Question 1

Gamma Company contracts to provide several manufacturers with tin.A cartel of tin-producing countries embargoes future shipments of tin to Gamma so that it cannot fulfill its contracts.Gamma
A)can substitute some other material for the tin.
B)is excused from the performance of its contracts.
C)is liable for breach of contract.
D)must still supply the tin needs of its customers.

Accepted Answer

Gamma is excused from the performance of its contracts due to the unforeseeable embargo on tin. This is considered to be a case of frustration of the contract, and therefore Gamma cannot be held liable for the breach of the contract.

Question 2

Olympic Steel Corporation contracts to sell steel to Precision Machining,Inc.After Olympic ships the steel,Precision breaches the contract.Incidental damages arising from the breach include the costs to Olympic of
A)designing the steel.
B)making the steel.
C)selling the steel.
D)transporting the steel.

Accepted Answer

Incidental damages include any expenses that arise directly from the breach, such as transportation costs incurred by Olympic Steel to deliver the steel to Precision Machining. The other choices, such as designing or making the steel, are not incidental damages as they are part of the normal business operations of Olympic Steel.

Question 3

Heavy Equipment,Inc. ,and Ideal Construction Company enter into a con?tract for the sale of a crane.Heavy Equipment does not know that Ideal is insolvent.Ideal sells the crane to Jiffy Build,Inc. ,a good faith purchaser.Heavy Equipment may
A)not reclaim the crane.
B)reclaim the crane if demand is made in a timely manner.
C)reclaim the crane if Ideal is going out of business entirely.
D)reclaim the crane if Jiffy Build is paying Interstate for it on credit.

Accepted Answer

Under the UCC, a good faith purchaser for value takes the goods free of any claim or interest of the original seller. Since Jiffy Build, Inc. is a good faith purchaser, Heavy Equipment, Inc. cannot reclaim the crane.

Question 4

Fact Pattern 16-1 
Internet Cafes,Inc. ,contracts to buy all of its requirements for coffee,at a mini?mum of 1 million pounds per year,from Java Corporation for six years.After three years,Internet tells Java that it plans to sell its company to Kwik Eateries,Inc.Kwik refuses to assure Java that it will continue Internet's contract.
-Refer to Fact Pattern 16-1.Kwik's refusal constitutes
A)a justified response based on Kwik's relation to the contract.
B)an assignment of Internet's rights under the contract.
C)a reasonable suspension of performance under the contract.
D)a repudiation of the contract.

Accepted Answer

Kwik's refusal to assure Java that it will continue Internet's contract is a repudiation of the contract, as it indicates a clear intent to not perform its obligations as required by the contract. This is a breach of the contract and gives Java the right to pursue legal action for damages. A justified response based on Kwik's relation to the contract or a reasonable suspension of performance would involve notifying Java of a delay or inability to perform due to unforeseen circumstances, not a clear refusal to continue with the contract. An assignment of Internet's rights under the contract would involve transferring those rights to a third party, which is not the case here.

Question 5

Square B Ranch and Tom enter into a contract on August 1 in which Square B agrees to sell 200 cattle to Tom.Tom cancels the con?tract ten days later.Square B is enti?tled to
A)force Tom to accept the cattle and recover the contract price.
B)keep the cattle and recover the contract price from Tom.
C)recover any resulting damages from Tom.
D)none of the choices.

Accepted Answer

The answer of Square B Ranch and Tom enter into...

Question 6

According the court in Case 16.1,Maple Farms,Inc.v.City School District of Elmira,the defense of commercial impracticability will not excuse the performance of a contractual obligation when there is an increase in the seller's costs while the contract is in force
A)unless the increase in the seller's costs is substantial.
B)under any circumstances.
C)unless the increase in the seller's costs makes it impossible for the seller to perform without losing money.
D)unless the increase in the seller's costs was not foreseeable at the time the contract was formed.

Accepted Answer

The defense of commercial impracticability can excuse performance if the increase in costs was not foreseeable at the time the contract was formed.

