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CHAPTER 21
PERFORMANCE AND BREACH OF SALES
AND LEASE CONTRACTS
ANSWERS TO QUESTIONS
AT THE ENDS OF THE CASES
CASE 21.1—QUESTION (PAGE 404)
WHAT IF THE FACTS WERE DIFFERENT?
Suppose that the court had ruled in the plaintiff’s favor. How might that ruling have affected the
plaintiff’s contracts with other parties? The actual outcome of the case meant that Maple Farms had to
CASE 21.2—QUESTIONS (PAGE 407)
1A. Why didn’t the “contract order” signed by the parties constitute a binding contract for the sale of
goods? No binding contract was formed because the sale could not be completed until Scoggin-Dickey
received two trade-in vehicles that conformed to their description in the contract order. When Scoggin–
Dickey rejected the trade-in vehicles as nonconforming goods, Romero’s offer (to purchase the 2006
Silverado pickup with a combination of assigned rebates, two trade-in vehicles, and cash) was thus never
fully accepted by the dealership. The court concluded that the order was not a binding sales contract
but a contract for sale (to sell goods at a future time) or a conditional sale.
2A. According to the court, “Romero and Scoggin–Dickey were both buyers and sellers.” What did
the court mean by this statement? The court commented that when the purchase price in a sale of
182 UNIT FOUR: DOMESTIC AND INTERNATIONAL SALES AND LEASE CONTRACTS
CASE 21.3—QUESTIONS (PAGE 413)
WHAT IF THE FACTS WERE DIFFERENT?
In Dare’s response to Houseman’s complaint, he admitted to orally promising her that she could have
the dog. Suppose that he had not admitted to this promise. On what principle should a trial court base a
finding that one of the parties is more credible on this point? A court must determine that “the assertion
of a special interest in possession is sincere and grounded in facts and circumstances which endow the
chattel [personal property] with a special . . . value” and is not based on “a sentiment assumed for the
purpose of litigation out of greed, ill-will or other sentiment or motive similarly unworthy of protection.”
This may be apparent from seeing the demeanor, and listening to the expressions, of a party testifying in
assertion of the interest. In Houseman’s case, the appellate court also cited her prompt attempt to
enforce her interest as evidence of her sincerity.
THE ETHICAL DIMENSION
What might the award to Houseman of the value of the dog instead of its possession mean to Dare, and
ANSWERS TO QUESTIONS IN THE REVIEWING FEATURE
AT THE END OF THE CHAPTER
1A. Acceptance
Because Egan had accepted the previous shipments, and because they were, like this shipment, only 5
percent short and of a quality superior to that designated in the parties’ contract, GFI had a legitimate
reason to expect that Egan would accept the fourth shipment.
2A. Substitution of carriers
3A. Doctrine
The doctrine of commercial impracticability could be used to excuse GFI from further performance of its
contractual obligations. When the performance of a contract becomes extremely difficult due to an
unexpected occurrence, a party may invoke this doctrine to release it from performing an obligation that
might be impossible or financially ruinous. In this situation, because GFI cannot obtain the silicon
necessary to make enough chips to fulfill its obligations under the contract, it can ask the court to
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CHAPTER 21: PERFORMANCE AND BREACH OF SALES AND LEASE CONTRACTS 185
4A. Right to reject
The contract between GFI and Egan is an installment contract. Under the UCC, a buyer or lessee can
ANSWER TO DEBATE THIS QUESTION IN THE REVIEWING FEATURE AT
THE END OF THE CHAPTER
If a contract specifies a particular carrier, then the shipper must use that carrier or be in break of
the contract—no exceptions should ever be allowed. If both parties agree to a specific carrier for the
goods, then of course, if there is a substitution of carriers, the seller is in breach and buyer can not only
refuse the shipment but sue for damages. That’s why we call such pieces of paper agreements—both
parties agreed to the terms in the contract.
ANSWERS TO QUESTIONS AND CASE PROBLEMS
AT THE END OF THE CHAPTER
21-1A. (Remedies of the seller or lessor
(Chapter 21—Pages 402–403)
The perfect tender doctrine required Ames to ship 100 Model Z television sets as contracted. Failure to
do so permitted Curley to rightfully reject the Model X television sets and generally hold Ames in breach.
An exception to the perfect tender doctrine, however, is Ames’s right to cure. There are two basic rules
186 UNIT FOUR: DOMESTIC AND INTERNATIONAL SALES AND LEASE CONTRACTS
The second rule states that if a seller tenders nonconforming goods that are rejected, but these
21-2A. QUESTION WITH SAMPLE ANSWER: Anticipatory repudiation
Topken basically has the following remedies.
