6.2 Sales Homework Questions

Question 1

Question CPA-01604

Under the Sales Article of the UCC, which of the following statements is correct regarding risk of loss and title to the goods under a sale or return contract?

1. Title remains with the seller until the buyer approves or accepts the goods, but risk of loss passes to the buyer immediately following delivery of the goods to the buyer.
2. Title and risk of loss remain with the seller until the buyer pays for the goods.
3. Title and risk of loss rest with the buyer until the goods are returned to the seller.
4. Title and risk of loss are shared equally between the buyer and the seller.

Answer 1

Explanation

Choice ‘‘c’’ is correct. In a sale or return, the buyer has title and risk of loss unless and until the goods are returned to the seller.

Choices ‘‘d’’, ‘‘a’’, and ‘‘b’’ are incorrect, per the above

Question 2

Question CPA-01605

An appliance seller promised a restaurant owner that a home dishwasher would fulfill the dishwashing requirements of a large restaurant. The dishwasher was purchased but it was not powerful enough for the restaurant. Under the Sales Article of the UCC, what warranty was violated?

1. The implied warranty of marketability.
2. The express warranty that the goods conform to the seller’s promise.
3. The express warranty against infringement.
4. The implied warranty of merchantability.

Answer 2

Explanation

Choice ‘‘b’’ is correct. Any affirmation of fact or promise that becomes part of the basis of the bargain creates an express warranty.

Choice ‘‘a’’ is incorrect. There is no warranty under the Sales Article entitled the ‘‘warranty of marketability.”

Choice ‘‘d’’ is incorrect. The warranty of merchantability is a promise that the goods will be fit for their ordinary purposes. Nothing here indicates that the home dishwasher would be unfit for its ordinary purpose of washing dishes in a home.

Choice ‘‘c’’ is incorrect. The warranty against infringement is a promise that the goods sold do not infringe on another’s patents or copyrights. Nothing indicates that this warranty was breached here.

Question 3

Question CPA-01635

Under the Sales Article of the UCC, which of the following circumstances will relieve a buyer from the obligation of accepting a tender or delivery of goods?

1. If the goods do not meet the buyer’s needs at the time of the tender or delivery.
2. If the goods at the time of the tender or delivery do not exactly conform to the requirements of the contract.
3. Neither I nor II.
4. I only.
5. Both I and II.
6. II only.

Answer 3

Explanation

Choice ‘‘d’’ is correct. A buyer may reject goods if they do not conform to the contract in any way. This is known as the perfect tender doctrine. However, the mere fact that the goods do not meet the buyer’s needs at the time of tender or delivery is not a ground for rejection if the goods conform to the contract.

Choices ‘‘b’’, ‘‘c’’, and ‘‘a’’ are incorrect. Each of these choices incorrectly address either I and/or II.

Question 4

Question CPA-01638

Under the Sales Article of the UCC, which of the following statements is correct regarding a good faith requirement that must be met by a merchant?

1. The merchant must charge the lowest available price for the product in the geographic market.
2. The merchant must adhere to all written and oral terms of the sales contract.
3. The merchant must observe the reasonable commercial standards of fair dealing in the trade.
4. The merchant must provide more extensive warranties than the minimum required by law.

Answer 4

Explanation

Choice ‘‘c’’ is correct. The UCC imposes an obligation of good faith on both parties to a contract. For merchants, this includes the duty to observe reasonable commercial standards.

Choice ‘‘b’’ is incorrect. Under the parol evidence rule, a merchant \/1/0uld not have to adhere to oral statements made before a written contract was made if the written contract appears to be a total integration of the entire deal.

Choice ‘‘d’’ is incorrect. A merchant need not go beyond the warranties required by law. Choice ‘‘a’’ is incorrect. There is no rule requiring merchants to sell at the lowest prices.

Question 5

Question CPA-01640

Under the Sales Article of the UCC, which of the following statements is correct regarding a seller’s obligation under a F.O.B. destination contract?

1. The seller is required to tender delivery of conforming goods at a specified destination.
2. The seller is required to arrange for the buyer to pick up the conforming goods at a specified destination.
3. The seller is required to tender delivery of conforming goods to a carrier who delivers to a destination specified by the buyer.
4. The seller is required to tender delivery of conforming goods at the buyer’s place of business.

Answer 5

Explanation

Choice ‘‘a’’ is correct. Under an F.O.B. destination contract, the seller has the risk of loss until he places conforming goods into the buyer’s hands at the named destination, not necessarily the buyer’s place of business.

Choices ‘‘b’’, ‘‘d’’, and ‘‘c’’ are incorrect, per the above.

Question 6

Question CPA-01643

Under the Sales Article of the UCC, in an auction announced in explicit terms to be without resen,e, when may an auctioneer withdraw the goods put up for sale?

1. At any time until the auctioneer announces completion of the sale.
2. If no bid is made within a reasonable time.
3. I only.
4. II only.
5. Neither I nor II.
6. Either I or II.

Answer 6

Explanation

Choice ‘‘b’’ is correct. In an auction without resen,e, the goods must be sold if an offer is made. Of course, if no offer is made within a reasonable time, the goods need not be sold. Item I describes a sale with rese1ve.

Choices ‘‘a’’, ‘‘d’’, and ‘‘c’’ are incorrect. Each of these choices incorrectly addresses either I and/or II.

Question 7

Question CPA-01697

Patch, a frequent shopper at Soon-Shop Stores, received a rain check for an advertised sale item after Soon­ Shop’s supply of the product ran out. The rain check was in writing and stated that the item would be offered to the customer at the advertised sale price for an unspecified period of time. A Soon-Shop employee signed the rain check. When Patch returned to the store one month later to purchase the item, the store refused to honor the rain check. Under the Sales Article of the UCC, will Patch win a suit to enforce the rain check?

1. Yes, because the rain check met the requirements of a merchant’s firm offer even though no effective time period was stated.
2. Yes, because Soon-Shop is required to have sufficient supplies of the sale item to satisfy all customers.
3. No, because one month is too long a period of time for a rain check to be effective.
4. No, because the rain check did not state the effective time period necessary to keep the offer open.

Answer 7

Explanation

Choice ‘‘a’’ is correct. The rain check satisfied the requirements of a ‘‘firm offer’’ because it inv0lved the sale of goods, the seller was a merchant, it was in writing and signed by the merchant, and the writing included words of firmness (i.e., a promise to keep the offer open). If no time is stated, as in this case, the offer is irrev0cable for a reasonable time, up to three months.

Choice ‘‘c’’ is incorrect. A merchant’s firm offer can be irrev0cable for up to three months.

Choice ‘‘d’’ is incorrect. If a merchant’s firm offer does not indicate how long the offer will be kept open, it is irrev0cable for a reasonable time, not to exceed three months.

Choice ‘‘b’’ is incorrect. There is no such rule under the UCC Sales Article, and, as a practical matter, it \/1/0uld be difficult to predict the supply needed.

