Deck 27: Remedies for Breach of Sales Contracts

Question 1

A buyer seeking damages because of a breach of the sales contract must give the seller notice of the breach within a reasonable time after the buyer discovers or should have discovered it.

Answer 1

True

Question 2

A seller has the right to stop shipment if the buyer has received goods on credit and the seller learns that the buyer is insolvent, the buyer has not provided assurances as requested, or the seller has grounds to believe performance by the buyer will not occur.

Answer 2

True

Question 3

When a buyer has broken a sales contract, the seller may resell the goods or the balance of them in the seller's possession.

Answer 3

True

Question 4

In the absence of an agreement for the extension of credit to the buyer for the purchase of goods, and until the buyer pays for the goods or performs whatever actions the contract requires, the seller has the right to retain possession of the goods.

Question 5

An action for breach of warranty generally must be brought within three (3) years of the breach.

Question 6

Proof of substantial impairment of the value of a contract to the buyer is required to justify revocation of acceptance.

Question 7

After rejecting goods, a buyer may continue to exercise rights of ownership with respect to the goods until the seller sends explicit instructions for return.

Question 8

The UCC statute of limitations applies to actions brought for remedies on the breach of a sales contract.

Question 9

If goods are specially manufactured and the buyer refuses to take them, it is possible for the seller to recover as damages the full purchase price and keep the goods.

Question 10

A cured transaction is a pledge of property by the buyer-debtor that enables the seller to take possession of the goods if the buyer fails to pay the amount owed.

Question 11

When a buyer wrongfully rejects goods, the seller may cancel the contract.

Question 12

When a buyer has breached the contract by failing to accept conforming goods, the seller may sue the buyer for the full purchase price if the goods cannot be resold by the seller.

Question 13

A buyer returning to the seller a raincoat that shrank in the rain is revoking acceptance.

Question 14

When a sales contract is broken by the buyer, the seller has only the remedies of lien and resale available.

Question 15

Rejection of an improper tender of goods constitutes a revocation of acceptance on the part of the buyer.

Question 16

A buyer may reject the goods or revoke the acceptance for any defects in the goods.

Question 17

If a buyer refuses to pay for goods after an acceptance that was not revoked, the seller may bring action to recover the purchase price and any incidental damages.

Question 18

A buyer is not barred from revoking acceptance of goods because the buyer has delayed until attempts of the seller to correct the defects proved unsuccessful.

Question 19

If a buyer rejects a tender of goods, the rejection must be made within ten days of tender. There is no requirement of notice to the seller of the choice made.

Question 20

Notifying a seller about a defect is not necessary if the buyer files suit for breach within four years.

Question 21

A liquidated damages clause is a contractual provision stipulating the amount of damages to be paid in the event of default or breach of contract.

Question 22

In an action by a third party against the buyer that is based on the seller's breach of warranty, the buyer must give notice of the action to the seller.

Question 23

A buyer may sue the seller for damages caused by the seller's fraud even if the buyer is barred by the UCC from suing for damages for breach of warranty.

Question 24

A buyer who breaches a contract after making a down payment generally will be subject to the rule that the seller may retain the full down payment as damages.

Question 25

A buyer who cancels a sales contract because the seller fails to deliver the goods is entitled to recover as much of the purchase price as had been paid.

Question 26

When a plaintiff sues on the basis of strict tort liability, the action is subject to:

A)the UCC statute of limitations.
B)the appropriate state's tort statute of limitations.
C)no statute of limitations.
D)FTC approval.

Question 27

The commercially reasonable charges incurred by a seller in caring for goods after the buyer's breach are recoverable by the seller in an action for damages as:

A)contract damages.
B)punitive damages.
C)additional damages.
D)incidental damages.

Question 28

A buyer may reject a tender of delivery:

A)unless it is perfect.
B)unless the goods substantially conform to the contract.
C)unless the seller promises to cure the defective tender.
D)unless the goods have been sold on credit.

Question 29

The statute of limitations for breach of a sales contract:

A)may be reduced by the buyer and the seller to one year.
B)may be expanded by the buyer and the seller to six years.
C)begins to run from the signing of the contract.
D)always requires a notice to the seller to activate the statute.

Question 30

Under UCC Article 2, specific performance is a remedy available only to buyers in those circumstances in which the goods are specially manufactured, unique, or rare.

Question 31

A seller's right to retain possession of goods until the seller has been paid is called a:

A)seller's lien.
B)buyer's lien.
C)merchandise estoppel.
D)nonpayment tort.

Question 32

If a seller elects to resell the goods remaining in the seller's possession after the buyer breaks the contract, the seller need not give:

A)any notice of the sale.
B)notice to the original buyer.
C)notice to the breaching buyer.
D)notice to the original buyer if the goods are perishable.

Question 33

The giving of notice to a seller within a reasonable time after a breach of warranty has been discovered by the buyer is a condition precedent to a suit by the buyer for breach of warranty.

Question 34

If consumer goods are sold under a contract that excludes consequential damages, and the buyer is later physically injured because of a defect in the goods, the exclusion of consequential damages is prima facie unconscionable and is not binding.

Question 35

A seller may not sue the buyer for the full purchase price if:

A)the goods are resold at one-third of the contract price.
B)the goods cannot be resold.
C)the goods have been accepted.
D)the goods have been damaged after the risk of loss passed to the buyer.