(a) Topken can identify the 500 washing machines to the contract and resell the goods [UCC 2–
704].
(b) Topken can withhold delivery and proceed with other remedies [UCC 2–703].
(c) Topken can cancel the contract and proceed with other remedies [UCC 2–703 and 2–
106(4)].
21-3A. Remedies of the buyer or lessee
(Chapter 21—Pages 411–413)
Lehor can use any of three remedies to get the parts from Beem:
(a) Because the parts are scarce, Lehor can seek, through an action in equity, specific
21–4A. CASE PROBLEM WITH SAMPLE ANSWER: Limitation of remedies
CHAPTER 21: PERFORMANCE AND BREACH OF SALES AND LEASE CONTRACTS 187
Consequential damages are foreseeable damages that result from a party’s breach of contract but are
caused by special circumstances beyond the contract. Under UCC 2–719, the parties to a contract can
21-5A. Remedies of the buyer
(Chapter 21—Pages 414–415)
The court ruled that the Waddells reasonably revoked their acceptance of the RV. Wheeler’s appealed to
the Nevada Supreme Court, which affirmed this part of the lower court’s judgment. Under UCC 2–608, a
21-6A. Additional provisions affecting remedies
(Chapter 21—Pages 415–416)
Parties to a sales contract subject to the UCC can vary their remedies in their contract. They can change
the measure of damages that might otherwise be available or specify remedies in lieu of those provided
in the UCC. For example, a seller can provide that a buyer’s remedy on the seller’s breach will be the
21–7A Obligations of the seller
(Chapter 21—Pages 405–406)
Under UCC 2–609 (and 2A–401), if a contracting party has “reasonable grounds” to believe that the
other party will not perform, he or she may “demand adequate assurance” of that performance. Until
21–8A. Breach and damages
(Chapter 21—Pages 414–415)
Yes, there was a contract as the dirt was not a gift. Utility saved resources by not having to haul the dirt
a greater distance, so it received something of value in the bargain. General damages were in order.
21-9A. A QUESTION OF ETHICS: Revocation
(a) Revocation of acceptance is the buyer’s refusal to keep delivered goods after they have
been accepted and the time for their rejection has expired. Under UCC 2–608, “a buyer may revoke
acceptance when (1) nonconformity substantially impairs the value of the goods to the buyer; (2) the
buyer revokes within a reasonable time based on difficulty in discovering defects or because the seller
provided assurances; and (3) the buyer revokes before any substantial change in the goods not caused
by their own defects.” Scotwood filed a motion for summary judgment on Miller’s counterclaim.
On the question of substantial impairment, the court cited Miller’s claim that “only 30–35%” of
the processed flake delivered in a certain size of container was usable and that “only 50%” of the
processed flake delivered in a different quantity was usable. Miller “also alleges that Scotwood knew
As for the third element of revocation, the court reiterated that Miller “early on attempted to
arrange for Scotwood [to] remove the goods from Miller and Sons’ possession, but Scotwood apparently
declined. * * * At the very least, it is a disputed issue of fact whether Miller and Sons revoked its
acceptance before a substantial deterioration in the goods occurred, particularly when Scotwood
refused to arrange to pick up the flake.” For these reasons, the court ruled the Scotwood was not
entitled to summary judgment on Miller’s counterclaim.
(b) One possible ethical basis for a buyer’s right of revocation is the “fairness” of allowing the
buyer to recover for defects in goods that could not have been reasonably discovered before the goods
were accepted. It would be unjust to enforce a deal in which a seller would have otherwise been held in
breach.
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ANSWER TO VIDEO QUESTION NO. 21–10
International Letter of Credit
(a) Do banks always require the same documents to be presented in letter-of-credit
transactions? If not, who dictates what documents will be required in the letter of credit? No.
Letter-of-credit transactions can require a variety of different documents, including bills of lading,
insurance policies, export licenses, and inspection certificates. The bill of lading is almost always
(b) At what point does the seller receive payment in a letter-of-credit transaction? When
the seller has complied with the terms of the letter of credit by shipping the goods and producing
the required documents for the issuing bank, the seller receives payment.
(c) What assurances does a letter of credit provide to the buyer and to the seller involved in
the transaction? The buyer is assured that payment will not be made to the seller unless the seller
them to another party—before they arrive at the port.