Question 8

Question CPA-01702

A sheep rancher agreed, in writing, to sell all the wool shorn during the shearing season to a weaver. The contract failed to establish the price and a minimum quantity of wool. After the shearing season, the rancher refused to deliver the wool. The weaver sued the rancher for breach of contract. Under the Sales Article of the UCC, will the weaver win?

1. No, because quantity cannot be omitted for a contract to be enforceable.
2. No, because the omission of price and quantity terms prevents the formation of a contract.
3. Yes, because this was an output contract.
4. Yes, because both price and quantity terms were omitted.

Answer 8

Explanation

Choice ‘‘c’’ is correct. Under the UCC, a contract to buy all of one’s requirements or to sell all of one’s output is valid even though an exact quantity is not stated. In addition, price and time for delivery are not essential terms under the UCC. As a general rule, the only essential term under the UCC is quantity, and an output or requirements term is considered a sufficiently precise quantity.

Choice ‘‘d’’ is incorrect. First, the contract has a quantity term, the rancher’s output for the season. Thus, this choice is factually incorrect. Second, if it were missing a quantity term, that would be a reason preventing enforcement.

Choice ‘‘a’’ is incorrect. Although it is true that an agreement is unenforceable under the Sales Article if it lacks a quantity term, the UCC treats output as an acceptable quantity term.

Choice ‘‘b’’ is incorrect because when a price term is omitted, the UCC implies a reasonable price, and the contract here does have a quantity term because output is considered an acceptable quantity.

Question 9

Question CPA-01706

EG Door Co., a manufacturer of custom exterior doors, verbally contracted with Art Contractors to design and build a $2,000 custom door for a house that Art was restoring. After EG had completed substantial work on the door, Art advised EG that the house had been destroyed by fire and Art was canceling the contract. EG finished the door and shipped it to Art. Art refused to accept delivery. Art contends that the contract cannot be enforced because it violated the Statute of Frauds by not being in writing. Under the Sales Article of the UCC, is Art’s contention correct?

1. Yes, because the contract cannot be fully performed due to the fire.
2. No, because the cancellation of the contract was not made in writing.
3. Yes, because the contract was not in writing.
4. No, because the goods were specially manufactured for Art and cannot be resold in EG’s regular course of business.

Answer 9

Explanation

Choice ‘‘d’’ is correct. The Statute of Frauds requires contracts inv0lving the sales of goods to be in writing if they exceed $500 (MYLEGS). However, if any of these exceptions apply, an oral contract will be enforceable:

Specially manufactured (custom) goods Written confirmation between merchants Admission in court

Performance

Choice ‘‘c’’ is incorrect. Although the contract is within the Statute of Frauds because it inv0lves the sale of goods for $500 or more and Art did not sign a memorandum sufficient to satisfy the Statute, the contract is nevertheless enforceable against Art under an exception to the Statute for specially manufactured goods.

Choice ‘‘a’’ is incorrect. Whether or not the contract can still be performed is not relevant to the Statute of Frauds. The Statute of Frauds conerns whether certain contracts need written evidence of their existence signed by the party being sued.

Choice ‘‘b’’ is incorrect. Nothing in the UCC requires cancellations to be in writing.

Question 10

Question CPA-01711

Under the Sales Article of the UCC, when a contract for the sale of goods stipulates that the seller ship the goods by common carrier ‘‘F.0. B. purchaser’s loading dock,” which of the parties bears the risk of loss during shipment?

1. The purchaser, because risk of loss passes when the goods are delivered to the carrier.
2. The seller, because risk of loss remains with the seller until the goods are accepted by the purchaser.
3. The purchaser, because title to the goods passes at the time of shipment.
4. The seller, because risk of loss passes only when the goods reach the purchaser’s loading dock.

Answer 10

Explanation

Choice ‘‘d’’ is correct. When a contract for the sale of goods includes an F.0. B. (free on board) delivery term, that term controls risk of loss. The seller has the risk of loss until the goods are delivered at the location named after the F.O.B. term. Here, the location is the purchaser’s loading dock, so risk of loss remains with the seller until the goods are delivered there.

Choice ‘‘a’’ is incorrect. When the delivery term is F.O.B. purchaser’s loading dock, risk of loss does not pass to the purchaser until the goods are delivered at the purchaser’s loading dock.

Choice ‘‘c’’ is incorrect. Under the UCC, risk of loss does not depend upon title, but rather upon the delivery term.

Choice ‘‘b’’ is incorrect. Risk of loss under an F.O.B. term passes when the goods are delivered at the named location, not when the goods are accepted by the purchaser.

Question 11

Question CPA-01714

Under the Sales Article of the UCC, a firm offer will be created only if the:

1. Offeree is a merchant.
2. Offer is made by a merchant in a signed writing.
3. Offer states the time period during which it will remain open.
4. Offeree gives some form of consideration.

Answer 11

Explanation

Choice ‘‘b’’ is correct. A firm offer (an offer that must remain open despite the absence of consideration) can be made only by merchants and must be in a signed writing.

Choice ‘‘c’’ is incorrect. If a firm offer does not state its period of irrev0cability, it will remain open for a reasonable time not to exceed three months.

Choice ‘‘d’’ is incorrect. A firm offer is an offer that must remain open despite the lack of consideration.

Choice ‘‘a’’ is incorrect. The offeree need not be a merchant in a firm offer situation; only the offerer need be a merchant.

Question 12

Question CPA-01717

Under the Sales Article of the UCC, the warranty of title:

1. Applies only if it is in writing and signed by the seller.
2. Provides that the seller deliver the goods free from any lien of which the buyer lacked knowledge when the contract was made.
3. Provides that the seller cannot disclaim the warranty if the sale is made to a bona fide purchaser for value.
4. Applies only if the seller is a merchant.

Answer 12

Explanation

Choice ‘‘b’’ is correct. The warranty of title is a guarantee from the seller that the goods are delivered free of all liens of which the buyer is unaware.

Choice ‘‘c’’ is incorrect. The warranty of title can be disclaimed by specific language or circumstance.

Choice ‘‘a’’ is incorrect. The warranty of title arises automatically in every sale of goods; it need not be in writing.

Choice ‘‘d’’ is incorrect. The warranty of title arises automatically in every sale of goods; even when the seller is not a merchant.

Question 13

Question CPA-01722

To establish a cause of action based on strict liability in tort for personal injuries that result from the use of a defective product, one of the elements the injured party must prove is that the seller:

1. Sold the product to the injured party.
2. Failed to exercise due care.
3. Was aware of the defect in the product.
4. Sold the product in a defective condition.

Answer 13

Explanation

Choice ‘‘d’’ is correct. An action for strict product liability will succeed only if the product was in a defective condition when sold, the seller was in the business of selling goods, the defect caused the plaintiff’s injury, and the product was expected to and did reach the consumer without substantial change.

Choice ‘‘c’’ is incorrect. The seller need not have been aware of the defect.

Choice ‘‘a’’ is incorrect. Strict product liability extends to all foreseeable users, privity is not required.