Question 36

A buyer who elects to cancel a contract because of the seller's breach may not later sue for breach of contract.

Question 37

A seller may cancel a sales contract if the buyer:

A)wrongfully rejects the goods.
B)repudiates the contract.
C)fails to make a payment due on or before delivery.
D)all of the above.

Question 38

The tort statutes of limitations tend to be __________the UCC statute of limitations.

A)shorter than
B)longer than
C)equal to
D)excluded by

Question 39

Under both the CISG and the UCC, a buyer may reject goods only if the tender of the goods is a fundamental breach of the contract.

Question 40

Which of the following is not an example of incidental damages recoverable by a seller?

A)expenses for the care of the goods after the buyer's breach
B)expenses for transportation of the goods after the buyer's breach
C)expenses for resale of the goods after the buyer's breach
D)expenses for the attorney's fees after the buyer's breach

Question 41

When a buyer has possession of goods after rightfully rejecting them, the buyer is treated:

A)the same as a seller in the possession of goods after default by a buyer.
B)as being strictly liable for the safety of the goods.
C)the same as if an entrustment had been created.
D)as an insurer of the goods until the seller retakes possession.

Question 42

To revoke acceptance of goods:

A)any defect or nonconformity must be discovered.
B)the goods must be dangerously defective.
C)the nonconformity must substantially impair the value of the goods.
D)action must be taken by the buyer within 60 days of delivery.

Question 43

In the absence of a liquidated damages clause and in the absence of proof of greater damages, the seller's damages are computed as

A)25% of the purchase price or $500, whichever is less.
B)25% of the purchase price or $500, whichever is greater.
C)20% of the purchase price or $500, whichever is greater.
D)20% of the purchase price or $500, whichever is less.

Question 44

A revocation of acceptance:

A)is accomplished only by a return of the goods.
B)is effective when the buyer notifies the seller.
C)requires no notification.
D)is a breach of contract.

Question 45

On January 15, 2009, Anders brought an action against Barnes for breach of a contract for the sale of electronic parts. The breach occurred on January 10, 2005, and Anders discovered the breach on January 20, 2005. The state statute of limitations for contract actions is five years. Barnes raised the UCC statute of limitations as a defense to the action. Is this defense valid?

Question 46

Under the CISG, a buyer may reject goods

A)consistent with the right of rejection set forth in the UCC.
B)if the goods are nonconforming to the contract in any way.
C)only if the tender is a fundamental breach of the contract.
D)only if the tender is illegal in subject matter and/or purpose.

Question 47

If a buyer procures the same or similar goods as those involved in the sales contract breached by the seller, the buyer:

A)loses all rights to prosecute for breach.
B)is said to have validated the seller's action.
C)is said to have covered.
D)is also in breach.

Question 48

When a seller breaches a contract for the sale of goods to a buyer, the buyer is entitled to specific performance of the contract if the:

A)goods are unique.
B)market cost of the goods has increased.
C)goods can be purchased in any major city in the country.
D)buyer's customers will be disappointed if the buyer does not obtain the goods.

Question 49

Fran had a very rare, and therefore expensive, automobile that she wished to sell. Fran worried that if the first attempt at selling the auto failed, the value of the auto might come into question. To prevent any potential loss of profit if the auto needed to be resold, Fran created a sales contract that provided for an estimation of damages should the contract later be breached by the potential buyer. A potential buyer was found, and the contract was signed. Later, because of a lack of sufficient financing, the buyer breached the sales contract. Fran requested the estimated damages provided for in the contract. The buyer refused, calling the clause unconscionable and excessive. Can Fran recover?

Question 50

Rejection of improper tender and revocation of acceptance are

A)synonymous.
B)distinguishable remedies.
C)common law remedies.
D)non-UCC remedies.

Question 51

Peter contracted to purchase five (5) cases of soda and a vacuum cleaner because Peter was planning a party for his son's graduation. Both contract forms that Peter signed contained exclusion of damages clauses; i.e., each contract stated that the buyer had no right to sue the seller in the event that the goods were defective. Instead, each seller's sole obligation was to replace or repair the defective goods within a reasonable time of being notified of the defect(s). These clauses in the contract were set forth in the ordinary type of the contract and were not especially conspicuous.
The vacuum cleaner was delivered on Friday, the day before the party, when the rugs in Peter's home were quite dirty. The vacuum cleaner did not work properly. Peter notified the seller, who responded by saying that nothing could be done until the following week. Frantic because guests were coming, Peter hired a cleaning service to clean the rugs.
While serving the soda to guests, one of the bottle caps burst from an unopened bottle with great force. It struck Peter in the eye and he required medical treatment and hospitalization.
Eventually, Peter sued both sellers for damages. Peter sought the expense of the cleaning service from one. From the other, Peter sought damages for personal injury, including his medical and hospitalization expenses. Both defendant-sellers cited the exclusion of damages clauses as their defense.

Question 52

A liquidation of damages clause is valid if it:

A)is not in excess of twice the provable damages.
B)is agreed to by both parties to the contract.
C)reasonably attempts to estimate the actual harm caused by a breach.
D)is a reasonable amount designed to punish the breaching party.