Chapter 19
Performance and Breach 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
1. The duty of good faith is imposed on the parties involved in commercial
contracts by the Uniform Commercial Code.
2. The seller’s or lessor’s major obligation under a sales contract is to tender
conforming goods to the buyer or lessee.
3. Tender must occur at a reasonable hour and in a reasonable manner.
4. Tender of delivery requires that the seller or lessor hold the goods at the
buyer’s or lessee’s disposal, but not that the goods be conforming.
5. There are no circumstances under which a contract can be tendered by
multiple deliveries of goods.
6. Under the UCC, if a contract does not designate the place of delivery for the
goods, then the goods must be made available at a location halfway between
the seller’s and the buyer’s places of business.
7. A shipment contract requires that the seller deliver the goods to a particular
location.
8. In contracts involving a carrier, a seller can complete performance through a
shipment contract or a destination contract.
9. Under the UCC, a seller’s tender of goods that do not conform in every way to
a contract is still a valid tender.
10. If the goods or their tender fail to conform to the contract, the buyer can accept
part and reject part.
11. Under the perfect tender rule, if tender is not perfect, the seller is obligated to
try again.
12. Under the UCC, there are no exceptions to the perfect tender rule.
13. The term cure refers to the right of the buyer to reject, adjust, or replace
nonconforming goods.
14. Until the time for performance under a contract expires, the seller has a right to
cure.
15. Once the time for performance under the contract has expired, the seller or
lessor can never exercise the right to cure.
16. An installment contract is breached if a buyer accepts any nonconforming
goods.
17. An installment contract is breached if a seller tenders any nonconforming
goods.
18. An installment contract is a single contract that requires or authorizes delivery
in two or more separate lots to be paid for in one payment.
19. If a contract specifies a certain carrier, a substitution of a different carrier for
any reason breaches the contract.
20. The doctrine of commercial impracticability only extends to problems that are
unforeseen.
21. If goods identified to a contract are destroyed through no fault of either party,
both parties are excused from performance.
22. Unless otherwise agreed, inspection of goods can take place at any reasonable
place and time and in any reasonable manner.
23. In general, a buyer’s duty to pay for tendered goods becomes absolute before
the buyer has had an opportunity to inspect the goods.
24. Once the seller has tendered delivery, the buyer is obligated to accept the
goods and pay for them.
25. If, before the time for performance, a buyer communicates an intent not to
perform, the seller can consider the buyer in breach and pursue a remedy.
26. On a lessee’s insolvency, the lessor can stop delivery of the goods.
CHAPTER 19: PERFORMANCE AND BREACH OF SALES & LEASE CONTRACTS 5
27. If a buyer breaches a contract while the seller is still in possession of the
goods, the seller can resell the goods and hold the buyer liable for any loss.
28. If a buyer wrongfully refuses to accept goods that conform to a contract, the
seller can recover damages.
29. If a buyer repudiates a contract, the seller cannot recover damages.
30. A buyer may reject a seller’s goods under any circumstances.
31. A buyer who obtains substitute goods to replace goods that a seller did not
deliver can also recover damages from the seller.
32. If a seller repudiates a contract, the buyer’s damages do not have to be
adjusted to reflect any expenses that were saved as a result of the breach.
33. If a seller fails to deliver the goods, the buyer’s damages do not include all
losses resulting from this course of events.
34. If a seller asks a buyer to store nonconforming goods overnight, then the buyer
is entitled to reimbursement for the costs involved.
35. Under the UCC, parties to a contract cannot limit or exclude consequential
damages.
MULTIPLE CHOICE QUESTIONS
1. Sparkling Gem Corporation agrees to sell Jewel Outlets, Inc. (JOI), fifty new
diamonds, but the contract does not specify a place of delivery. JOI is expected
to pick up the goods. The place of delivery is
a. Sparkling’s place of business.
b. JOI’s place of business.
c. the Annual Gems and Jewels Convention in New York City.
d. the U.S. Postal Service office nearest to JOI’s place of business.
2. Big Eggs, Inc. agrees to supply Omelet Express with five hundred eggs. Big
Eggs cannot reasonably ask Omelet Express to pick up the eggs at
a. 1:00 P.M.
b. 2:00 P.M.
c. 3:00 P.M.
d. 4:30 A.M.