Choice ‘‘b’’ is incorrect. The seller need not have failed to exercise due care; liability is strict and can be imposed even on a careful seller.

Question 14

Question CPA-01724

Under the Sales Article of the UCC, which of the following factors is most important in determining who bears the risk of loss in a sale of goods contract?

1. The method of shipping the goods.
2. Title to the goods.
3. The contract’s shipping terms.
4. How the goods were lost.

Answer 14

Explanation

Choice ‘‘c’’ is correct. Assuming that the loss occurred under a shipment contract, risk of loss under the UCC is controlled by the shipping terms, not by title.

Choice ‘‘a’’ is incorrect. The method of shipping the goods (e.g., car v.;_ train) is irrelevant to who bears the risk of loss under the UCC; the shipping terms are the key when the contract is a shipment contract.

Choice ‘‘b’’ is incorrect. Risk of loss under the UCC is controlled by the shipping terms in a shipment contract, not by title.

Choice ‘‘d’’ is incorrect. Risk of loss under the UCC is controlled by the shipping terms in a shipment contract, not by how the goods were lost.

Question 15

Question CPA-01727

Under the Sales Article of the UCC, in an F.O.B. place of shipment contract, the risk of loss passes to the buyer when the goods:

1. Reach the buyer’s loading dock.
2. Are identified to the contract.
3. Are placed on the seller’s loading dock.
4. Are delivered to the carrier.

Answer 15

Explanation

Choice ‘‘d’’ is correct. In an F.O.B. place of shipment contract, risk of loss passes when the goods are placed in the hands of a carrier at the seller’s loading dock.

Choice ‘‘b’’ is incorrect. Risk of loss would pass on identification only if the parties specifically so provided.

Choice ‘‘c’’ is incorrect. In an F.O.B. place of shipment contract, it is not sufficient just to get the goods to the loading dock; risk does not pass until the goods are placed in the hands of a carrier there.

Choice ‘‘a’’ is incorrect. In an F.0. B. place of shipment contract, risk of loss passes when the goods are placed in the hands of a carrier at the seller’s loading dock.

Question 16

Question CPA-01732

Under the Sales Article of the UCC, and unless otherwise agreed to, the seller’s obligation to the buyer is to:

1. Hold conforming goods and give the buyer whatever notification is reasonably necessary to enable the buyer to take delivery.
2. Deliver the goods to the buyer’s place of business.
3. Deliver all goods called for in the contract to a common carrier.
4. Set aside conforming goods for inspection by the buyer before delivery.

Answer 16

Explanation

Choice ‘‘a’’ is correct. Absent an agreement otherwise, the seller is not obligated to deliver the conforming goods to the buyer, but merely needs to hold them for the buyer’s disposition.

Choice ‘‘b’’ is incorrect. Absent an agreement otherwise, a seller has no duty to deliver the conforming goods to the buyer.

Choice ‘‘c’’ is incorrect. Absent an agreement otherwise, a seller has no duty to deliver the conforming goods to a common carri•er.

Choice ‘‘d’’ is incorrect. Absent an agreement otherwise, a seller need not hold the conforming goods aside for inspection before delivery.

Question 17

Question CPA-01734

Under the Sales Article of the UCC, which of the following statements regarding liquidated damages is (are) correct?

1. The injured party may collect any amount of liquidated damages provided for in the contract.
2. The seller may retain a deposit of up to $500 when a buyer defaults even if there is no liquidated damages provision in the contract.
3. I only.
4. II only.
5. Both I and II.
6. Neither I nor II.

Answer 17

Explanation

Choice ‘‘b’’ is correct. I: An injured party cannot necessarily collect ‘‘any amount’’ of liquidated damages specified in a contract. UCC 2-718(1) restricts recovery to reasonable liquidated damages; any amounts above a reasonable amount are considered unenforceable penalties. II: Under UCC 2-718(2)(b), a seller can usually retain up to $500 of the buyer’s deposit on the buyer’s breach.

Question 18

Question CPA-01750

Under the Sales Article of the UCC, which of following statements is correct?

1. The contract must inv0lve the sale of goods for a price of more than $500.
2. None of the provisions of the UCC may be disclaimed by agreement.
3. Merchants and nonmerchants are treated alike.
4. The obligations of the parties to the contract must be performed in good faith.

Answer 18

Explanation

Choice ‘‘d’’ is correct. The Sales Article imposes a duty of good faith on all parties.

Choice ‘‘c’’ is incorrect. Certain provisions of the Sales Article differentiate between merchants and nonmerchants (e.g., only a merchant makes the implied warranty of merchantability).

Choice ‘‘a’’ is incorrect. The Sales Article applies to all sales of goods. The $500 limit refers to the Statute of Frauds within the Sales Article.

Choice ‘‘b’’ is incorrect. Most provisions of the Sales Article can be varied by agreement (e.g., warranties may be disclaimed).

Question 19

Question CPA-01754

Under the Sales Article of the UCC, which of the following statements is correct regarding the warranty of merchantability arising when there has been a sale of goods by a merchant seller?

1. The warranty arises when the buyer relies on the seller’s skill in selecting the goods purchased.
2. The warranty arises as a matter of law when the seller ordinarily sells the goods purchased.
3. The warranty cannot be disclaimed.
4. The warranty must be in writing.

Answer 19

Explanation

Choice ‘‘b’’ is correct. The warranty of merchantability is implied whenever a merchant (one who ordinarily sells goods of the kind sold) sells goods. UCC 2-314

Choice ‘‘d’’ is incorrect. The warranty of merchantability is an implied warranty-it need not be in writing.

Choice ‘‘a’’ is incorrect. The warranty of merchantability is implied whenever a merchant (one who ordinarily sells goods of the kind sold) sells goods. The warranty that can arise from reliance is the warranty of fitness for particular purpose.

Choice ‘‘c’’ is incorrect. The warranty of merchantability can be specifically disclaimed or by words such as ‘‘as

is• II

Question 20

Question CPA-01759

High sues the manufacturer, wholesaler, and retailer for bodily injuries caused by a power saw High purchased. Which of the following statements is correct under strict liability theory?

1. Contributory negligence on High’s part will always be a bar to recovery.
2. High may recover even if he cannot show any negligence was inv0lved.
3. Privity will be a bar to recovery insofar as the wholesaler is concerned if the wholesaler did not have a reasonable opportunity to inspect.
4. The manufacturer will av0id liability if it can show it followed the custom of the industry.

Answer 20

Explanation

Choice ‘‘b’’ is correct. An action for strict product liability does not require a showing of negligence. The product must have been unreasonably dangerous when it left the seller’s hands.

Choice ‘‘a’’ is incorrect. In an action for strict liability in tort, High’s contributory negligence would be irrelevant.

Choice ‘‘d’’ is incorrect. Custom in the industry is good evidence that there was no negligence, but a whole industry can be found to be following a negligent practice, and industry custom is not a defense in a strict liability product liability case.

