Question 1

________ refers to the right of a buyer and lessee to substitute goods for those due under a sales or lease agreement.

Accepted Answer

Cover refers to the right of a buyer and lessee to substitute goods for those due under a sales or lease agreement, allowing them to purchase or lease substitute goods when the seller or lessor fails to deliver as agreed.

Question 2

Miguel, a buyer becomes insolvent and has breached his contract by not paying for goods that are in transit. Which of the following statements is true?

Accepted Answer

The carrier may stop delivery on the entire shipment if the buyer becomes insolvent and breaches the contract by not paying for the goods. This is a right of the seller under the Uniform Commercial Code (UCC) when the buyer is insolvent.

Question 3

When a lessee in possession of the goods is in breach, when may a lessor reclaim goods according to UCC 2A-525(2)?

Accepted Answer

When the lessee fails to make payments according to the lease terms, the lessor may reclaim the goods.

Question 4

Which of the following statements is true regarding revocation of accepted nonconforming goods?

Accepted Answer

The Uniform Commercial Code (UCC) allows for the revocation of acceptance of nonconforming goods under certain conditions, but it does not specify a fixed time limit for doing so. The revocation must occur within a reasonable time after the buyer discovers or should have discovered the grounds for it and before any substantial change in the condition of the goods that is not caused by their own defects.

Question 5

Assuming proper proof, which of the following represents damages a buyer or lessee may recover in the event of a breach?

Accepted Answer

In the event of a breach, a buyer or lessee may recover both incidental and consequential damages, but not remedial damages, which are not typically recognized as a separate category in contract law.

Question 6

Which of the following is NOT something the buyer must do in obtaining cover?

Accepted Answer

The buyer is not required to ensure the goods are identical to the original goods, but rather that they are reasonable substitutes. This allows for some flexibility in what can be considered an appropriate replacement, as long as it serves a similar purpose or function.

Question 7

________ include lost profits so long as those damages are not too speculative in nature.

Accepted Answer

Consequential damages include lost profits as long as they can be proven with reasonable certainty and are not too speculative.

Question 8

The UCC allows for buyers and lessees to recover goods identified in the contract if the seller or lessor becomes insolvent within ________ after receiving the first payment due under the agreement.

Accepted Answer

The UCC allows for buyers and lessees to recover goods identified in the contract if the seller or lessor becomes insolvent within 10 days after receiving the first payment due under the agreement.

Question 9

Which of the following may a buyer/lessee do if the seller/lessor delivers nonconforming goods?

Accepted Answer

Under the Uniform Commercial Code (UCC), when a seller or lessor delivers nonconforming goods, the buyer or lessee has the right to reject the goods. After rejecting the goods, the buyer or lessee can either obtain cover (purchase substitute goods) or cancel the contract. This provides flexibility in how to address the breach of contract by the seller or lessor.

Question 10

Carolyn, a lessee in possession of a leased piece of equipment, fails to make payments on the equipment as required. What remedy does Raul, the lessor, have under the UCC 2A-525(2)?

Accepted Answer

Under UCC 2A-525(2), if a lessee fails to make payments as required, the lessor has the right to reclaim the goods. This provision specifically addresses the remedies available to a lessor when a lessee defaults on a lease agreement.

Question 11

________ usually requires that the seller or lessor deliver the particular goods identified in the contract.

Accepted Answer

Specific performance is a legal remedy that requires the seller or lessor to deliver the exact goods specified in the contract, rather than simply paying damages for non-delivery.

Question 12

Fred's Fireplaces enters into a contract with Miguel's Patio Supply in which Miguel's agrees to purchase 20 fireplaces. This is considered a small order. Miguel, who is still running a business and who is still solvent, fails to pay for the fireplaces. Fred's Fireplaces stops delivery as the fireplaces are on the way to Miguel. Did Fred's Fireplaces act appropriately?

