1
Chapter 22
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
B1. Under the UCC, the aggrieved party is not limited to one exclusive remedy.
B2. Merchants are held to a higher standard of performance or duty than are
nonmerchants.
B3. 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.
B4. The seller’s right to cure does not affect the right of the buyer or lessee to reject
goods.
2 TEST BANK B—UNIT FOUR: DOMESTIC & INT’L SALES & LEASE CONTRACTS
B5. Unless a contract provides otherwise, an installment contract is breached when
only one nonconforming installment impairs the value of the whole contract, no
matte how slight the impairment.
B6. The doctrine of commercial impracticability does not extend to problems that
could have been foreseen.
B7. If goods identified to a contract are destroyed through no fault of either party,
both parties are excused from performance.
B8. In the absence of any specific agreements, the buyer or lessee must make
payment subsequent to receipt of the goods.
B9. If, before the time for contract performance, one party clearly communicates to
the other the intention not to perform, the other party must wait to see if the
repudiating party will decide to honor the contract despite the avowed intention
to renege.
B10. 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.
B11. If a buyer breaches a contract, the seller can choose to simply cancel the
contract.
CHAPTER 22: PERFORMANCE & BREACH OF SALES & LEASE CONTRACTS 3
B12. If a buyer wrongfully refuses to accept goods, the seller can bring an action to
recover the damages sustained.
B13. When a buyer has breached a sales contract, and the goods are in his or her
possession, the seller can sue to recover the purchase price, but not incidental
damages.
B14. A buyer’s failure to cover will bar him or her from using any other remedies
available under the UCC.
B15. If a buyer or lessee fails to reject the goods within a reasonable amount of time,
acceptance will be presumed.
B16. A buyer who rightfully rejects nonconforming goods may obtain cover or cancel
the contact, but may not seek damages.
B17. Acceptance of goods precludes the buyer or lessee from exercising the right of
rejection.
B18. The parties to a sales or lease contract can expressly provide for remedies in
addition to those provided in the UCC.
4 TEST BANK B—UNIT FOUR: DOMESTIC & INT’L SALES & LEASE CONTRACTS
B19. The United Nations Convention on Contracts for the International Sale of
Goods provides international sellers and buyers with remedies very different to
those available under the UCC.
B20. When a buyer or lessee is a consumer, any limitation of consequential
damages for personal injuries resulting from consumer goods is prima facie
unconscionable.
MULTIPLE CHOICE QUESTIONS
B1. Sun Power, Inc., sells solar power cells and panels to commercial dealers in
the Southwest. With regard to the UCC’s good faith requirement, Sun Power
can
a. avoid it only by a conspicuous written disclaimer.
b. avoid it only by oral disclaimer.
c. avoid it with or without a disclaimer.
d. not disclaim it.
B2. 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.
CHAPTER 22: PERFORMANCE & BREACH OF SALES & LEASE CONTRACTS 5
B3. GR8 Daze Products, Inc., and Hot Springs Spas Stores enter into a contract for
a sale of hot tubs. 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.
B4. Energy Products Corporation and First Response Preparedness.com enter into
a contract for a sale of portable generators. 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.
B5. 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 the contract description.
b. entirely conform to the contract description except in one or two details.
c. conform to the contract description in every way.
d. substantially conform to the contract description in most details.
B6. Lock & Key Storage Pods and Maxi Discount Stores enter into a contract for a
lease of ten storage pods of a certain size. Lock & Key delivers ten pods, but
they are not the right size. Maxi Discount
a. cannot reject the entire shipment.
b. can reject the entire shipment.
c. must accept the entire shipment.
d. must reject the entire shipment.
6 TEST BANK B—UNIT FOUR: DOMESTIC & INT’L SALES & LEASE CONTRACTS
B7. 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.
B8. 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.
B9. 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.
CHAPTER 22: PERFORMANCE & BREACH OF SALES & LEASE CONTRACTS 7
B10. 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.
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.
B11. Repair Tools Company contracts to deliver fifty heavy-duty steel floor jacks to
Serv-UR-Self Auto Stores on May 1 for which Serv-UR-Self agrees to pay.
Repair Tools tells Serv-UR-Self on April 15 that delivery will be delayed until
June 1. Serv-UR-Self may do all of the following except
a. force Repair Tools to deliver substitute goods before the time for the
contract’s performance.
b. await Repair Tools’ performance for a commercially reasonable time.
c. sue Repair Tools for breach of contract.
d. suspend its own performance.