Choice ‘‘c’’ is incorrect. The fact that the wholesaler did not have an opportunity to inspect is not a defense.

Question 21

Question CPA-01767

Under the Sales Article of the UCC, which of the following events will release the buyer from all its obligations under a sales contract?

1. Anticipatory repudiation by the buyer that is retracted before the seller cancels the contract.
2. Impracticability of delivery under the terms of the contract.
3. Refusal of the seller to give written assurance of performance when reasonably demanded by the buyer.
4. Destruction of the goods after risk of loss passed to the buyer.

Answer 21

Explanation

Choice ‘‘c’’ is correct. Failure to give adequate assurances when reasonably demanded is a form of anticipatory repudiation. It constitutes a breach and discharges the buyer.

Choice ‘‘d’’ is incorrect. If the goods are destroyed after the risk of loss passes to the buyer, the buyer is obligated to pay for the goods since the buyer had the risk.

Choice ‘‘b’’ is incorrect. If the delivery terms are impracticable, the buyer must accept delivery by some other reasonable means.

Choice ‘‘a’’ is incorrect. If the buyer repudiates, the seller has the right to hold the buyer to the contract; the buyer is not discharged unless the seller cancels. If the buyer retracts the repudiation in a timely fashion, the contract is treated as if there were no repudiation and the buyer remains liable in full.

Question 22

Question CPA-01770

Rowe Corp. purchased goods from Stair Co. that were shipped C.0. D. Under the Sales Article of the UCC, which of the following rights does Rowe have?

1. The right to possession of the goods before paying.
2. The right to reject nonconforming goods.
3. The right to delay payment for a reasonable period of time.
4. The right to inspect the goods before paying.

Answer 22

Explanation

Choice ‘‘b’’ is correct. Under a C.O.D. contract, a buyer has a reasonable time after delivery in which to inspect the goods and reject them if they are nonconforming.

Choice ‘‘d’’ is incorrect. In a C.O.D. contract, there is no right to inspect the goods before delivery, as there is a duty to pay cash on delivery.

Choice ‘‘a’’ is incorrect. Under the Sales Article the general rule is that payment and possession are concurrent conditions; there is no general right to possession before payment.

Choice ‘‘c’’ is incorrect. A C.0. D. contract requires payment on delivery.

Question 23

Question CPA-01776

Under the UCC Sales Article, which of the following statements is correct concerning a contract inv0lving a merchant seller and a non-merchant buyer?

1. Whether the UCC Sales Article is applicable does not depend on the price of the goods inv0lved.
2. The contract will be either a sale or return or sale on approval contract.
3. The contract may not inv0lve the sale of personal property with a price of more than $500.
4. Only the seller is obligated to perform the contract in good faith.

Answer 23

Explanation

Choice ‘‘a’’ is correct. The Sales Article applies to all contracts for the sale of goods, regardless of price. Choice ‘‘d’’ is incorrect. All parties are bound by the obligation of good faith under the UCC.

Choice ‘‘b’’ is incorrect. The presumption is that all sales are final. A sale or return or sale on approval (both of which allow the return of the goods) is available only if the parties so provide.

Choice ‘‘c’’ is incorrect. The Sales Article covers all sales of goods. If the purchase price is $500 or more, a writing may be required to enforce the contract under the Sales Article’s Statute of Frauds, but the Sales Article still applies.

Question 24

Question CPA-01779

Vick bought a used boat from Ocean Marina that disclaimed ‘‘any and all warranties’’ in connection with the sale. Ocean was unaware the boat had been stolen from Kidd. Vick surrendered it to Kidd when confronted with proof of the theft. Vick sued Ocean. Who is likely to prevail and why?

1. Ocean, because Vick surrendered the boat to Kidd.
2. Vick, because the implied warranty of title has been breached.
3. Ocean, because of the disclaimer of warranties.
4. Vick, because a merchant cannot disclaim implied warranties.

Answer 24

Explanation

Choice ‘‘b’’ is correct. Every sale includes a warranty that the seller has title unless the warranty is specifically disclaimed or the facts give the buyer notice that there is no such warranty. The warranty is not disclaimed by general disclaimers such as the one here disclaiming ‘‘any and all warranties.”

Choice ‘‘d’’ is incorrect. Any seller, including a merchant, can disclaim the warranty of title but the method here (general disclaimer) is not a sufficient disclaimer.

Choice ‘‘c’’ is incorrect. The warranty of title is not disclaimed by general disclaimers such as the one here disclaiming ‘‘any and all warranties.’’

Choice ‘‘a’’ is incorrect. There is a warranty of title implied in every sale, breach of which gives rise to an action for damages. The fact that the buyer here turned over the stolen merchandise to its true owner does nothing to alleviate the seller’s breach of warranty.

Question 25

Question CPA-01782

Quick Corp. agreed to purchase 200 typewriters from Union Suppliers, Inc. Union is a wholesaler of appliances and Quick is an appliance retailer. The contract required Union to ship the typewriters to Quick by common carrier, ‘‘FOB Union Suppliers, Inc. Loading Dock.” Which of the parties bears the risk of loss during shipment?

1. Quick, because title to the typewriters passed to Quick at the time of shipment.
2. Union, because the risk of loss passes only when Quick receives the typewriters.
3. Quick, because the risk of loss passes when the typewriters are delivered to the carrier.
4. Union, because both parties are merchants.

Answer 25

Explanation

Choice ‘‘c’’ is correct. In an FOB contract, the seller has the risk of loss up to the named location. Here, the location named is the seller’s own loading dock. Thus, the risk of loss passes as soon as the goods are off the loading dock and in the hands of the carrier. UCC 2-319

Choice ‘‘b’’ is incorrect. In an FOB contract, risk of loss remains with the seller only up to the named location, not until the goods are received by the seller.

Choice ‘‘d’’ is incorrect. In a shipment contract, the time that risk of loss passes is dependent on the terms of the contract and not on whether the parties are merchants. Even where shipment is not contemplated, risk of loss depends on whether the seller is a merchant. The status of the buyer is irrelevant.

Choice ‘‘a’’ is incorrect. Although it is true that title passed to the buyer on delivery to the carrier, risk of loss does not necessarily follow title.

Question 26

Question CPA-01785

Webstar Corp. orally agreed to sell Northco Inc. a computer for $20,000. Northco sent a signed purchase order to Webstar confirming the agreement. Webstar received the purchase order and did not respond. Webstar refused to deliver the computer to Northco, claiming that the purchase order did not satisfy the UCC Statute of Frauds because it was not signed by Webstar. Northco sells computers to the general public and Webstar is a computer wholesaler. Under the UCC Sales Article, Webstar’s position is:

1. Incorrect because only the buyer in a sale-of-goods transaction must sign the contract.
2. Incorrect because it failed to object to Northco’s purchaser order.
3. Correct because the purchase price of the computer exceeded $500.
4. Correct because it was the party against whom enforcement of the contract is being sought.