Question 7

Craft Engineering,Inc. ,contracts for a sale of technical instruments to Delta Design Company.Before the date on which performance is due,Craft notifies Delta that it will not perform.This is
A)anticipatory repudiation.
B)perfect tender.
C)rejection of performance.
D)revocation of acceptance.

Accepted Answer

Craft's notification to Delta that it will not perform before the date on which performance is due is an anticipatory repudiation. This is because Craft has indicated its intention not to perform the contract, thereby creating the possibility of a breach before the date of performance.

Question 8

Professional Products Company contracts to deliver emergency medical supplies to Rescue & Relief Corporation using only Sky Airways.If Sky de?clares bankruptcy,then
A)only Rescue & Relief may elect to perform the contract.
B)Professional may deliver the goods in any reasonable manner.
C)Sky must designate a substitute carrier.
D)the entire contract is void.

Accepted Answer

If the specified carrier (Sky Airways) is unable to perform due to bankruptcy, Professional Products Company may deliver the goods in any reasonable manner as a substitute performance to fulfill the contract.

Question 9

LowPrice Footwear Company contracts to buy 10,000 pairs of boots from Massive Boots,Inc.LowPrice becomes insolvent.Massive may insist that LowPrice
A)accept early delivery of the order.
B)pay cash.
C)post a bond to guarantee payment.
D)submit a letter from a court providing assurances of payment.

Accepted Answer

Massive Boots, Inc. may insist that LowPrice pay cash due to LowPrice's insolvency, as a means to ensure payment for the goods.

Question 10

Orchard Farms contracts with four food companies to sell its entire crop of oranges.Orchard loses half of the crop to an unexpected insect infestation.Orchard must
A)apportion its surviving crop fairly among its customers.
B)breach some of its contracts.
C)buy elsewhere as many oranges as needed to satisfy its contracts.
D)substitute other fruit for the oranges.

Accepted Answer

Since Orchard Farms is contracted to sell its entire crop of oranges to four food companies, it cannot breach any of its contracts. It also cannot substitute other fruits for oranges as it will be considered a breach of contract. The only option is to apportion its surviving crop fairly among its customers to honor the contracts.

Question 11

Ample Country Stables contracts to buy 1,000 horseshoes from Blacksmith,Inc. ,for $1 per shoe.When the market price decreases to 50 cents per shoe,Ample refuses to go through with the deal.Blacksmith can recover
A)$1,500.
B)$1,000.
C)$500.
D)$0.

Accepted Answer

Since Ample Country Stables refused to go through with the deal, they have breached the contract. However, Blacksmith, Inc. is entitled to recover damages for the breach. The damages in this case would be the difference between the contract price ($1 per shoe) and the market price when Ample refused to go through with the deal (50 cents per shoe), multiplied by the number of shoes (1,000). Therefore, Blacksmith, Inc. can recover $500 (0.50-1.00)*1000).

Question 12

Topps Publishing,Inc. ,contracts for a sale of textbooks to University Bookstores,Inc.(UBI).Value Shipping Company,the carrier,transports the books to Witte Warehouse Company.Topps' right to stop delivery is lost when UBI's rights to the goods are acknowledged by
A)the appropriate government agency only.
B)Value only.
C)Witte only.
D)Value or Witte.

Accepted Answer

Topps' right to stop delivery is lost when UBI's rights to the goods are acknowledged by either the carrier (Value) or the warehouse company (Witte), hence the correct answer is D.

Question 13

Hi-Tech Company contracts to sell fiber optic cable to Internet Services,Inc.Hi-Tech may bring an action to recover the purchase price and inciden?tal damages if Internet
A)accepts the cable and pays for it.
B)accepts the cable but does not pay for it.
C)rejects the cable.
D)revokes acceptance of the cable.

Accepted Answer

The answer of Hi-Tech Company contracts to sell fiber optic...

Question 14

Glide Chair Company contracts to deliver 100 chairs to Home Furnishings Store on May 1.Glide tells Home on April 15 that it is canceling the con?tract be?cause its workers have gone on strike.Home may
A)await Glide's performance,sue,or suspend its own performance.
B)only await Glide's performance for a commercially reasonable time.
C)only sue Glide for breach of contract.
D)only suspend its own performance.

