Deck 19: Introduction to Sales and Leases

Question 1

In determining whether a contract containing both a sale of goods and a service is a UCC contract or general contract, a majority of states follow the predominant purpose test.

Answer 1

True

Question 2

If a merchant signs a written offer to buy or sell goods, this will be irrevocable only if accompanied by consideration.

Answer 2

False

Question 3

The purpose of Article 2 of the UCC is to modernize, clarify, simplify, and make uniform the law of sales.

Answer 3

True

Question 4

A contract to purchase stocks and bonds is governed by Article 2 of the UCC.

Question 5

Contracts containing unconscionable clauses are void and unenforceable.

Question 6

The definition of "goods" in the UCC may include timber, minerals, growing crops, or a building.

Question 7

Substantive unconscionability involves scrutiny by the court for "bargaining naughtiness."

Question 8

Albert has a contract to buy 100 tables from Bartholomew at a price of $50 a table. Five days before Bartholomew is to deliver the tables, he calls Albert to say that he is sorry but $50 won't cover his costs, and he will now need at least $75 a table. Albert agrees, because he needs the tables for his special sale. The modified contract is enforceable even though Albert isn't getting any new consideration, so long as Bartholomew is acting in good faith and the agreement to the new price is put in writing.

Question 9

Leslie, the owner of a shoe store, purchased 500 Model XT-50 running shoes from her supplier, but a price was not stated in the contract. The contract is voidable at Leslie's option until the parties agree on a price.

Question 10

A lease is the transfer of title to goods from seller to buyer for a price.

Question 11

Under the CISG, contracts for the sale of goods do not have to be evidenced by a writing to be enforceable, unless one of the parties has its place of business in a country that provides otherwise.

Question 12

Under the Code, if the parties have reached no agreement on price, the price is a reasonable one at the time of making the contract.

Question 13

The UCC definition of "unconscionable" is clear and unambiguous.

Question 14

Amendments to UCC Articles 2 and 2A were promulgated in 2003 to accommodate electronic commerce and to reflect developments in business and law and, as of 2011, these amendments had been adopted in all of the states.

Question 15

A finance lease is a special type of lease transaction that generally involves three parties instead of two.

Question 16

The UCC modifies the common law rule by requiring additional consideration for the modification of a contract.

Question 17

If a contract does not comply with the statute of frauds, it is void.

Question 18

The CISG governs only the formation of the contract of sales and the rights and obligations of the seller and buyer. It does not cover the validity of the contract or any of its provisions.

Question 19

Article 2A of the UCC affords special treatment for consumer leases.

Question 20

A lessee under a consumer lease and a buyer under a sale of goods are provided with the same protections against unconscionability under the UCC.

Question 21

"Goods" for purposes of the Code are essentially defined as tangible, movable, personal property.

Question 22

An example of the "course of dealing" concept that courts will use in interpreting a contract under the UCC would be:

A) Steven and Michelle have been involved in contracts together for over 5 years. Steven maintains the sign for Michelle's restaurant. Each time Steven sees the sign needs repair, he fixes it without need of express consent from Michelle. Michelle has always paid the bill promptly.
B) Temaco, Superior Oil, and AllBig, are the largest national oil companies in the country. In each refinery, orders are placed at the beginning of each quarter for priority delivery to distributors.
C) Bob sees an ad in the local paper for heritage flower seeds sold by Mel. He calls Mel and is so excited by his find that he orders a quantity of the seeds to be shipped as soon as possible but does not inquire as to price. Mel sends him the seeds and the invoice.
D) None of the above.

Question 23

If a UCC contract does not contain all the terms necessary to carry it out, there will be no contract.

Question 24

A "merchant" is defined as a person who:

A) is a dealer in a particular type of goods.
B) by his occupation holds himself out as having knowledge or skills peculiar to certain goods or practices.
C) employs an agent or broker whom he holds out as having such knowledge or skill.
D) All of these.

Question 25

The common law "mirror image" rule has been modified by the Code.

Question 26

Which of the following is not true about auctions?

A) The UCC provides that if an auction sale is advertised or announced in explicit terms to be with reserve, the auctioneer may not withdraw the article put up for sale unless no bid is made within a reasonable time.
B) Unless an auction is advertised as being without reserve, the sale is with reserve.
C) Whether an auction is with or without reserve, a bidder may retract his bid at any time prior to acceptance by the auctioneer.
D) If the auctioneer knowingly receives a bid on behalf of the seller and notice has not been given that the seller reserves the right to bid at the sale, the bidder to whom the goods are sold can avoid the sale.

Question 27

The Code addresses the "battle of the forms" problem by focusing on intent of the parties.

Question 28

If the original agreement was oral, a subsequent oral modification, which brings the resulting contract within the statute of frauds, is binding on and enforceable by the parties.

Question 29

A "sale" of goods happens when:

A) the parties agree.
B) the parties sign the contract.
C) title to the goods is passed.
D) a promise to transfer title is made.