Answer 26

Explanation

Choice ‘‘b’’ is correct. Although the contract here requires a writing under the Statute of Frauds signed by the party to be charged, the Sales Article provides a ‘‘confirmatory memo’’ or ‘‘written confirmation’’ exception between merchants. If one merchant sends the other a memo of their contract sufficient to bind the sender, it will bind the recipient as well unless the recipient objects within a reasonable time. UCC 2-201

Choice ‘‘a’’ is incorrect. The party whose signature is required is the party against whom the contract is being enforced. If the seller does not want to sell, a writing signed by the seller generally is required to make the contract enforceable against the seller. UCC 2-201

Choice ‘‘d’’ is incorrect. Although it is true that the Statute of Frauds generally requires a writing signed by the party against whom enforcement is sought, the Sales Article has an exception (the confirmatory memo rule for contracts between merchants) which provides that between merchants, if one merchant sends the other a memo of their contract sufficient to bind the sender, it will bind the recipient as well unless the recipient objects within a reasonable time. UCC 2-201

Choice ‘‘c’’ is incorrect. Although the contract here requires a writing under the Statute of Frauds signed by the party to be charged, the Sales Article provides a ‘‘confirmatory memo’’ exception. Between merchants, if one merchant sends the other a memo of their contract sufficient to bind the sender, it will bind the recipient as well unless the recipient objects within a reasonable time. UCC 2-201

Question 27

Question CPA-01787

Under the UCC Sales Article, which of the following legal remedies would a buyer not have when a seller fails to transfer and deliver goods identified to the contract?

1. Suit for specific performance.
2. Suit for punitive damages.
3. Recover the identified goods (capture).
4. Purchase substitute goods (cover).

Answer 27

Explanation

Choice ‘‘b’’ is correct. The Sales Article does not provide for punitive damages.

Choice ‘‘a’’ is incorrect. The Sales Article allows an aggrieved buyer specific performance when substitute goods cannot be purchased; e.g., where the subject matter is unique.

Choice ‘‘d’’ is incorrect. ‘‘Cover’’ (purchase of substitute goods) is one of the basic remedies available to the buyer where a seller refuses to deliver goods.

Choice ‘‘c’’ is incorrect. Where goods have been identified (and the buyer has paid part of the purchase price), the buyer may take possession of the goods through replevin.

Question 28

Question CPA-01801

Which of the following statements applies to a sale on approval under the UCC Sales Article?

1. Title to the goods passes to the buyer on delivery of the goods to the buyer.
2. Risk of loss for the goods passes to the buyer when the goods are accepted after the trial period.
3. Both the buyer and seller must be merchants.
4. The buyer must be purchasing the goods for resale.

Answer 28

Explanation

Choice ‘‘b’’ is correct. In a sale on approval, risk of loss passes to the buyer on approval of the goods. Choice ‘‘c’’ is incorrect. A sale on approval does not require that either party be a merchant.

Choice ‘‘d’’ is incorrect. If the buyer is purchasing for resale, it generally is a sale or return. In any case, there is

no such requirement for a sale on approval.

Choice ‘‘a’’ is incorrect. In a sale on approval, title does not pass to the buyer on delivery; rather it passes when the buyer approves the goods.

Question 29

Question CPA-01809

Which of the following statements would not apply to a written contract governed by the provisions of the UCC Sales Article?

1. The obligations of the parties must be performed in good faith.
2. The contract must inv0lve the sale of goods for a price of $500 or more.
3. The contract may inv0lve the sale of personal property.
4. The obligations of a nonmerchant may be different from those of a merchant.

Answer 29

Explanation

Choice ‘‘b’’ is correct. Any contract can be in writing under Article 2. If the contract is for the sale of goods for

$500 or more a writing is required under the Statute of Frauds, but this does not mean that a writing is not permitted for contracts inv0lving less money.

Choice ‘‘c’’ is incorrect. A written contract under Article 2 can inv0lve personal property; it may not inv0lve real property.

Choice ‘‘d’’ is incorrect. Some obligations under Article 2 do differ depending on whether merchants are inv0lved (e.g., the implied warranty of merchantability arises only in sales by merchants).

Choice ‘‘a’’ is incorrect. All contracts under the UCC are subject to the good faith requirement.

Question 30

Question CPA-01814

On May 2, Handy Hardware sent Ram Industries a signed purchase order that stated, in part, as follows: ‘‘Ship for May 8 delivery 300 Model A-X socket sets at current dealer price. Terms 2/10/net 30.’’

Ram received Handy’s purchase order on May 4. On May 5, Ram discovered that it had only 200 Model A-X socket sets and 100 Model W-Z socket sets in stock. Ram shipped the Model A-X and Model W-Z sets to Handy without any explanation concerning the shipment. The socket sets were received by Handy on May 8.

Which of the following statements concerning the shipment is correct?

1. Ram’s shipment is a counteroffer.
2. Handy’s order can only be accepted by Ram shipping conforming goods.
3. Ram’s shipment is an acceptance of Handy’s offer.
4. Handy’s order must be accepted by Ram in writing before Ram ships the socket sets.

Answer 30

Explanation

Choice ‘‘c’’ is correct. Under Article 2 an offer can be accepted by a promise to ship or by prompt shipment. Shipment of nonconforming goods constitutes both an acceptance and a breach unless a notice is sent prior to shipping that the goods are only an accommodation.

Choice ‘‘a’’ is incorrect. Shipment of nonconforming goods is not a counteroffer unless accompanied by a notice of accommodation. Here, Handy shipped the socket sets without any explanation concerning the shipment.

Choice ‘‘d’’ is incorrect. In a goods contract, acceptance of an offer can be made merely by shipping goods.

Choice ‘‘b’’ is incorrect. Shipment of goods is an acceptance, whether or not the goods conform. If they do not conform, the shipment is also a breach.

Question 31

Question CPA-01821

On May 2, Handy Hardware sent Ram Industries a signed purchase order that stated, in part, as follows: ‘‘Ship for May 8 delivery 300 Model A-X socket sets at current dealer price. Terms 2/10/net 30.’’

Ram received Handy’s purchase order on May 4. On May 5, Ram discovered that it had only 200 Model A-X socket sets and 100 Model W-Z socket sets in stock. Ram shipped the Model A-X and Model W-Z sets to Handy without any explanation concerning the shipment. The socket sets were received by Handy on May 8.

Assuming a contract exists between Handy and Ram, which of the following implied warranties would result?

1. Implied warranty of merchantability.
2. Implied warranty of fitness for a particular purpose.

Ill. Implied warranty of title.

1. I only.
2. I, II, and Ill.
3. Ill only.
4. I and Ill only.

Answer 31

Explanation

Choice ‘‘d’’ is correct. Every sale of goods by a merchant includes an implied warranty of merchantability. Ram appears to be a wholesaler or a manufacturer, and in either case would qualify as a merchant. Thus, the warranty of merchantability will arise here. A warranty of fitness for particular purpose arises only where the buyer relies on the seller to choose goods suitable for the buyer’s purposes, and here Handy was not relying on Ram to choose suitable goods but instead specified the goods it wanted. Thus, the warranty of fitness will not arise here. Every sale of goods includes a warranty that the seller has title to the goods unless the warranty is disclaimed explicitly or by the circumstances. Thus, the warranty of title would arise here.

