ANSWERS TO PROBLEMS
1. Tammie contracted with Kristine to manufacture, sell, and deliver to Kristine and put in running
order a certain machine. After Tammie set up the machine and put it in running order, Kristine
found it unsatisfactory and notified Tammie that she rejected the machine. She continued to use it
for three months but continually complained of its defective condition. At the end of the three
months, she notified Tammie to come and get it. Has Kristine lost her right (a) to reject the
machine? (b) to revoke acceptance of the machine?
Answer: (a) Rejection. After the buyer has rejected the goods, the Code allows her to exercise no
ownership of them. As a result, Kristine has lost her right to reject the machine, although she has
2. Smith, having contracted to sell to Beyer thirty tons of described fertilizer, shipped to Beyer by
carrier thirty tons of fertilizer that he stated conformed to the contract. Nothing was stated in the
contract as to time of payment, but Smith demanded payment as a condition of handing over the
fertilizer to Beyer. Beyer refused to pay unless he was given the opportunity to inspect the
fertilizer. Who is correct? Explain.
3. Benny and Sheree entered into a contract for the sale of one hundred barrels of flour. No
mention was made of any place of delivery. Thereafter, Sheree demanded that Benny deliver the
flour at her place of business, and Benny demanded that Sheree come and take the flour from his
place of business. Neither party acceded to the demand of the other. Has either one a right of
action against the other?
Answer: Place of Tender. Benny would have a cause of action against Sheree. Section 2-308(a) of
the U.C.C. provides that unless otherwise agreed, the place for delivery of the goods is Benny’s
4. Johnson, a manufacturer of air-conditioning units, made a written contract with Maxwell to sell
to Maxwell forty units at a price of $200 each and to deliver them at a certain apartment building
owned by Maxwell for installation by Maxwell. On the arrival of Johnson’s truck for delivery at
the apartment building, Maxwell examined the units on the truck, counted only thirty units, and
asked the driver if that was the total delivery. The driver replied that it was as far as he knew.
Maxwell told the driver that she would not accept delivery of the units. The next day, Johnson
telephoned Maxwell and inquired why delivery was refused. Maxwell stated that the units on the
truck were not what she ordered, that she ordered forty units, that only thirty were tendered, and
that she was going to buy air-conditioning units elsewhere. In an action by Johnson against
Maxwell for breach of contract, Maxwell defends on the ground that the tender of thirty units was
improper, because the contract called for delivery of forty units. Is this a valid defense?
5. Edwin sells a sofa to Jack for $800. Edwin and Jack both know that the sofa is in Edwin’s
warehouse, located approximately ten miles from Jack’s home. The contract does not specify the
place of delivery, and Jack insists that the place of delivery is either his house or Edwin’s store. Is
Jack correct?
6. On November 4, Kim contracted to sell to Lynn 500 sacks of flour at $4 each to be delivered to
Lynn by December 12. On November 27, Kim shipped the flour. By December 5, when the car
arrived, containing only 450 sacks, the market price of flour had fallen. Lynn refused to accept
delivery or to pay. Kim shipped 50 more sacks of flour, which arrived December 10. Lynn refused
delivery. Kim resold the 500 sacks of flour for $3 per sack. What are Kim’s rights against Lynn?
Answer: Cure by the Seller. Kim should prevail. Tender entitles the seller to acceptance of goods
and payment of the purchase price. U.C.C. Section 2-507. Where any tender is rejected because
7. Farley and Trudy entered into a written contract whereby Farley agreed to sell and Trudy
agreed to buy 6,000 bushels of wheat at $10.33 per bushel, deliverable at the rate of 1,000
bushels a month commencing June 1, the price for each installment being payable ten days after
delivery thereof. Though Farley delivered and received payment for the June installment, he
defaulted by failing to deliver the July and August installments. By August 15, the market price of
wheat had increased to $12.00 per bushel. Trudy thereupon entered into a contract with Albert to
purchase 5,000 bushels of wheat at $12 per bushel deliverable over the ensuing four months. In
late September, the market price of wheat started to decline and by December 1 was $9.25 per
bushel. Explain whether Trudy would succeed in a legal action against Farley for breach of
contract.