Question 30

Karen has agreed to buy Sara's car, but the two have not agreed on the price. When there is no agreement as to price in a contract for a sale of goods, what effect does it have on the contract?

A) The price is whatever the seller decides.
B) The price is a reasonable price at the time of making the contract.
C) The price is a reasonable price at the time of delivery.
D) There is no contract, because the agreement is not definite and certain enough.

Question 31

The Code provides that its remedies shall be liberally administered to place the aggrieved party in a position as good as the one she would have occupied had the defaulting party fully performed.

Question 32

Under the Code, a contract to sell or lease personal property is recognized whenever the parties manifest such an intent, even if they cannot identify a precise moment the contract was formed.

Question 33

Leases of personal property exceed $100 billion annually and are governed by Article 2A of the UCC.

Question 34

Unless an auction is advertised or announced as being without reserve, the sale is with reserve, and the auctioneer may withdraw the goods at any time until he announces completion of the sale.

Question 35

Mike inherited some antiques. Pat agrees to buy them. In the contract, Mike and Pat agree to value the antiques at whatever the Sotheby's representative says. If the valuation is much higher than either of them anticipated, Pat:

A) has to buy at the price set by the Sotheby representative.
B) has to buy, but at what Pat and Mike believe was a reasonable price.
C) has no obligation to buy the antiques.
D) can treat the contract as canceled.

Question 36

If a merchant makes a written offer to buy or sell goods, this will be irrevocable only if accompanied by consideration.

Question 37

In the Carter v. Tokai Financial Services, Inc. case, the agreement was found to:

A) fit within the definition of a secured transaction.
B) be governed by UCC Article 9.
C) be for an initial term of five years, which ARC had an option to renew for nominal consideration.
D) be a true finance lease.

Question 38

A contract has an open price term if the agreement:

A) says nothing as to price.
B) provides that the parties shall agree later as to the price and they fail to so agree.
C) fixes the price in terms of some agreed market or other standard, as set by a third person or agency, and the price is not so set.
D) All of these.
E) None of these.

Question 39

Shannon orally agrees to buy 500 telephone answering machines from Thomas for $25,000. Thomas delivers 300 answering machines to Shannon, who receives and accepts them. Which of the following is correct with regard to this transaction?

A) Shannon can enforce the contract for the additional 200 machines.
B) The contract is enforceable to the extent of the 300 machines that have been received and accepted.
C) The entire contract is in violation of the statute of frauds and cannot be enforced.
D) This is a bad deal, and is therefore commercially unconscionable from the beginning and is unenforceable.

Question 40

Which of the following transactions is governed by Article 2 of the UCC?

A) The sale of an apartment complex.
B) The sale of oranges to be picked from a 10-acre grove.
C) The sale of common stock of a soft drink company.
D) A contract to receive medical services in a hospital.

Question 41

Under the CISG, which of the following would not always be considered a material alteration to an offer?

A) A change in payment.
B) A change in time of delivery.
C) A change in color of goods ordered.
D) The addition of an arbitration clause for settlement of disputes.

Question 42

Davis Co. and Ruby Creations enter an oral contract providing that Ruby will deliver three dozen dresses to Davis at $20 per dress. The next day, Davis sent Ruby a letter signed by Davis's purchasing agent confirming the quantity and item, but not mentioning the price. Which of the following is true?

A) Davis Co. is not bound by the terms of the letter unless Ruby responds in writing to verify the agreement.
B) Ruby Creations and Davis Co. were bound in an enforceable contract at the time they entered the oral agreement.
C) Davis is bound by the contract when its authorized agent sends the letter, but Ruby Creations is bound by the oral contract ten days after receiving the letter, unless it objects in writing within that time.
D) The parties cannot be bound by the contract because the price term was missing from the written confirmation.

Question 43

Edie telephoned the office supply store and agreed to buy a dozen ink cartridges at $26 each. She then realized what a good buy this was and called the store with a request to modify the contract to read two dozen. What is the consequence?

A) The modified contract is unenforceable.
B) The modified contract is void.
C) The modified contract is valid and enforceable.
D) There is no consideration, so the contract is void.

Question 44

The case of Construction Associates, Inc. v. Fargo Water Equipment Co. illustrates the doctrine of:

A) course of dealing.
B) unconscionability.
C) usage of trade.
D) a transaction outside the Code.

Question 45

A contract that does not satisfy the writing requirement of the Article 2 statute of frauds, but which is otherwise valid, is enforceable in which of the following situations?

A) Where the goods have been delivered and accepted.
B) Where payment has been accepted.
C) Where the goods have been specially manufactured and are not suitable for resale in the ordinary course of business.
D) All of these are situations where the contract would be enforceable.

Question 46

Which of the following is true regarding unconscionability under the Code?