Question 32

Question CPA-01827

To establish a cause of action based on strict liability in tort for personal injuries resulting from using a defective product, one of the elements the plaintiff must prove is that the seller (defendant):

1. Was engaged in the business of selling the product.
2. Was in privity of contract with the plaintiff.
3. Failed to exercise due care.
4. Defectively designed the product.

Answer 32

Explanation

Choice ‘‘a’’ is correct. Strict product liability applies only to persons in the business of selling the product inv0lved, including manufacturers, wholesalers, and retailers.

Choice ‘‘c’’ is incorrect. Strict liability does not require a showing of fault. Thus, negligence need not be proved.

Choice ‘‘b’’ is incorrect. Privity is not required in tort. Thus, an action for strict liability can be brought against anyone in the chain of distribution of the defective product, as long as the product was defective when it left that person’s hands.

Choice ‘‘d’’ is incorrect. Strict product liability is not limited to design defects; it is available for manufacturing defects as well. Even when there was a design defect, it is not necessary to show that the defendant is the party who designed the product.

Question 33

Question CPA-01841

Bond purchased a painting from Wool, who is not in the business of selling art. Wool tendered delivery of the painting after receiving payment in full from Bond. Bond informed Wool that Bond would be unable to take possession of the painting until later that day. Thieves stole the painting before Bond returned. The risk of loss:

1. Remained with Wool because the parties agreed on a later time of delivery.
2. Passed to Bond at the time the contract was formed and payment was made.
3. Passed to Bond at Wool’s tender of delivery.
4. Remained with Wool because Bond had not yet received the painting.

Answer 33

Explanation

Choice ‘‘c’’ is correct. Where the seller is not a merchant, risk of loss passes to the buyer upon tender of delivery of the goods.

Question 34

Question CPA-01845

Smith contracted in writing to sell Peters a used personal computer for $600. The contract did not specifically address the time for payment, place of delivery, or Peters’ right to inspect the computer. Which of the following statements is correct?

1. Peters is entitled to inspect the computer before paying for it.
2. Peters may not pay for the computer using a personal check unless Smith agrees.
3. Smith is obligated to deliver the computer to Peters’ home.
4. Smith is not entitled to payment until 30 days after Peters receives the computer.

Answer 34

Explanation

Choice ‘‘a’’ is correct. A purchaser has a right to inspect goods before paying for them unless the contract provides otherwise.

Choice ‘‘c’’ is incorrect. If the contract is silent, delivery is deemed to be due at the seller’s place of business, or if the seller has none, at the seller’s home. Thus, delivery here would be at Smith’s home.

Choice ‘‘b’’ is incorrect. A seller must accept a check as payment or give the buyer additional time to obtain cash.

Choice ‘‘d’’ is incorrect. Unless otherwise agreed, payment and delivery are simultaneous conditions. Thus, payment here would be due on delivery.

Question 35

Question CPA-01856

Cara Fabricating Co. and Taso Corp. agreed orally that Taso would custom manufacture a compressor for Cara at a price of $120,000. After Taso completed the VI/Ork at a cost of $90,000, Cara notified Taso that the compressor was no longer needed. Taso is holding the compressor and has requested payment from Cara. Taso has been unable to resell the compressor for any price. Taso incurred storage fees of $2,000. If Cara refuses to pay Taso and Taso sues Cara, the most Taso will be entitled to recover is:

a.

$92,000

b.

$120,000

C.

$105,000

d.

$122,000

Answer 35

Explanation

Choice ‘‘d’’ is correct. Despite the fact that the contract here was oral and for the sale of goods for $500 or more, it is enforceable under the Statute of Frauds because the compressor constitutes specially manufactured goods, and so the contract falls within an exception to the Statute of Frauds. A seller can bring an action for the full contract price when it is unable to sell the goods that a buyer refuses to accept. The seller can also recover incidental damages such as costs of storage. Thus, Taso would be able to recover the full $120,000 contract price plus the $2,000 in storage fees.

Question 36

Question CPA-02341

Cookie Co. offered to sell Distrib Markets 20,000 pounds of cookies at $1.00 per pound, subject to certain specified terms for delivery. Distrib replied in writing as follows:

'’We accept your offer for 20,000 pounds of cookies at $1.00 per pound, weighing scale to have valid city certificate. ‘’

Under the UCC:

1. A contract was formed between the parties.
2. No contract was formed because Distrib included the weighing scale requirement in its reply.
3. No contract was formed because Distrib’s reply was a counteroffer.
4. A contract will be formed only if Cookie agrees to the weighing scale requirement.

Answer 36

Explanation

Choice ‘‘a’’ is correct. The UCC does not follow the mirror image rule; instead, generally anything that looks like an acceptance will operate as an acceptance, even if it contains new terms. In such a case, a contract generally is formed even if the offerer fails to agree to the new terms. Thus, even though the acceptance contained an additional term regarding the weighing scale, it is an effective acceptance. Indeed, even if this contract were at common law, the acceptance probably would have been found valid. The requirement of a valid city certificate for the weighing scale probably would be considered to be an implied condition of the offer.

Thus, choices ‘‘d’’, ‘‘b’’, and ‘‘c’’ are incorrect.

Question 37

Question CPA-02393

Under the UCC Sales Article, the implied warranty of merchantability:

1. May be disclaimed by a seller’s oral statement that mentions merchantability.
2. Arises only in contracts inv0lving a merchant seller and a merchant buyer.
3. Is breached if the goods are not fit for all purposes for which the buyer intends to use the goods.
4. Must be part of the basis of the bargain to be binding on the seller.

Answer 37

Explanation

Choice ‘‘a’’ is correct. Under Article 2 of the UCC the implied warranty of merchantability may be disclaimed in a number of ways. One such way is by the use of an oral statement that mentions merchantability.

Choice ‘‘b’’ is incorrect. Under the UCC the implied warranty of merchantability can only be given where the seller is a ‘‘merchant’’ of goods. The buyer may be a merchant or a non-merchant.

Choice ‘‘c’’ is incorrect. This answer concerns the implied warranty of ‘‘fitness’’ and not merchantability. The warranty of merchantability mainly is a warranty that the goods are fit for ordinary purposes.

Choice ‘‘d’’ is incorrect. An ‘‘express’’ warranty must be part of the basis of the bargain; this is not true of the ‘‘implied’’ warranties.

