Chapter 11
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. A contract for a sale of real property or services is a contract for a sale of
goods.
2. Goods associated with real estate often fall within the scope of Article 2.
3. Under the UCC, good faith means honesty in fact and the observance of
reasonable commercial standards of fair dealing in the trade.
4. Title and risk of loss can pass to the buyer from the seller before the goods are
identified to the contract.
5. Identification takes place when specific goods are designated as the subject
mater of a sales or lease contract.
6. Any explicit understanding between the buyer and the seller determines when
title passes.
7. A bill of lading is a receipt signed by a warehouse for goods stored in a
warehouse.
8. Under a destination contract, the risk of loss passes to the buyer when the
goods are duly delivered to the carrier.
9. The contract term “free on board” indicates that the selling price of goods
includes transportation costs to the specific F.O.B. place named in the contract.
10. Merchants are held to a higher standard of performance or duty than are
nonmerchants.
11. Under a shipment contract, if the seller does not make a reasonable contract
for transportation or notify the buyer of the shipment, the buyer can reject the
goods if a material loss results.
12. A buyer’s failure to cover will bar him or her from using any other remedies
available under the UCC.
13. A buyer who rightfully rejects nonconforming goods may obtain cover or cancel
the contact, but may not seek damages.
14. The parties to a sales or lease contract can expressly provide for remedies in
addition to those provided in the UCC.
15. A warranty of good title means that a seller warrants that he or she has valid
title to the goods and that transfer of the title is rightful.
16. Statements of fact made during the bargaining process are express warranties.
17. An expression of opinion will usually create a warranty.
18. Goods must be of the highest quality possible to be merchantable.
19. Merchants are not required to warrant that the goods they sell are fit for their
ordinary purpose.
20. 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
1. 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.
2. 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.
3. 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 required acceptance of its terms.
c. the offeror objects to the new terms within a reasonable time.
d. any of the choices.
4. 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.
5. Big Beef, Inc. raises calves to sell. Big Beef breeds its cows in April, and the
cows calve in February of the following year. In January Andrea contracts with
Big Beef to buy fifty calves. Identification takes place in
a. January, when the contract is signed.
b. April, when the calves are conceived.
c. February, when the calves are born.
d. a reasonable period of time.
6. Megan, an agent for a department store, orders one hundred dresses from
Sal’s Clothing Shop for the Spring Blossom Sale. There is no specific
agreement in the sale contract indicating when title will pass to the department
store. The title will pass to the department store when
a. Megan signs the contract.
b. Megan and the Sal’s Clothing Shop agent sign the contract.
c. Sal’s Clothing Shop physically delivers the dresses to the department
store.
d. Megan pays Sal’s Clothing Shop for the dresses.
7. Foster contracts with Golf Carts Unlimited, Inc. to buy five golf carts. The
contract lists the five carts as GC001, GC002, GC003, GC004, GC005.
Identification
a. requires that Foster verify his identity to take possession of the carts.
b. has taken place.
c. cannot take place until the contract is reviewed by a court.
d. will take place only when Foster pays for the golf carts.
8. Outdoor Outfitters Store contracts to buy fifty tents from Pitched Camp, Inc.
Unless the contract states otherwise, it is assumed to be
a. none of the choices.
b. a destination contract.
c. a shipment contract.
d. a delivery ex-ship.
9. Quaff n’ Quench Café buys twenty-five bags of Columbia coffee beans from
Roasted Bean Brokers, Inc. The parties agree to ship the oranges “F.O.B.
Quaff n’ Quench ” via Swiftline Trucking Company. The oranges rot in transit.
The loss is suffered by
a. Quaff n’ Quench.
b. Swiftline.
c. Columbia.
d. Roasted Bean.
10. Fuel Connector Products, Inc., agrees to sell Go-Flo, Inc., a certain quantity of
hose couplings and fittings, but the contract does not specify a place of
delivery. Go-Flo is expected to pick up the goods. The place of delivery is
a. Fuel Connector’s place of business.
b. Go–Flo’s place of business.
c. the current location of the hose couplings and fittings.
d. the U.S. Postal Service office nearest to Go-Flo’s place of business.