Accepted Answer

Home Furnishings Store has three options: 
1. Await Glide's performance: Home can choose to wait and see if Glide is able to fulfill its obligation to deliver the 100 chairs by May 1, despite the strike. If Glide is unable to fulfill the contract, Home may have legal recourse. 
2. Sue: Home can sue Glide for breach of contract, seeking compensation for any damages incurred as a result of Glide's cancellation. 
3. Suspend its own performance: Home can choose to suspend its own performance, meaning it does not take any further actions to fulfill its side of the contract until it receives clarity on Glide's ability to perform.

Question 15

On May 1,Silver Star Auto Sales agrees to sell a car to Troy.Five days later,Troy cancels the contract.Silver Star is enti?tled to
A)force Troy to take the car.
B)recover any resulting damages from Troy but not resell the car.
C)resell the car and recover any resulting damages from Troy.
D)resell the car but not recover any damages from Troy.

Accepted Answer

If Troy cancels the contract, Silver Star Auto Sales can resell the car and recover any resulting damages from Troy. This is because Troy has breached the contract by canceling it, and so Silver Star is entitled to damages. Reselling the car is one way to mitigate these damages. Option A is not a feasible solution as Troy has already canceled the contract. Option B is only partial as Silver Star has the right to resell the car as well. Option D is not feasible as Silver Star is entitled to recover damages from Troy.

Question 16

Quality Equipment Company contracts for a sale of goods to Regional Sales Corporation.Quality can enforce its right to payment
A)only after Regional has actually inspected the goods.
B)only after Regional has had an opportunity to inspect the goods.
C)only before Regional has inspected the goods.
D)whether or not Regional has had the chance to inspect the goods.

Accepted Answer

Under the Uniform Commercial Code (UCC), a buyer has the right to inspect goods before payment unless otherwise agreed. This ensures that the goods conform to the contract before the buyer is obligated to pay.

Question 17

Garden Vegetable Farm and Hungry Folks Restaurant,Inc. ,enter into a contract for a sale of tomatoes.Hungry declares bankruptcy.Garden can stop deliv?ery of the goods in transit
A)only if the quantity is at least a carload.
B)only if the quantity is at least a planeload.
C)only if the quantity is at least a truckload.
D)regardless of the quantity.

Accepted Answer

Under the Uniform Commercial Code (UCC), Garden Vegetable Farm can stop delivery of the goods in transit regardless of the quantity if the buyer, Hungry Folks Restaurant, Inc., declares bankruptcy. This is because bankruptcy is considered a breach of contract, and under the UCC, the seller has the right to stop delivery if they have a reasonable belief that the buyer will not pay for the goods. There is no minimum quantity requirement for stopping delivery in this situation.

Question 18

Regal Manufacturing Company contracts to sell sweaters to Superb Styles Store.Before the sweat?ers are delivered,Superb indicates that it will not be able to pay.Regal can resell the goods
A)after finishing the job and identifying the goods,or stopping the job.
B)only after finishing the job and identifying the goods.
C)only if Regal immediately stops the job.
D)under no circumstances.

Accepted Answer

Regal can resell the goods only after finishing the job and identifying the goods, or stopping the job. This is because if they continue with the job, they may incur additional expenses that Superb Styles Store may not be able to pay for. By identifying the goods and reselling them, Regal can mitigate their losses.

Question 19

Sweet Produce Company contracts with Tasty Restaurant to ship six hun?dred heads of lettuce in three equal installments.When the first install?ment arrives,ten heads of lettuce are rotten.Tasty may
A)cancel the contract.
B)recover from Sweet for breach of the entire contract.
C)reject the first installment only.
D)use as much of the lettuce as it wishes without paying for it.

Accepted Answer

Tasty can reject the first installment only due to the ten rotten heads of lettuce, but it cannot cancel the entire contract or recover damages for breach of contract since the contract allows for three equal installments. Tasty also cannot use the lettuce without paying for it unless Sweet agrees to waive payment.

