On-Line Test Bank for Miller & Jentz s5

Interactive Quiz for Modern, Chapter 14

Chapter 14 – The Formation of Sales Contracts

1. The Uniform Commercial Code (UCC) attempts to provide which of the following: a. guidelines for making common law contracts that deal with the sale of land. b. a framework for all international contracts dealing with the sale of securities. c. a consistent and integrated framework of rules to deal with all aspects of commercial sales transactions. d. a consistent body of rules for dealing with criminal violations of the law that involve either securities or government bonds.

Answers:

a. Incorrect. The UCC does not deal with the sale of land at all. b. Incorrect. The UCC does not cover many international sales. c. Correct. The UCC attempts to provide a logical framework for these kinds of commercial transactions. d. Incorrect. The UCC does not deal with criminal law at all.

2. Article 2 of the UCC governs: a. contracts for the sale of land. b. contracts for the sale of goods. c. negotiable instruments. d. bulk sales.

Answers:

a. Incorrect. The common law, not the UCC, governs contracts for the sale of land. b. Correct. Article 2 covers contracts for the sale of goods. c. Incorrect. Article 3 deals with negotiable instruments. d. Incorrect. Article 6 deals with bulk sales.

3. If Jim sells Smith copper that he removed from land that he owns in Colorado, this contract: a. will be covered by Article 2 of the UCC. b. will be covered by Article 2A of the UCC. c. will be covered by Article 3 of the UCC. d. will be covered by the common law.

Answers: 2

a. Correct. Jim is selling a good that he has separated from the land. Therefore, this contract will be covered by Article 2. b. Incorrect. Article 2A covers leases, and this is a sale. c. Incorrect. Article 3 covers negotiable instruments. d. Incorrect. Although Jim is selling a good associated with real estate, the copper has been separated from the land; thus, the sale of the copper will be governed by the UCC.

4. If you lease an automobile from an automobile dealer, this contract is covered by: a. Article 2 of the UCC. b. Article 2A of the UCC. c. Article 6 of the UCC. d. the common law, because it involves an intangible good.

Answers:

a. Incorrect. Article 2 covers contracts for the sale of goods, not leases or subleases of goods. b. Correct. Article 2A covers leases of goods. c. Incorrect. Article 6 covers bulk transfers, not subleases. d. Incorrect. This contract involves the lease of tangible goods, not intangible goods, and leases of goods are covered by Article 2A of the UCC.

5. The effect of open terms on a contract covered by the UCC is that: a. the contract will be void because of the open terms. b. the contract will be valid if it involves the sale of land. c. the contract will be valid if the parties intended to form a contract and there is a reasonable basis for a court to grant a remedy. d. the contract will be valid as long as the parties expressed some interest in negotiating.

Answers:

a. Incorrect. The UCC provides “gap-filling” provisions that the courts apply to contracts with open terms. b. Incorrect. Remember, the UCC does not cover contracts for the sale of land. c. Correct. As long as both requirements are met, the contract will be valid. d. Incorrect. The parties must do more than express an interest in negotiating; they must express an intent to form a contract. 3

6. Suppose that Frank offers to sell to Keith an antique armoire worth more than $2,500. Keith agrees to buy the armoire and signs a contract for the purchase. The price of the armoire, however, is left out of the contract. In this case: a. there is a contract as long as the court can determine a reasonable price at the time of delivery. b. there is a contract only if Frank refuses to name a price. c. there is a contract only if Keith is able to produce evidence that Frank defrauded him. d. there is no contract because parties cannot leave the price term out of the contract.

Answers:

a. Correct. If the price term is omitted in a contract, the UCC allows the court to determine a reasonable price at the time for delivery. b. Incorrect. The validity of the contract does not depend upon Frank’s refusal to set a price. c. Incorrect. Keith does not need to produce evidence of fraud; open price terms are permitted. d. Incorrect. The parties almost certainly DO have a contract, because it would not be difficult for a court to determine a reasonable market price for the armoire.

7. If Lisa offers to sell all of the white chocolate macadamia nut brownies that she makes to Pam, who needs them to sell in her specialty foods store, Lisa and Pam have created: a. a requirements contract. b. an output contract. c. a void contract. d. an invalid open quantity contract.

Answers:

a. Incorrect. A requirements contract involves a buyer agreeing to buy and a seller agreeing to sell all the goods that the buyer needs or requires. b. Correct. An output contract involves a seller agreeing to sell and a buyer agreeing to buy all of the goods that the seller produces. c. Incorrect. This contract is not void, despite the lack of a definite quantity term. d. Incorrect. Even though the quantity term is indefinite, this contract would be a valid output contract.

8. Under a shipment contract, title passes from the seller to buyer: a. when the goods are delivered to the buyer’s office. 4

b. at the time and place of shipment, typically by a carrier. c. when the goods are identified. d. when the goods are created.

Answers:

a. Incorrect. The goods need not be delivered to the buyer’s office in a shipment contract, but rather, they should be delivered to a carrier, who will then transport them. b. Correct. The seller delivers conforming goods to a carrier, such as a trucking company, and title passes at the time and place of shipment. c. Incorrect. In a shipment contract, title does not pass once the goods are identified but rather when they are shipped. d. Incorrect. In a shipment contract, title does not pass when the goods are created but rather when they are shipped.

9. If Jill buys a stolen watch from Sam, and if she knows that Sam stole the watch from an unsuspecting woman on the street, what kind of title does Jill take to the watch? a. She takes voidable title, based on the woman’s ability to locate her. b. She takes good title because she was a good faith purchaser. c. She takes valid title but may be subject to the tort of conversion. d. She takes void title because Sam’s title was void based on theft.

Answers:

a. Incorrect. Jill’s title is void, not voidable, based on Sam’s theft. b. Incorrect. Jill does not take good title because the goods she purchased are stolen and she was aware of this fact. c. Incorrect. Jill’s title is not valid, although she may be subject to a tort claim. d. Correct. Jill has void title because Sam, the seller, had no title to transfer to Jill.

10. Under a shipment contract, when does the risk of loss shift from the seller to the buyer? a. When the goods are delivered to the carrier. b. When the goods are identified. c. When the goods are created. d. When the goods reach the buyer.

Answers:

a. Correct. Risk of loss shifts to the buyer when the goods are duly delivered to a carrier under a shipment contract. 5 b. Incorrect. Risk of loss shifts after the goods are identified in this kind of contract. c. Incorrect. Risk of loss shifts after the goods are created in this kind of contract. d. Incorrect. Risk of loss shifts to the buyer once the seller delivers the goods to the carrier.