A18–A19 apply)
Olisa enters into a contract to buy a stove from Pay–to-Own Appliance store with the price to
be paid in monthly installments. After thirty-six months of payments, Olisa has paid more
than twice the price of a similar stove. Eighteen payments remain due under the contract.
A18. Refer to Fact Pattern 19-A1. Olisa files a suit against Pay-to-Own, claiming that their
contract is so unfair and one sided that it would be unreasonable to enforce it. Olisa is
asserting
a. the concept of good faith.
b. the principle of fair trade.
c. the predominant-factor test.
d. the doctrine of unconscionability.
A19. Refer to Fact Pattern 19-A1. Under the UCC, the court can evaluate the contract to
determine whether it was unreasonably unfair and one sided
a. at the time it was made.
b. at the end of its term.
c. in the middle of its performance.
d. at the time of Gail’s suit.
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A20. Overseas Corporation (OC), a U.S. firm, orally agrees to sell six freezers to Pisa Pizza,
Ltd., in Italy. OC fails to deliver. Under the CISG, Pisa Pizza can
a. enforce the agreement.
b. not enforce the agreement because it is not in writing.
c. not enforce the agreement because the price term is not specified.
d. not enforce the agreement because there is no consideration.
ESSAY QUESTIONS
A1. Clean Machines Company makes washing machines. Over the phone, Clean offers to
sell Dealers Appliance Outlet one hundred model EZ2000 washers at a price of $150
per unit. Clean says that it will keep the offer open for ninety days. Dealers responds
that within two or three weeks it will decide whether to accept. One week later, Clean
faxes, and Dealer receives, notice that the offer is withdrawn. Dealer immediately
phones Clean to accept the $150-per-unit offer. When Clean refuses to deliver at that
price, Dealer files a suit. Clean asserts, first, that there is no contract and, second, that
if there is a contract, it is unenforceable. Discuss Clean’s assertions.
236 TEST BANK A—UNIT 4: DOMESTIC AND INT’L SALES & LEASE CONTRACTS
A2. Tune Products, Inc., offers to sell to Unlimited Sales Company one hundred MP3
players at $50 a piece, subject to certain specific delivery dates. Unlimited replies with
a signed purchase order that reads, “Accept your offer for 100 I-appliances at $50
each. Must be delivered to our warehouse.” Tune does not respond or deliver the
goods. Unlimited files a suit for breach of contract, to which Tune answers that there
is no contract because Unlimited’s purchase order contained additional terms and is
not signed by Tune. Can Unlimited recover? Explain.