249
Chapter 21
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
A1. The duties and obligations under the terms of a contract include those specified by
custom.
A2. The UCC’s good faith provision can never be disclaimed.
A3. A shipment contract requires a seller to deliver goods at a particular destination.
250 TEST BANK A—UNIT 4: DOMESTIC & INT’L SALES & LEASE CONTRACTS
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.
A5. Once the time for performance under a contract has expired, the seller or lessor loses
the right to cure.
A6. With an installment contract, a buyer or lessee cab reject an installment on any
pretext.
A7. Occurrences unforeseen by either party when a contract was made may make
performance commercially impracticable, but the perfect tender rule still applies.
A8. Unless the parties agree otherwise, the buyer or lessee has an absolute right to
inspect the goods before making payment.
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.
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.
CHAPTER 21: PERFORMANCE & BREACH OF SALES & LEASE CONTRACTS 251
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.
A12. If a lessee breaches a contract, the lessor can choose to simply cancel the contract.
A13. If a buyer repudiates a contract, the seller cannot recover damages.
A14. If a lessee is insolvent, a lessor can stop a carrier or bailee from delivering the goods
regardless of the quantity shipped.
A15. When a lessor refuses to deliver the goods, a lessee can obtain specific performance
only if the goods are not unique.
A16. A buyer may reject a seller’s goods only if they fail to conform to a material term of
the contract.
A17. Revocation of acceptance is not effective until notice is given to the seller or lessor.
252 TEST BANK A—UNIT 4: DOMESTIC & INT’L SALES & LEASE CONTRACTS
A18. If the parties to a sales contract state that a certain remedy is exclusive, then it is the
sole remedy.
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.
A20. Under the UCC, parties to a contract cannot limit or exclude consequential damages.
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.
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.
CHAPTER 21: PERFORMANCE & BREACH OF SALES & LEASE CONTRACTS 253
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 delivery is in
a. California.
b. Delaware.
c. Florida.
d. Hawaii.
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.
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 containers, 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.
254 TEST BANK A—UNIT 4: DOMESTIC & INT’L SALES & LEASE CONTRACTS
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.
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.
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.
CHAPTER 21: PERFORMANCE & BREACH OF SALES & LEASE CONTRACTS 255
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.
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.
A11. Richman Manufacturing Company contracts to sell sweaters to Sweet Sweaters store.
Before the sweaters 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.
256 TEST BANK A—UNIT 4: DOMESTIC & INT’L SALES & LEASE CONTRACTS
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.
A13. 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 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.
A14. Field Gardens and Gourmet Restaurant, Inc., enter into a contract 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.
CHAPTER 21: PERFORMANCE & BREACH OF SALES & LEASE CONTRACTS 257
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.
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.
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.
258 TEST BANK A—UNIT 4: DOMESTIC & INT’L SALES & LEASE CONTRACTS
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.
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.
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.
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
CHAPTER 21: PERFORMANCE & BREACH OF SALES & LEASE CONTRACTS 259
installments between October 1 and the following 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.
260 TEST BANK A—UNIT 4: DOMESTIC & INT’L SALES & LEASE CONTRACTS