Answer: Installment Contracts: Cover. Yes, Trudy would prevail. Farley’s failure to deliver the
July and August installments substantially impaired the value of the whole contract and therefore
was a breach of the whole contract. Section 2-612(3) U.C.C. It was a breach which excused
8. Bain ordered from Marcum a carload of lumber, which he intended to use in the construction of
small boats for the U.S. Navy, pursuant to contract. The order specified that the lumber was to be
free from knots, wormholes, and defects. The lumber was shipped, and immediately on receipt
Bain looked into the door of the fully loaded car, ascertained that there was a full carload of
lumber, and acknowledged to Marcum that the carload had been received. On the same day, Bain
moved the car to his private siding and sent to Marcum full payment in accordance with the terms
of the order.
A day later, the car was moved to the work area and unloaded in the presence of the Navy
inspector, who refused to allow three-fourths of it to be used because of excessive knots and
wormholes in the lumber. Bain then informed Marcum that he was rejecting the order and
requested refund of the payment and directions on disposition of the lumber. Marcum replied that
because Bain had accepted the order and unloaded it, he was not entitled to return of the
purchase price. Who is correct? Explain.
Answer: Inspection. Bain is entitled to return a of the purchase price. Unless otherwise agreed the
9. The plaintiff, a seller of milk, had for ten years bid on contracts to supply milk to the defendant
school district, and had supplied milk to other school districts in the area. On June 15, the
plaintiff contracted to supply the defendant’s requirements of milk for the next school year, at a
price of $0.0759 per half-pint. The price of raw milk delivered from the farm had for years been
controlled by the U.S. Department of Agriculture. On June 15, the department’s administrator for
the New York/ New Jersey area had mandated a price for raw milk of $8.03 per hundredweight.
By December, the mandated price had been raised to $9.31 per hundredweight, an increase of
nearly 20 percent. If required to complete deliveries at the contract price, the plaintiff would lose
$7,350.55 on its contract with the defendant and would face similar losses on contracts with two
other school districts. Is the plaintiff correct in its assertion (a) that its performance had become
impracticable through unforeseen events and (b) that it is entitled to relief from performance?
Answer: Excuses for Nonperformance: Nonhappening of Presupposed Condition. The UCC
recognizes that performance may be excused in instances where it would be commercially
10. In April F. W. Lang Company (Lang) purchased an ice cream freezer and refrigeration
compressor unit from Fleet for $2,160. Although the parties agreed to a written installment
contract providing for an $850 down payment and eighteen installment payments, Lang made
only one $200 payment upon receipt of the goods. One year later, Lang moved to a new location
and took the equipment along without notifying Fleet. Then, in May or June of the following year,
Lang disconnected the compressor from the freezer and used it to operate an air conditioner.
Lang continued to use the compressor for that purpose until the sheriff seized the equipment and
returned it to Fleet pursuant to a court order. Fleet then sold the equipment for $500 in what both
parties conceded was a fair sale. Lang then brought an action charging that the equipment was
defective and unusable for its intended purpose and sought to recover the down payment and
expenses incurred in repairing the equipment. Fleet counterclaimed for the balance due under the
installment contract less the proceeds from the sale. Who will prevail? Why?
11. Deborah McCullough bought a new car from Bill Swad Chrysler, Inc. The car was protected by
both a limited warranty and an extended warranty. McCullough immediately encountered
problems with the automobile’s brakes, transmission, and air-conditioning and discovered a
number of cosmetic defects as well. She returned the car to Swad for repairs, but Swad did not fix
the brakes properly or perform any of the cosmetic work. Moreover, new problems appeared with
respect to the car’s steering mechanism. McCullough returned the car twice more for repairs, but
on each occasion, old problems persisted and new ones emerged. After the engine abruptly shut
off on a short trip away from home and the brakes again failed on a more extensive excursion,
McCullough presented Swad with a list of thirty-two of the car’s defects and demanded their
correction. When Swad failed to remedy more than a few of the problems, McCullough wrote a
letter to Swad calling for rescission of the purchase agreement and a refund of the purchase price
and offering to return the car upon receiving from Swad instructions regarding where to return it.