A) It is defined in Article 2 as "extortionately harsh, showing no regard for conscience."
B) The Code denies or limits enforcement of an unconscionable contract for the sale of goods.
C) Unconscionability may be substantive, but it cannot be procedural.
D) Unconscionability of a contract for the sale of goods makes the contract void.

Question 47

The CISG specifically excludes sales of:

A) goods bought for personal, family, or household use.
B) ships or aircraft.
C) electricity.
D) All of these.

Question 48

The definition of "usage of trade" includes:

A) a sequence of previous conduct between the parties that may fairly be regarded as establishing a common basis of understanding for interpreting their expressions and agreement.
B) a practice regularly observed and followed in a place, vocation, or trade.
C) separation rules that apply to transactions between merchants.
D) All of these.

Question 49

The Code has made certain offers irrevocable without the offeree's giving any consideration for the promise to keep the offer open. These offers are known as:

A) options.
B) firm offers.
C) variant acceptances.
D) auctions.

Question 50

A(n) __________ is a special type of lease transaction generally involving three parties instead of two.

A) consumer lease
B) sale
C) finance lease
D) option

Question 51

The most important element in determining whether a sales contract has been made is the:

A) language of the contract.
B) fact that the terms of the offer and acceptance are exactly alike.
C) number of open terms.
D) intent of the parties to make a contract.

Question 52

Mary and Remaldi Co. have dealt with each other for many years. Mary's Boutique orders 100 assorted lipsticks at $2.00 each from Remaldi Co. Remaldi sends back a confirmation letter with an additional, nonmaterial term. There is:

A) no contract, but a counteroffer.
B) a contract with the additional term unless Mary objects.
C) a contract with the additional term only if Mary agrees.
D) a contract without the additional term.

Question 53

Under Article 2A:

A) a court faced with an unconscionable contract or clause must refuse to enforce the entire contract.
B) consumers in an unconscionable consumer lease contract receive an additional remedy over consumers in unconscionable sales contracts. Reasonable attorneys' fees may be awarded.
C) there is no provision for relief for unconscionable conduct in the collection of a claim arising from a consumer lease contract.
D) lessees under all types of leases of personal property have the same protections against unconscionable contracts.

Question 54

Categorizing a transaction as a lease rather than a security interest:

A) has significant implications for the parties and for third parties.
B) has significant implications only for the parties to the transaction.
C) would mean the provisions of Article 9 of the UCC apply to the transaction.
D) Two of these are correct.

Question 55

Which of the following is not true about a consumer lease under UCC Article 2A?

A) The lessor must be regularly engaged in the business of leasing or selling goods.
B) The lessee cannot be an organization.
C) There is no dollar limit on the amount of a consumer lease under Article 2A.
D) Consumer protection provisions are contained in Article 2A, and these may not be varied by the parties' agreement.

Question 56

Who among the following is most likely not considered a merchant according to Article 2 of the UCC?

A) Jim who owns a wholesale auto parts business.
B) Tom who, as a hobby, builds and sells birdhouses on the weekends.
C) Kay who sells her 3-year-old fishing boat to her neighbor.
D) Jan, who is not knowledgeable about selling sailboats, but who employs an experienced expert in the trade.

Question 57

The doctrine of unconscionability has evolved through its application by the courts to include:

A) contract negotiating procedures.
B) substantive contract terms.
C) good faith.
D) Both contract negotiating procedures  and substantive contract terms  are correct.

Question 58

In the case of Pittsley v. Houser, the court:

A) held that the contract should be severed into different parts, applying the UCC to the part of the contract involving goods and the common law to the services part of the contract.
B) held that the "predominant factor" test contravened the UCC's declared purpose.
C) found the "predominant factor" test was the better, more prudent rule.
D) found the CISG governed the contract in question.

Question 59

The Code defines __________ as "honesty in fact in the conduct or transaction concerned."

A) good faith
B) unconscionability
C) merchantability
D) entrusting

Question 60

Which of the following is correct with respect to "finance leases"?

A) A finance lease generally involves four parties.
B) Finance leases are governed by the Truth in Lending Act rather than the UCC.
C) The finance lessor functions as a source of credit.
D) All of these are correct.

Question 61

Discuss the similarities or possible differences between the parol evidence rule under the common law of contracts and the parol evidence rule found in Article 2.

Question 62

What does Article 2 say with regard to the following?
a. Good faith.
b. Unconscionability.
c. Expansion of commercial practices.

Question 63

Explain when a writing is required under the UCC for a contract for the sale of goods and what is needed in that writing. Identify three exceptions to the requirement of a writing or record for the sale of goods.

Question 64

Discuss the concept of freedom of contract under Articles 2 and 2A of the UCC.

Question 65

List four areas of contract law where the common law of contracts and the law of sales differ. Give both the common law rule and the rule under Article 2.

Question 66

What is a "merchant?" Identify four provisions in Article 2 that apply to merchants, but not to others.