Accepted Answer

Under the UCC, a seller can stop delivery of goods in transit if the buyer is insolvent or if the shipment is large. Since Miguel is solvent and the order is small, Fred's Fireplaces cannot stop delivery.

Question 13

Fred's Fireplaces enters into a contract with Miguel's Patio Supply in which Miguel's agrees to purchase 20 fireplaces. The fireplaces are delivered, but a day after delivery, Fred discovers Miguel is insolvent. Fred reclaims the fireplaces. Did Fred's Fireplaces act appropriately?

Accepted Answer

The UCC allows sellers to reclaim goods if the buyer is insolvent, without specifying a minimum quantity of goods or requiring a lawsuit before reclaiming.

Question 14

Abel is a seller of rare sports cards. Yolanda asks Abel to find her a Babe Ruth rookie baseball card and agrees to pay him a $1,000 finders fee above the price of the card. Abel finds a card that Josef has for sale and enters into a contract with Josef to buy the card. Josef is supposed to send it by Tuesday because Yolanda is leaving the country on Thursday. Josef never sends the card, and Yolanda tells Abel to forget it because she is leaving the country. If Abel sues Josef for $1,000 in damages, is he likely to win?

Accepted Answer

The $1,000 finder's fee that Abel would have received from Yolanda is a consequential damage resulting from Josef's breach of contract by not sending the card as agreed. Consequential damages are recoverable when they are foreseeable by both parties at the time the contract is made.

Question 15

Which circumstance may a seller reclaim goods when a buyer is in possession of goods and is in breach under UCC 2-702(2),

Accepted Answer

Under UCC 2-702(2), a seller may reclaim goods if the seller discovers the buyer is insolvent within 10 days after the buyer received the goods. This provision is specifically designed to protect sellers in the event of the buyer's insolvency.

Question 16

Fred's Fireplaces enters into a contract with Miguel's Patio Supply in which Miguel's agrees to purchase 20 fireplaces. Fred does not deliver the fireplaces,so Miguel purchases fireplace from Joe's Chimney's instead. Joe's charges significantly above market rate, but Miguel pays anyway because Miguel intends to sue Fred for the difference. Did Miguel act appropriately?

Accepted Answer

Miguel did not act appropriately because, under the Uniform Commercial Code (UCC), when a buyer covers by obtaining substitute goods, they are expected to act in good faith and make a reasonable purchase. Overpaying significantly above the market rate does not align with the duty to mitigate damages reasonably.

Question 17

Fred's Fireplaces enters into a contract with Miguel's Patio Supply in which Miguel's agrees to purchase 20 fireplaces. Miguel fails to pay and Fred's Fireplaces, upon discovering that Miguel is insolvent, stops delivery as the fireplaces are on the way to Miguel. Did Fred's Fireplaces act appropriately?

Accepted Answer

The Uniform Commercial Code (UCC) permits a seller to stop delivery of goods in transit under certain circumstances, such as the buyer's insolvency, which is the case here with Miguel's Patio Supply.

Question 18

What is the preferred remedy for non-breaching buyers or lessees under the UCC?

Accepted Answer

Cover is the preferred remedy for non-breaching buyers or lessees under the Uniform Commercial Code (UCC), allowing them to purchase substitute goods and seek damages for any difference in cost.

Question 19

Henrietta is a solvent buyer but breaches her contract by not paying for goods that are in transit. At this point, which of the following is true?

Accepted Answer

The carrier may stop delivery if the shipment is large, such as a carload or truckload, when the buyer breaches the contract by not paying.

Question 20

When does the UCC allow buyers and lessees to seek the remedy of specific performance?

Accepted Answer

The UCC permits the remedy of specific performance primarily in situations where the goods are unique or when a remedy at law (such as monetary damages) would be inadequate. This is because specific performance is an equitable remedy that is typically reserved for cases where monetary compensation cannot adequately resolve the breach of contract, such as with unique goods or in other special circumstances where damages are insufficient.

Quiz 24: Remedies for Breach of Sales and Lease Contracts