Swad did not respond to the letter, and McCullough brought an action against Swad. She
continued to operate the vehicle until the time of trial, some seventeen and one-half months (and
23,000 miles) later. Can McCullough rescind the agreement?
12. On March 17, Peckham bought a new car from Larsen Chevrolet for $16,400. During the first
one and one-half months after the purchase, Peckham discovered that the car’s hood was dented,
its gas tank contained no baffles, its emergency brake was inoperable, the car did not have a jack
or a spare tire, and neither the clock nor the speedometer worked. Larsen claimed that Peckham
knew of the defects at the time of the purchase. Peckham, on the other hand, claimed that he did
not know the extent of the defects and that despite his repeated efforts, the defects were not
repaired until June 11. Then, on July 15, the car’s dashboard caught fire, leaving the car’s
interior damaged and the car itself inoperable. Peckham then returned to Larsen Chevrolet and
told Larsen that Larsen had to repair the car at its own expense or that he, Peckham, would
either rescind the contract or demand a new automobile. Peckham also claimed that at the end of
their conversation, he notified Larsen Chevrolet that he was electing to rescind the contract and
demanded the return of the purchase price. Larsen denied having received that oral notification.
On October 12, Peckham sent a written notice of revocation of acceptance to Larsen. What are
the rights of the parties?
Answer: Revocation of Acceptance. Judgment for Peckham. Although Peckham sought the
common law remedy of rescission, the relief sought was equivalent to the Code concept of
revocation of acceptance. For Peckham to revoke his acceptance, he had to show 1) that the car
13. Joc Oil bought a cargo of fuel oil for resale. The certificate from the foreign refinery stated the
sulfur content of the oil was 0.5 percent. Joc Oil entered into a written contract with Con Ed for
the sale of this oil. The contract specified a sulfur content of 0.5 percent. Joc Oil knew, however,
that Con Ed was authorized to buy and burn oil of up to 1 percent sulfur content and that Con Ed
often bought and mixed oils of varying contents to stay within this limit. The oil under contract
was delivered to Con Ed, but independent testing revealed a sulfur content of 0.92 percent. Con
Ed promptly rejected the nonconforming shipment. Joc Oil immediately offered to substitute a
conforming shipment of oil, although the time for performance had expired after the first
shipment of oil. Con Ed refused to accept the substituted shipment. Joc Oil sues Con Ed for
breach of contract. Judgment?
Answer: Cure by the Seller. Judgment for Joc Oil. The Uniform Commercial Code provides the
seller opportunity to cure, even if the time for performance is past, if 1) the seller had reasonable
14. The plaintiff, a German wine producer and exporter, contracted to ship 620 cases of wine to the
defendant, a distributor in North Carolina. The contract was silent as to the shipment destination.
During the next several months, the defendant called repeatedly to find out the status of the
shipment. Later, without notifying the defendant, the plaintiff delivered the wine to a shipping line
in Rotterdam, destined for Wilmington, North Carolina. The ship and the wine were lost at sea en
route to Wilmington. When the defendant refused to pay on the contract, the plaintiff sued.
Decision?
Answer: Shipment Contracts. Here the risk of loss is still borne by the West German wine producer.