B12. On May 1, Garage Prefabricators, Inc., agrees to sell four portable garages to
Hiway Truck Service Center. Five days later, Hiway refuses delivery and
cancels the contract. Garage Prefabricators is entitled to
a. force Hiway to accept the garage.
b. recover any damages from Hiway but not resell the garage.
c. resell the garage and recover any damages from Hiway.
d. resell the garage but not recover any damages from Hiway.
B13. Garden Field Farms and Haute Gourmet Restaurant, Inc., enter into a contract
for a sale of lettuce. After Garden Field ships the lettuce but before Haute
Gourmet receives it, the buyer declares bankruptcy. Garden Field can stop
delivery of the goods in transit
a. only if the quantity is deficient.
8 TEST BANK B—UNIT FOUR: DOMESTIC & INT’L SALES & LEASE CONTRACTS
b. only if the quantity exceeds the contract amount.
c. only if the quantity is at least a truckload.
d. regardless of the quantity.
B14. Loading Ramps Plus Inc. contracts to sell sixteen aluminum loading ramps to
Moving Services, Inc. Loading Ramps ships the ramps, which Moving Services
accepts but does not pay for. Loading Ramps can
a. sue to recover the purchase price plus incidental damages.
b. sue to recover the purchase price minus incidental damages.
c. resell the ramps to any buyer willing to reclaim them from Moving
Services.
d. require Moving Services to revoke its acceptance of the ramps.
B15. Oh! Wow! Markets, Inc., rejects a shipment of turkey that does not conform to
its contract with Poultry Processing Corporation, but is unable to obtain
instructions from the seller. Oh! Wow! Markets can
a. destroy the goods.
b. cure the goods to make them conform to the contract.
c. retain the goods without paying for them.
d. reship or store the goods for the seller.
B16. Almond Farms contracts for the sale of a certain quantity of nuts to Bulk Natural
Foods Stores. Almond Farms delivers nonconforming goods. Acceptance will be
presumed unless Bulk Natural Foods rejects the goods
a. within a reasonable time after delivery.
b. within a reasonable time after ordering the goods.
c. within any time, since hunting rifles are not perishable.
d. before the last day of the current hunting season.
CHAPTER 22: PERFORMANCE & BREACH OF SALES & LEASE CONTRACTS 9
B17. BBQ, Inc., makes and sells grills to Cook’s Choice and Grill Mart, retailers of
kitchen appliances, outdoor cooking equipment, and related utensils. Their
contracts limit consequential damages when the loss is commercial in nature.
This is prima facie unconscionable with respect to
a. BBQ.
b. Grill Mart.
c. Cook’s Choice.
d. none of these parties.
Fact Pattern 22-B1 (Questions B18–B20 apply)
Economy Bank issues a letter of credit in favor of Finish & Refining Company, a U.S.
firm, to facilitate an international sales contract to buy resources from Global Mining,
Ltd., a British company.
B18. Refer to Fact Pattern 22-B1. Global Mining is entitled to payment when it
a. enters into the contract with Finish & Refining.
b. verifies that Finish & Refining has the money to pay for the purchase.
c. complies with the terms and conditions of the letter of credit.
d. asks to be paid.
B19. Refer to Fact Pattern 22-B1. Economy Bank is bound to
a. make sure that the parties perform the contract.
b. verify with Finish & Refining that the transaction has been completed.
c. make payment when Global Mining presents the proper documents.
d. pay Global Mining whenever it asks to be paid.
B20. Refer to Fact Pattern 22-B1. In this letter of credit, the account party is
a. Global Mining.
b. Finish & Refining.
c. Economy Bank.
d. Great Britain.
10 TEST BANK B—UNIT FOUR: DOMESTIC & INT’L SALES & LEASE CONTRACTS
ESSAY QUESTIONS
B1. 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?
B2. Motor Vehicles Body Shops contracts to buy from Paint Supply & Equipment
Headquarters, Inc., twenty-four spray paint guns at $30 each to be delivered by
October 1. Paint Supply knows that Motor Vehicles Body Shops will use the
guns to complete a special job by October 31 for a certain auto dealer. Motor
Vehicles Body Shops expects to make $17,000 profit from the job. Paint Supply
fails to deliver on October 1. Motor Vehicles Body Shops attempts to buy
substitute spray guns, but must pay $40.00 for each and take delivery on
October 15, cutting Motor Vehicles Body Shops’ profits when the dealer
arranges for some of the job to be done elsewhere. Motor Vehicles Body
Shops sues Paint Supply. What is the measure of recovery?
ANSWER: The buyer exercised the buyer’s right to cover and should get the
CHAPTER 22: PERFORMANCE & BREACH OF SALES & LEASE CONTRACTS 11