3. Clear Day Company, which is based in Delaware, agrees to sell fifty windows,
currently stored in Florida, to Far Vu, Inc., which is based in Hawaii. Absent an
agreement to the contrary, the place of delivery is in
a. California.
b. Delaware.
c. Florida.
d. Hawaii.
4. Office Suppliers, Inc. and Little Office Shop enter into a contract for a sale of
office supplies. Office Suppliers is the seller. Under a shipment contract, the
Office Suppliers does not have to
a. obtain and promptly deliver or tender to the buyer any documents
necessary to enable the buyer to obtain the goods.
b. deliver the goods to a particular destination.
c. put the goods in the hands of the carrier.
d. promptly notify the buyer when the shipment has been made.
5. Elegant Carpets, Inc., and Fantastic Floors Stores enter into a contract for a
sale of carpeting. Under a shipment contract, the seller must
a. allow the buyer to reject the goods for any reason.
b. deliver the goods to a particular destination.
c. inspect the goods before shipping them.
d. place the goods into the hands of a carrier.
6. Pine Mills Corporation and Ur-Choice Lumberyards enter into a contract for a
sale of plywood. Under 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. inspect the goods before tendering their delivery.
d. place the goods into the hands of a carrier.
7. Business Rental Corporation (BRC) and Cartage Trucking Company enter into
a contract for a lease of ten hydraulic lifts. Under the perfect tender rule, BRC
must ship or tender goods to the lessee that
a. approximately conform to all of the details of the contract.
b. entirely conform to the contract except in one or two details.
c. exactly conform to the contract in every detail.
d. substantially conform to the contract in most details.
8. Screen Perfect, Inc., and TV Stores enter into a contract for a sale of high–
definition television sets. Screen Perfect ships goods that do not exactly
conform to the contract in some details. TV Stores
a. cannot reject the entire shipment.
b. can reject the entire shipment.
c. must accept the entire shipment.
d. must reject the entire shipment.
9. Genuine Seed Company and Hillside Farmers Cooperative enter into a
contract for a sale of hybrid seeds. Under the perfect tender rule, Genuine
Seed must ship or tender seeds to Hillside that
a. approximately conform to all of the details of the contract.
b. entirely conform to the contract except in one or two details.
c. exactly conform to the contract in every detail.
d. substantially conform to the contract in most details.
10. Vehicle Leasing Agency (VLA) and Wander Trucking Company enter into a
contract for a lease of eight cargo vans. VLA delivers eight vans, but they are
not cargo-sized. Wander
a. cannot reject the entire shipment.
b. can reject the entire shipment.
c. must accept the entire shipment.
d. must reject the entire shipment.
11. Kim’s Pony Rides orders ten saddles from Little Horse Saddles, Inc. The sales
contract states that if the saddles are defective, Kim’s will allow Little Horse
Saddles to repair or replace them instead of rejecting the shipment. When the
saddles arrive, they are defective. In this case, the perfect tender rule
a. does not apply.
b. applies to both parties.
c. applies only to Little Horse Saddles.
d. applies only to Kim’s Pony Rides.
12. Food Packaging, Inc., agrees to sell 50,000 6-ounce yogurt containers to
Golden Dairy Company. Food 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. Under these circumstances, Golden
a. cannot reject delivery, and Food cannot later replace the containers.
b. cannot reject delivery, but Food can later replace the containers.
c. may reject delivery, and notice to Golden of Food’s intent to cure will
give Food a reasonable time to replace the containers.
d. may reject delivery, but Food cannot later replace the containers.
13. On January 10, Winchester Pet Supplies orders fifty small dog collars from
Quality Collars, Inc. to be delivered by January 15. On January 13, Quality
Collars tenders fifty large dog collars. Winchester Pet Supplies rejects the
shipment. Quality Collars has
a. no right to cure.
b. until January 15 to cure.
c. until the end of the business day on January 13 to cure.
d. unlimited time to cure.