Failure to give the buyer (here defendant) notice of the shipment of the wine prevented the buyer
15. Can-Key Industries, Inc., manufactured a turkey-hatching unit, which it sold to Industrial
Leasing Corporation (ILC), which leased it to Rose-A-Linda Turkey Farms. ILC conditioned its
obligation to pay on Rose-A-Linda’s acceptance of the equipment. Rose-A-Linda twice notified
Can-Key that the equipment was unacceptable and asked that it be removed. Over a period of
fifteen months Can-Key made several unsuccessful attempts to solve the problems with the
equipment. During this time, Can-Key did not instruct Rose-A-Linda to refrain from using the
equipment. Rose-A-Linda indicated its dissatisfaction with the equipment, and ILC refused to
perform its obligations under the contract. Can-Key then brought suit against ILC for breach of
contract. It argued that Rose-A-Linda accepted the equipment, because it used it for fifteen
months. ILC countered that the equipment was unacceptable and asked that it be removed. It
claimed that Can-Key refused and failed to instruct Rose-A-Linda to refrain from using the
equipment. Therefore, ILC argued, Rose-A-Linda effectively rejected the turkey-hatching unit,
relieving ILC of its contractual obligations. Who is correct? Explain.
Answer: Acceptance. Judgment for ILC. Since ILC’s acceptance was conditioned upon the
acceptance by its lessee, Rose-A-Linda, it was only obligated to pay for the unit if Rose-A-Linda
16. Frederick Manufacturing Corporation ordered 500 dozen units of Import Traders’ rubber pads
for $2,580. The order indicated that the pads should be “as soft as possible.” Import Traders
delivered the rubber pads to Frederick Manufacturing on November 19. Frederick failed to
inspect the goods upon delivery, even though the parties recognized that there might be a problem
with the softness. Frederick finally complained about the nonconformity of the pads in April of
the following year, when Import Traders requested the contract price for the goods. Can Import
Traders recover the contract price from Frederick?
Answer: Acceptance. Yes. Under the Code, the contract price may be recovered by a seller when a
buyer accepts the goods. Here, acceptance occurred when Frederick failed to make an effective
17. Moulton Cavity & Mold Inc. agreed to manufacture twenty-six innersole molds to be purchased
by Lyn-Flex. Moulton delivered the twenty-six molds to Lyn-Flex after Lyn-Flex allegedly
approved the sample molds. However, Lyn-Flex rejected the molds, claiming that the molds did
not satisfy the specifications exactly, and denied that it had ever approved the sample molds.
Moulton then sued, contending that Lyn-Flex wrongfully rejected the molds. Lyn-Flex, argued
that the Code’s perfect tender rule permitted its rejection of the imperfect molds, regardless of
Moulton’s substantial performance. Decision?
Answer: Perfect Tender Rule. Judgment for Lyn-Flex. Under the Code’s perfect tender provision,
18. Neptune Research & Development, Inc. (the buyer), manufacturer of solar-operated valves used
in scientific instruments, saw advertised in a trade journal a hole-drilling machine with a very
high degree of accuracy, manufactured and sold by Teknics Industrial Systems, Inc. (the seller).
Because the machine’s specifications met the buyer’s needs, the buyer contacted the seller in late
March and ordered one of the machines to be delivered in mid-June. There was no
“time-is-of-the-essence” clause in the contract.
Although the buyer made several calls to the seller throughout the month of June, the seller never
delivered the machine and never gave the buyer any reasons for the nondelivery. By late August,
the buyer desperately needed the machine. The buyer went to the seller’s place of business to
examine the machine and discovered that the still-unbuilt machine had been redesigned, omitting
a particular feature that the buyer had wanted. Nonetheless, the buyer agreed to take the
machine, and the seller promised that it would be ready on September 5. The seller also agreed to
call the buyer on September 3 to give the buyer two days to arrange for transportation of the
machine.
The seller failed to telephone the buyer on September 3 as agreed. On September 4 the buyer
called the seller to find out the status of the machine and was told by the seller that “under no
circumstances” could the seller have the machine ready by September 5. At this point, the buyer
notified the seller that the order was canceled. One hour later, still on September 4, the seller
called the buyer, retracted its earlier statement, and indicated that the machine would be ready by
the agreed September 5 date. The buyer sued for the return of its $3,000 deposit. Should the
buyer prevail? Explain.