Question 38

Question CPA-02397

Yost Corp., a computer manufacturer, contracted to sell 15 computers to lv0r Corp., a computer retailer. The contract specified that delivery was to be made by truck to lv0r’s warehouse. Instead, Yost shipped the computers by rail. When lv0r claimed that Yost did not comply with the contract, Yost told lv0r that there had been a trucker’s strike when the goods were shipped. lv0r refused to pay for the computers. Under these circumstances, lv0r:

1. May return the computers and av0id paying for them because the contract was v0id under the theory of commercial impracticability.
2. May return the computers and av0id paying for them because of the way Yost delivered them.
3. Is obligated to pay for the computers because title to them passed to lv0r when lv0r received them.
4. Is obligated to pay for the computers because Yost made a valid substituted performance.

Answer 38

Explanation

Choice ‘‘d’’ is correct. Under the UCC, if the parties agreed that delivery would be made in a certain way and the agreed method becomes impossible, the seller must arrange for other commercially reasonable transportation and the buyer must accept. Therefore, ‘‘b’’ is incorrect. Impracticability is not a defense, so ‘‘a’’ is incorrect too.

Choice ‘‘c’’ is incorrect. lv0r is obligated to pay for them because Yost was permitted to use a different means of transportation, when title passed is not relevant. lv0r claimed he did not have to pay because Yost did not use a truck for delivery.

Question 39

Question CPA-02403

Gray Fabricating Co. and Pine Corp. agreed orally that Pine would custom manufacture a processor for Gray at a price of $80,000. After Pine completed the work at a cost of $60,000, Gray notified Pine that the processor was no longer needed. Pine is holding the processor and has requested payment from Gray. Pine has been unable to resell the processor for any price. Pine incurred storage fees of $1,000. If Gray refuses to pay Pine and Pine sues Gray, the most Pine will be entitled to recover is:

a.

$80,000

b.

$81,000

C.

$61,000

d.

$60,000

Answer 39

Explanation

Choice ‘‘b’’ is correct. Where the buyer of specially manufactured goods breaches the contract and the seller is unable to resell the goods, the seller may recover as damages the contract price ($80,000) plus reasonable incidental expenses, such as the costs of storage ($1,000).

Note: An oral agreement in excess of $500 is binding in the sale of ‘‘special order goods’’ as an exception to the Statute of Frauds.

Choices ‘‘d’’, ‘‘c’’, and ‘‘a’’ are incorrect. Where the buyer of specially manufactured goods breaches the contract and the seller is unable to resell the goods, the seller may recover as damages the contract price ($80,000) plus reasonable incidental expenses, such as the costs of storage ($1,000). The seller is not limited to his or her costs ($60,000 or $61,000) or the contract price ($80,000).

Question 40

Question CPA-02406

West purchased a painting from Noll, who is not in the business of selling art. Noll tendered delivery of the painting after receiving payment in full from West. West informed Noll that West \/1/0uld be unable to take possession of the painting until later that day. Thieves stole the painting before West returned. The risk of loss:

1. Remained with Noll, because the parties agreed on a later time of delivery.
2. Passed to West on Noll’s tender of delivery.
3. Passed to West at the time the contract was formed and payment was made.
4. Remained with Noll, because West had not yet received the painting.

Answer 40

Explanation

Choice ‘‘b’’ is correct. Under the UCC, risk of loss rules, the risk of loss passes to the buyer on tender of delivery where the seller is a non-merchant who is making the delivery.

Choices ‘‘d’’ and ‘‘a’’ are incorrect. Where the seller is a nonmerchant, the risk of loss passed to the buyer upon tender of delivery, despite the fact that the buyer stated that he would return later to pick the goods up.

Choice ‘‘c’’ is incorrect. Under the UCC, where the seller is a nonmerchant and a shipment contract is not inv0lved, the risk of loss passes to the buyer on tender of delivery and not when the contract was formed.

Question 41

Question CPA-02420

On May 2, Lace Corp., an appliance wholesaler, offered to sell appliances worth $3,000 to Parco, Inc., a household appliance retailer. The offer was signed by Lace’s president, and provided that it would not be withdrawn before June 1. It also included the shipping terms: ‘‘F.O.B.-Parco’s warehouse.” On May 29, Parco mailed an acceptance of Lace’s offer. Lace received the acceptance on June 2.

If Lace inadvertently ships the wrong appliances to Parco and Parco rejects them two days after receipt, title to the goods will:

1. Pass to Parco when they are identified to the contract.
2. Revert to Lace when they are rejected by Parco.
3. Remain with Parco until the goods are returned to Lace.
4. Pass to Parco when they are shipped.

Answer 41

Explanation

Choice ‘‘b’’ is correct. Once the buyer has rightfully rejected the non-conforming goods, the title to the goods reverts to the seller.

Choice ‘‘a’’ is incorrect. Title to goods passes when the parties agree, or if they do not agree, upon delivery. Title does not pass when the goods are identified to the contract.

Choice ‘‘d’’ is incorrect. Under the UCC, title generally passes when goods are delivered. Where the seller has the duty to deliver to a destination other than the seller’s place of business (here, the buyer’s warehouse), title does not pass until the goods are delivered at that location.

Choice ‘‘c’’ is incorrect. A rejection or other refusal by the buyer to receive or retain the goods, whether or not justified, or a justified rev0cation of acceptance revests title to the goods in the seller at the time of rejection or rev0cation of acceptance. Title does not remain with the buyer until the goals are returned to the seller.

Question 42

Question CPA-02455

On May 2, Mason orally contracted with Acme Appliances to buy for $480 a washer and dryer for household use. Mason and the Acme salesperson agreed that delivery would be made on July 2. On May 5, Mason telephoned Acme and requested that the delivery date be moved to June 2. The Acme salesperson agreed with this request. On June 2, Acme failed to deliver the washer and dryer to Mason because of an inventory shortage. Acme advised Mason that it would deliver the appliances on July 2 as originally agreed. Mason believes that Acme has breached its agreement with Mason. Acme contends that its agreement to deliver on June 2 was not binding. Acme’s contention is:

1. Incorrect, because Acme’s agreement to change the delivery date is a firm offer that cannot be withdrawn by Acme.
2. Correct, because the agreement to change the delivery date was not in writing.
3. Incorrect, because the agreement to change the delivery date was binding.
4. Correct, because Mason is not a merchant and was buying the appliances for household use.

Answer 42

Explanation

Choice ‘‘c’’ is correct. Under the UCC, a contract inv0lving ‘‘goods’’ may be modified without the need for additional (new) consideration. Here, the subsequent modification is binding. Moreover, no writing was required for the modification because the contract price, as modified, was less than $500.

Choice ‘‘d’’ is incorrect. Mason’s status as a nonmerchant is irrelevant and Acme is bound to the June 2 delivery date because it was a valid modification. Under the UCC, a modification sought in good faith is binding even absent consideration, and an oral modification is enforceable if the contract, as modified, is not within the Statute of Frauds (i.e., it is for the sale of goods for less than $500).

Choice ‘‘b’’ is incorrect. The oral agreement to change the delivery date is enforceable here, because a contract modification under the Sales Article is enforceable if the contract, as modified, is not within the Statute (i.e., it is for the sale of goods for less than $500). Moreover, the agreement is binding despite the lack of consideration because, under the Sales Article, a modification sought in good faith is binding despite the lack of consideration.

