Deck 26: Remedies for Breach of Sales Contracts

Question 1

Some courts allow sellers to recover the profits they would have made if the buyer had completed the transaction.

Answer 1

True

Question 2

If a buyer chooses to cover, the substituted goods purchased must be substantially identical to the contract goods.

Answer 2

False

Question 3

Rejection of an improper tender of goods constitutes terminates the buyer's options for recovery.

Answer 3

False

Question 4

Suppose NovaTek sells $10,000 worth of goods to BestGear on credit and ships the products. During shipment NovaTek discovers BestGear is insolvent. NovaTek can stop shipment of the product if BestGear has not provided assurances.

Question 5

The UCC's statute of limitations applies when a party is seeking recovery on strict tort liability, fraud, or negligence.

Question 6

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

Question 7

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

Question 8

When a sales contract is breached, the common law governs the statute of limitations.

Question 9

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

Question 10

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

Question 11

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

Question 12

A buyer may revoke acceptance because of a seller's failure to complete promised repairs.

Question 13

Consequential damages are available to the buyer but not to the seller.

Question 14

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

Question 15

A buyer revokes her acceptance when she returns a raincoat to the seller that shrank in the rain.

Question 16

If a buyer refuses to accept specially manufactured goods, the seller has the right to keep the goods, and recover the full purchase price as damages.

Question 17

The recovery of lost profits by the seller provides reimbursement for costs the seller incurred in gearing up for contract performance.

Question 18

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 19

To recover damages, a buyer must give the seller notice of the breach within three (3) days.

Question 20

If a buyer materially breaches the contract, the seller may not cancel the contract until it notifies the buyer.

Question 21

A sales contract may provide that in case of breach, no damages may be recovered or no consequential damages may be recovered.

Question 22

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 23

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 24

A buyer can be barred from claiming a breach if the sales contract expressly states that the buyer will not assert any defenses against the seller.

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

Consumer protection law prohibits the waiver of defenses in consumer contracts.

Question 27

The statute of limitations for breach of a sales contract:

A) may be reduced between merchants 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 28

A seller may cancel a sales contract if the buyer does any of the following except:

A) wrongfully rejects the goods.
B) repudiates the contract.
C) fails to make a payment due on or before delivery.
D) rejects an improper tender.

Question 29

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 30

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 31

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 32

A liquidated damages clause is a contractually-agreed upon amount of damages to be paid in the event of default or breach.

Question 33

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 34

The right of a buyer to cancel or rescind a sales contract is never impacted by a delay in exercising that right.

Question 35

The buyer must give notice of the action to the seller if a third party 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 36

If a seller elects to resell the goods remaining in the seller's possession after the buyer breaks the contract, the seller:

A) must always give notice of the sale to the original buyer.
B) is never required to give notice of the sale to the original buyer.
C) is required to follow strict standards in the resale of the goods.
D) is not required to give notice of the sale to the original buyer when the goods are perishable.

Question 37

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 38

A defrauded buyer may avoid the contract and recover damages.

Question 39

If goods are specially manufactured, unique, or rare, a buyer may have the right to specific performance.

Question 40

A buyer may reject a tender of delivery:

A) if the goods do not conform to the contract in some way.
B) only if the goods have a substantial defect.
C) unless the seller promises to cure the defective tender.
D) unless the goods have been sold on credit.

Question 41

A buyer can revoke acceptance of the goods, if the seller does any of the following, except:

A) the seller fails to deliver conforming goods.
B) the seller has repudiated the contract.
C) the defective goods substantially impair value of the contract.
D) cancels the shipment while in transit.

Question 42

Buyers often also experience ______ damages, which are those damages the buyer experiences with respect to a third party as a result of the seller's breach.

A) foreseeable.
B) incidental.
C) punitive.
D) consequential

Question 43

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 44

Suppose Jim is seriously injured by his new chain saw. If the sales contract excluded any damages from recovery, courts would hold that contract:

A) enforceable depending on FTC guidelines.
B) unconscionable under the CISG.
C) is enforceable under UCC Article 2.
D) unconscionable and unenforceable.

Question 45

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 46

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 47

On January 15, 2012, Anders brought an action against Barnes for breach of a contract for the sale of electronic parts. The breach occurred on January 10, 2008, and Anders discovered the breach on January 20, 2008. 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 48

A liquidation of damages clause in a consumer contract is enforceable 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.

Question 49

In the absence of a liquidated damages clause and a 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 50

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 51

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 52

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 53

In the case of a breach of warranties, the buyer:

A) should not notify the seller.
B) is required to notify the seller.
C) does not have the option to resell the goods.
D) is not able to recover consequential damages.