Answer: Anticipatory Repudiation. Yes. The seller repudiated the contract when it stated on
19. ALPAC and Eagon are corporations that import and export raw logs. In April, Setsuo Kimura,
ALPAC’s president, and C.K. Ahn, Eagon’s vice president, entered into a contract for ALPAC to
ship about 15,000 cubic meters of logs between the end of July and the end of August. Eagon
agreed to purchase them. Subsequently, the market for logs began to soften, making the contract
less attractive to Eagon. ALPAC became concerned that Eagon would try to cancel the contract.
Kimura and Ahn began a series of meetings and letters, apparently to assure ALPAC that Eagon
would purchase the logs.
Eagon was troubled by the drop in timber prices and initially withheld approval of the shipment.
Ahn sent numerous internal memoranda to the home office indicating that it might not wish to
complete the deal, but that accepting the logs was “inevitable” under the contract.
On August 23, Eagon received a fax from ALPAC suggesting a reduction in price and volume of
the contract, but Eagon did not respond. Soon after, Kimura asked Ahn whether he intended to
accept the logs; Ahn admitted that he was having trouble getting approval. On August 30, Ahn
informed the home office that he would attempt to avoid accepting the logs but that it would be
difficult and suggested holding ALPAC responsible for shipment delay. Kimura thereafter
believed that Eagon would not accept the shipment and eventually canceled the vessel reserved to
ship the logs, believing that Eagon was canceling the contract. The logs were not loaded or
shipped by August 31, but Ahn and Kimura continued to discuss the contract. On September 7,
Ahn told Kimura that he would try to convince the firm to accept the delivery and indicated that
he did not want Kimura to sell the logs to another buyer. The same day, Ahn informed Eagon that
it should consider accepting the shipment in September or October.
By September 27, ALPAC had not shipped the logs and sent a final letter to Eagon stating that
because it failed to take delivery of the logs, it had breached the contract. Eagon responded to the
letter, stating that there was “no contract” because ALPAC’s breach (not shipping by the
deadline) excused Eagon’s performance. Explain whether either party breached the agreement.
Answer: Anticipatory Repudiation: Common law supports the position that, when the parties have
not indicated that time is of the essence, late delivery is not a material breach. However, as a
ANSWERS TO “TAKING SIDES” PROBLEMS
On February 26, 2014, William Stem purchased a used BMW from Gary Braden for $26,600.
Stem’s primary purpose for buying the car was to use it to drive his child to school and various
activities. Braden indicated to Stem that the car had not been wrecked and that it was in good
condition. Stem thought the car had been driven only seventy thousand miles. Less than a week
after the purchase, Stem discovered a disconnected plug that, when plugged in, caused the oil
warning light to turn on. When Stem then took his car to a mechanic, the mechanic discovered
that the front end was that of a 2004 BMW and the rear end was that of a 2000 BMW. Further
investigation revealed that the front half had been driven one hundred and seventy thousand
miles. On March 10, 2014, Stem sent a letter informing Braden that he refused the automobile
and that he intended to rescind the sale. Braden refused. Stem then drove the automobile for
seven months and nearly nine thousand miles before filing an action against Braden, seeking to
revoke his acceptance and to obtain the return of the purchase price.
(a) What arguments would support Stem’s revocation of his acceptance and the return of the
purchase price?
(b) What arguments would support Braden’s denial of Stem’s claim?
(c) Who should prevail? Explain.
ANSWER:
(a) Stem could argue that he had revoked his acceptance of a product within a reasonable time
after discovering a nonconformity that substantially impaired the value of the goods to him.
The UCC provides that a buyer may revoke acceptance of a product within a reasonable time after
discovering a nonconformity that substantially impairs the value of the product to the buyer.
Although the trial court permissibly could have considered Stem’s use of the car as evidence that its
value was not substantially impaired, Dickson v. U-J Chevrolet Co., 454 So.2d 964, 967 (Ala.1984),
it was not compelled to do so. Accordingly, the trial court could have determined that the
automobile’s nonconformities substantially impaired its value to Stem. There is no substantial
dispute either that Stem’s revocation occurred within a reasonable time or that Stem properly notified
Braden, and the trial court could have found that Stem revoked his acceptance within a reasonable
time and that he met the notice requirements of Section 7-2-608.