11. On July 10, Pet Supply Store orders fifty small dog collars from Quality Collars,
Inc. to be delivered by July 15. On July 13, Quality Collars tenders fifty large
dog collars. Pet Supply rejects the shipment. Quality Collars has
a. no right to cure.
b. until July 15 to cure.
c. until the end of the business day on July 13 to cure.
d. unlimited time to cure.
12. 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 Sweet Fruits using another trucking company with
refrigerated trucks.
b. must refund Sweet Fruits’ 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 Sweet Fruits
incidental damages.
13. Beef Burgers, Inc. contracts to buy five hundred steers from Fattening
Feedlots. Before Fattening Feedlots can deliver the steers, there is an outbreak
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.
14. 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
CHAPTER 11: SALES AND LEASE CONTRACTS 9
a. cannot reject the entire shipment.
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.
15. Arnold buys a backhoe from Big Dig Equipment Inc. Arnold is unaware that
Credit Collection Company holds a lien against the backhoe when he buys it. If
Credit Collection repossesses the backhoe, Arnold can
a. recover from Big Dig for breach of warranty.
b. do nothing.
c. file criminal charges against Big Dig and Credit Collection.
d. recover damages from Credit Collection for breach of warranty.
16. Riverside Ranch is a horse breeding facility. Steed Stables is a customer
looking for a new stallion for its breeding program. Riverside’s representative
Tomas shows Steed a stallion that he says is very fertile and can easily breed
twenty mares per year. This statement is
a. an express warranty.
b. an implied warranty.
c. a warranty of title.
d. puffery.
17. Livestock Feedlot orders one hundred sacks of cattle feed from MegaNutrient
Feed, Inc. Each sack is stamped with the phrase “Twenty percent protein.” This
is
a. an express warranty.
b. an implied warranty.
c. a warranty of title.
d. puffery.
18. Chord Guitars Inc. sells guitars and other stringed instruments to consumers. A
Chord salesperson says to a potential customer, “This Chord is the best guitar
you’ll find anywhere, even online.” This statement is
a. an implied warranty of fitness for a particular purpose.
b. an implied warranty of merchantability.
c. an express warranty.
d. none of the choices.
19. Trucks & Trailers, Inc. (T&T), and United Delivery Service enter into a contract
for a lease of trucks. T&T is a merchant who deals in goods of the kind leased.
Under the UCC, an implied warranty of merchantability arises
a. automatically.
b. only if the lessee asks for such a warranty.
c. only if the lessor expresses such a warranty.
d. only in conjunction with sales contracts, not lease contracts.
20. Toro, S.A., which is 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.
ESSAY QUESTIONS
1. Erin contracts in writing to sell her Ford-brand pick-up truck to Garth for
$10,500. Erin agrees to deliver the truck on Friday, and Garth promises to pay
the $10,500 on the following Monday. On Thursday, Garth tells Erin that he
changed his mind and will not buy the truck. Over the weekend, Garth changes
his mind again and tenders $10,500 to Erin on Monday. Erin has not sold the
truck to another party but refuses the tender and refuses to deliver. Garth
claims that Erin has breached their contract. Erin contends that Garth’s
repudiation released her from her duty to perform under the contract. Who is
correct, and why?
2. Motor Vehicle Body Shops contracts to buy from Paint Supply & Equipment
HQ, Inc., twenty-four spray paint guns at $30 each to be delivered by October
1. Paint Supply knows that Motor Vehicle Body Shops will use the guns to
complete a special job by October 31 for a certain auto dealer. Motor Vehicle
Body Shops expects to make $17,000 profit from the job. Paint Supply fails to
12 TEST BANK—UNIT THREE: THE COMMERCIAL ENVIRONMENT
deliver on October 1. Motor Vehicle Body Shops attempts to buy substitute
spray guns, but must pay $40 for each and take delivery on October 15, cutting
Motor Vehicle Body Shops’ profits when the dealer arranges for some of the
job to be done elsewhere. Motor Vehicle Body Shops sues Paint Supply. What
is the measure of recovery?