14. Levi’s Toy Store orders one hundred board games from Big Board Games
Warehouse. When the games are delivered, they are all missing pieces. Levi’s
CHAPTER 19: PERFORMANCE AND BREACH OF SALES & LEASE CONTRACTS 11
Toy Store rejects the shipment. Big Board Games wants to cure. Big Board
Games must
a. promptly notify Levi’s Toy Store of the intent to cure.
b. pay Levi’s Toy store a cure fee.
c. send a truck to pick up the nonconforming goods before the end of the
business day.
d. create a new contract with Levi’s Toy Store.
15. Sally’s Sweet Fruits contracts with Fruits to You, Inc. for a delivery of two
hundred pounds of strawberries to be delivered by Keep Kool Trucking, a
trucking company with refrigerated trucks. On the day of delivery, the
refrigeration units on Keep Kool’s trucks are not working. Fruits to You
a. may ship the goods to Sally’s using another trucking company with
refrigerated trucks.
b. must refund Sally’s money and cancel the contract.
c. must wait to ship the strawberries until Keep Kool has fixed its trucks.
d. must ship the goods through a different carrier and pay Sally incidental
damages.
16. Mineral Resource Company contracts to provide several manufacturers with
tin. When a cartel of tin-producing countries suddenly embargoes future
shipments of tin to Mineral Resource so that it cannot fulfill its contracts, the
distributor
a. can substitute some other material for the tin.
b. is excused from the performance of its contracts.
c. is liable for breach of contract.
d. must still supply the tin needs of its customers.
17. Beef Burgers, Inc. contracts to buy five hundred steers from Fattening
Feedlots. Before Fattening Feedlots can deliver the steers, there is an outbreak
12 UNIT THREE: COMMERCIAL TRANSACTIONS
of disease in the feedlot, and all the cattle are quarantined. In this case the
perfect tender rule
a. applies to both parties.
b. does not apply.
c. applies only to Beef Burgers.
d. applies only to Fattening Feedlots.
18. 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.
19. Silas Paving Co. contracts to buy some construction machinery from Massive
Earthmovers, Inc. Before either party performs, Massive sells its assets to
Phoenix Equipment Corp. On learning of the sale, Silas is concerned about its
contract with Massive. Silas should
a. demand assurances of performance from Massive.
b. consider the contract repudiated and sue Massive for breach.
c. buy the machinery from a different supplier and bill Massive for the
price.
d. buy the machinery from a different supplier and bill Phoenix for the price.
20. Shane’s Auto Parts orders twenty tires from Tough Tires, Inc. The truck
delivering the tires to Shane’s is in an accident and ten of the tires are
damaged. Shane’s Auto Parts
a. cannot reject the entire shipment.
CHAPTER 19: PERFORMANCE AND BREACH OF SALES & LEASE CONTRACTS 13
b. must still pay for all twenty tires at the original contract price.
c. may inspect the tires and accept the shipment with a reduction in price.
d. must reject the entire shipment.
21. Julia orders twelve violins for her music shop from Notable Notes Instrument
Manufacturers. The sale is made on credit. Julia orders the violins on May 1,
Notable Notes ships the violins on May 2, and Julia receives the violins on May
4. Julia sells all the violins by June 15. Julia’s credit period most likely began on
a. May 1.
b. May 2.
c. May 4.
d. June 15.
22. Craft Engineering, Inc., contracts for a sale of technical instruments to Detail
Design Company. Before the date on which performance is due, Craft notifies
Detail that it will not perform. This is
a. anticipatory repudiation.
b. perfect tender.
c. rejection of performance.
d. revocation of acceptance.
23. Sof’ Chair Company contracts to deliver 100 chairs to Stuffy Furnishings Store
on May 1 for which Stuffy agrees to pay. Sof’ tells Stuffy on April 15 that
delivery will be delayed until June 1. Stuffy may
a. await performance, sue Sof’, or suspend its own performance.
b. only await Sof’s performance for a commercially reasonable time.
c. only sue Sof’ for breach of contract.
d. only suspend its own performance.
24. Loomis Weaving Company contracts to sell sweaters to Style Mart stores.
Before the sweaters are delivered, Style Mart indicates that it will not be able to
pay. Loomis can resell the goods
a. either after finishing the job (and identifying the goods), or after stopping
the job.
b. only after finishing the job and identifying the goods.
c. only if Loomis immediately stops the job.
d. under no circumstances.