Question 20

Fact Pattern 16-1 
Internet Cafes,Inc. ,contracts to buy all of its requirements for coffee,at a mini?mum of 1 million pounds per year,from Java Corporation for six years.After three years,Internet tells Java that it plans to sell its company to Kwik Eateries,Inc.Kwik refuses to assure Java that it will continue Internet's contract.
-Refer to Fact Pattern 16-1.Java can
A)assign its rights under the contract but cannot terminate it.
B)do nothing.
C)suspend performance under the contract until Java is fully paid.
D)terminate the contract and seek damages.

Accepted Answer

Java can terminate the contract and seek damages because there is no clause in the contract that requires Kwik Eateries to assume Internet's obligations. Since Java's performance is based on the assumption that the contract would continue for six years, the failure of Internet to fulfill the contract may be considered a breach of contract, giving Java the right to terminate the agreement and seek damages.

Quiz 16: Performance Breach of Sales Lease Contracts

Gamma Company contracts to provide several manufacturers with tin.A cartel of tin-producing countries embargoes future shipments of tin to Gamma so that it cannot fulfill its contracts.Gamma

Olympic Steel Corporation contracts to sell steel to Precision Machining,Inc.After Olympic ships the steel,Precision breaches the contract.Incidental damages arising from the breach include the costs to Olympic of

Heavy Equipment,Inc. ,and Ideal Construction Company enter into a con?tract for the sale of a crane.Heavy Equipment does not know that Ideal is insolvent.Ideal sells the crane to Jiffy Build,Inc. ,a good faith purchaser.Heavy Equipment may

Square B Ranch and Tom enter into a contract on August 1 in which Square B agrees to sell 200 cattle to Tom.Tom cancels the con?tract ten days later.Square B is enti?tled to

According the court in Case 16.1,Maple Farms,Inc.v.City School District of Elmira,the defense of commercial impracticability will not excuse the performance of a contractual obligation when there is an increase in the seller's costs while the contract is in force

Craft Engineering,Inc. ,contracts for a sale of technical instruments to Delta Design Company.Before the date on which performance is due,Craft notifies Delta that it will not perform.This is

Professional Products Company contracts to deliver emergency medical supplies to Rescue & Relief Corporation using only Sky Airways.If Sky de?clares bankruptcy,then

LowPrice Footwear Company contracts to buy 10,000 pairs of boots from Massive Boots,Inc.LowPrice becomes insolvent.Massive may insist that LowPrice

Orchard Farms contracts with four food companies to sell its entire crop of oranges.Orchard loses half of the crop to an unexpected insect infestation.Orchard must

Ample Country Stables contracts to buy 1,000 horseshoes from Blacksmith,Inc. ,for $1 per shoe.When the market price decreases to 50 cents per shoe,Ample refuses to go through with the deal.Blacksmith can recover

Topps Publishing,Inc. ,contracts for a sale of textbooks to University Bookstores,Inc.(UBI) .Value Shipping Company,the carrier,transports the books to Witte Warehouse Company.Topps' right to stop delivery is lost when UBI's rights to the goods are acknowledged by

Hi-Tech Company contracts to sell fiber optic cable to Internet Services,Inc.Hi-Tech may bring an action to recover the purchase price and inciden?tal damages if Internet

Glide Chair Company contracts to deliver 100 chairs to Home Furnishings Store on May 1.Glide tells Home on April 15 that it is canceling the con?tract be?cause its workers have gone on strike.Home may

On May 1,Silver Star Auto Sales agrees to sell a car to Troy.Five days later,Troy cancels the contract.Silver Star is enti?tled to

Quality Equipment Company contracts for a sale of goods to Regional Sales Corporation.Quality can enforce its right to payment

Garden Vegetable Farm and Hungry Folks Restaurant,Inc. ,enter into a contract for a sale of tomatoes.Hungry declares bankruptcy.Garden can stop deliv?ery of the goods in transit

Regal Manufacturing Company contracts to sell sweaters to Superb Styles Store.Before the sweat?ers are delivered,Superb indicates that it will not be able to pay.Regal can resell the goods

Sweet Produce Company contracts with Tasty Restaurant to ship six hun?dred heads of lettuce in three equal installments.When the first install?ment arrives,ten heads of lettuce are rotten.Tasty may