25. Double D Ranch and Esau enter into a contract on August 1 for the sale of 200
cattle. Esau cancels the contract ten days later. Double D is unable to sell the
cattle to another buyer. Double D is entitled to
a. force Esau to accept the cattle and recover the contract price.
b. keep the cattle and recover the contract price from Esau.
c. keep the cattle only.
d. recover the contract price from Esau but must destroy the cattle.
26. Ramblin’ Country Stables contracts to buy 1,000 horseshoes from Blacksmith,
Inc., for $1 per shoe. When the market price decreases to 50 cents per shoe,
Ramblin’ refuses to go through with the deal. Blacksmith can recover
a. $1,500.
b. $1,000.
c. $500.
d. $0.
27. Garden Field Farms and Haute Gourmet Restaurant, Inc., enter into a contract
for a sale of lettuce before Haute Gourmet declares bankruptcy. Garden 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.
28. Hi-Tech Company contracts to sell fiber optic cable to Internet Services, Inc.
Hi-Tech may bring an action to recover the purchase price and incidental
damages if Internet
a. accepts the cable and pays for it.
b. accepts the cable but does not pay for it.
c. rejects the cable.
d. revokes acceptance of the cable.
29. Text Publishers, Inc., contracts for a sale of textbooks to University Bookstores, Inc.
Viable Shipping Corporation, the carrier, transports the books to Warehouse
Storage Company. Text’s right to stop delivery is lost when University’s rights to the
goods are acknowledged by
a. the appropriate government agency.
b. the students who opt to buy the books.
c. University Bookstores.
d. Warehouse Storage.
30. Noni and Myra enter into a contract for a sale of clarinets and other wind
instruments. Noni does not deliver. Myra 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.
31. Bayou Boats, Inc., contracts for the sale of seven swamp boats to Eventide
Fishing Tours. Bayou repudiates the contract. Eventide’s recovery is measured
at the time
a. Bayou advertised the goods.
b. Eventide ordered the goods.
c. Eventide learned of the breach.
d. Bayou knew that it would repudiate the contract.
32. Leatherbound Stores, Inc., rejects a shipment of goods that does not conform
to its contract with Cowhide Corporation, but is unable to obtain instructions
from the seller. Leatherbound may
a. resell or return the goods only.
b. resell or store the goods only.
c. return or store the goods only.
d. resell, return, or store the goods.
33. Natural 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 Natural
Foods accepts. To recover damages for the nonconformity, Natural Foods
must give notice of the breach within a reasonable time to
a. Olive Grove only.
b. Olive Grove, Pic ‘N Pay, and the appropriate government agency.
c. Pic ‘N Pay only.
d. the appropriate government agency only.
34. BBQ, Inc., makes and sells grills to Grill Mart, a retailer, which sells one of the
grills to Hope, a consumer. BBQ and Grill Mart include in their contracts a
limitation on consequential damages for personal injuries arising from a breach
of warranty. This is prima facie unconscionable with respect to
a. all of these parties.
b. BBQ and Grill Mart, but not Hope.
c. Hope only.
d. none of these parties.
35. Summer Breeze, Inc., contracts for the sale of fifty ceiling fans to Island Décor
store. If Summer Breeze fails to deliver the goods, Island Décor must
commence a suit for breach of contract within
a. four years.
b. not more than one year.
c. not less than four years.
d. thirty days.
ESSAY QUESTIONS
1. Signal Sets Company contracts to deliver one hundred 52-inch plasma high–
definition 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.
2. Colby contracts in writing to sell his 2005 Dodge-brand pick-up truck to Efrem
for $10,500. Colby agrees to deliver the truck on Friday, and Efrem promises to
pay the $10,500 on the following Monday. On Thursday, Efrem tells Colby that
he changed his mind and will not buy the truck. Over the weekend, Efrem
changes his mind again and tenders $10,500 to Colby on Monday. Colby has
not sold the truck to another party but refuses the tender and refuses to deliver.
Efrem claims that Colby has breached their contract. Colby contends that
Efrem’s repudiation released him from his duty to perform under the contract.
Who is correct, and why?