Choice ‘‘a’’ is incorrect. A firm offer is a written offer by a merchant containing words of firmness (i.e., a promise to keep the offer open). The agreement here is not a firm offer, but rather is a modification, an agreement between the parties to change their contract.

Question 43

Question CPA-02458

Which of the following conditions must be met for an implied warranty of fitness for a particular purpose to arise in connection with a sale of goods?

1. The warranty must be in writing.
2. The seller must know that the buyer was relying on the seller in selecting the goods.
3. Both I and II.
4. II only.
5. Neither I nor II.
6. I only.

Answer 43

Explanation

Choice ‘‘b’’ is correct. II only. The implied warranty of fitness is created when the seller of goods knows at the time of the sale that the buyer is relying on the seller to select goods fit for the purpose that the buyer told the seller about.

The implied warranty of fitness need not be in writing or even specifically mentioned. Choices ‘‘d’’, ‘‘a’’, and ‘‘c’’ are incorrect, per above.

Question 44

Question CPA-02462

On February 15, Mazur Corp. contracted to sell 1,000 bushels of wheat to Good Bread, Inc. at $6.00 per bushel with delivery to be made on June 23. On June 1, Good advised Mazur that it would not accept or pay for the wheat. On June 2, Mazur sold the wheat to another customer at the market price of $5.00 per bushel. Mazur had advised Good that it intended to resell the wheat. Which of the following statements is correct?

1. Mazur can resell the wheat only after June 23.
2. Good can retract its anticipatory breach at any time before June 23.
3. Good can successfully sue Mazur for specific performance.
4. Mazur can successfully sue Good for the difference between the resale price and the contract price.

Answer 44

Explanation

Choice ‘‘d’’ is correct. Good’s statement constituted an anticipatory repudiation (i.e., an unequiv0cal statement that the party would not perform). Anticipatory repudiation is an immediate breach, and it gives the nonbreaching party several options, including the option to treat the contract as being breached, reselling the goods, and recovering the difference between the contract price and the resale price.

Choice ‘‘a’’ is incorrect. Good’s statement constituted an anticipatory repudiation (i.e., an unequiv0cal statement that the party would not perform). In an anticipatory repudiation situation, the nonrepudiating party has the option of treating the repudiation as an immediate breach; it need not wait until the original date of performance. Thus, Mazur does not have to wait until June 23 to resell the goods.

Choice ‘‘b’’ is incorrect. A party who breaches through anticipatory repudiation can rev0ke its repudiation only if the norepudiating party does not change its position in reliance on the repudiation. Here, Mazur changes its position by reselling the wheat on June 2. Thus, Good’s ability to rev0ke its anticipatory repudiation was cut off on June 2.

Choice ‘‘c’’ is incorrect. Since the goods are not unique or special, the remedy known as specific performance would not be available. Additionally, since Good (buyer) is the one who breached the contract he/she cannot successfully sue.

Question 45

Question CPA-04975

Generally, if parties to a contract for the sale of goods do not mention how the goods are to be delivered, and where no common carrier is to be used, Article 2 of the UCC requires that the delivery take place at:

1. The seller’s place of business.
2. The buyer’s place of business.

Ill. Either the seller’s or the buyer’s place of business.

1. II only.
2. I only.
3. Neither I, II, nor Ill.
4. Ill only.

Answer 45

Explanation

Choice ‘‘b’’ is correct. Generally, where there is no agreement in noncarrier cases, the buyer will usually be expected to pick up the goods at the seller’s place of business.

Choices ‘‘a’’, ‘‘d’’, and ‘‘c’’ are incorrect, per the above explanation.

Question 46

Question CPA-04978

Cindy purchases a stereo system from Kookie at Kookie’s yard sale. Kookie is an appliance salesman for J&J’s Appliance store. Kookie offers to place the stereo system in Cindy’s car, but Cindy asks Kookie to temporarily hold onto the stereo instead. Kookie agrees to keep the stereo system in his garage until Cindy can pick it up. A fire starts in the garage through no fault of Kookie and the stereo is destroyed. Who bears the burden of the loss?

1. Cindy.
2. Kookie.
3. Both I and II.
4. I only.
5. Neither I nor II.
6. II only.

Answer 46

Explanation

Choice ‘‘b’’ is correct. If the seller is a nonmerchant, such as one selling personal goods at a yard sale, risk of loss passes to the buyer upon the seller’s tender of delivery of the goods to the buyer. Although Kookie would qualify as an appliance merchant, Kookie did not deal in goods of the kind sold here (a car stereo) and so was not a merchant with respect to the stereo. Moreover, Kookie tendered delivery when Kookie offered to place the stereo in Cindy’s car. Thus, the risk of loss passed to Cindy at that time.

Choices ‘‘d’’, ‘‘a’’, and ‘‘c’’ are incorrect, per the above explanation.

Question 47

Question CPA-04981

Party A contracts for the sale of widgets to Party B. Before the date on which performance is due, Party B notifies Party A that it will not perform. This is a(an):

1. Anticipatory repudiation.
2. Anticipatory retribution.
3. Rejection of performance.
4. Perfect tender.

Answer 47

Explanation

Choice ‘‘a’’ is correct. Anticipatory repudiation occurs when either the buyer or the seller indicates in advance of performance that he or she will not perform.

Choice ‘‘b’’ is incorrect. There is no such legal term.

Choice ‘‘d’’ is incorrect. Perfect tender is a UCC doctrine that provides that a buyer of goods may reject unless the goods tendered conform completely with the contract.

Choice ‘‘c’’ is incorrect. Rejection of performance inv0lves the refusal of a tender of performance by the other party.

Question 48

Question CPA-04985

To determine whether the products that a merchant sells to the public are merchantable, a key factor to examine is whether:

1. The manufacturer violated any laws or regulations.
2. The products are quality products that are fit for a specific purpose.
3. The products are fit for the ordinary purpose for which such goods are used.
4. The products are made according to the best manufacturing methods.

Answer 48

Explanation

Choice ‘‘c’’ is correct. The implied warranty of merchantability is implied in every sale by a merchant seller. Among other things, it is a warranty that the goods sold are fit for the ordinary purpose for which they were designed. For instance, a chair is designed to be sat upon as its ordinary purpose. If it breaks when a person sits on it that \/1/0uld be a breach of the warranty of merchantability.

Choice ‘‘d’’ is incorrect. The warranty of merchantability does not require that the goods be manufactured using the best manufacturing methods.

Choice ‘‘b’’ is incorrect. The warranty of fitness for a particular purpose covers goods that are sold for a specific purpose.

Choice ‘‘a’’ is incorrect. This answer is too broad. If the goods themselves were in violation of laws or regulations they would not be merchantable. But the mere fact that the manufacturer violated any law or regulation (e.g., wage and labor laws) would not necessarily violate the warranty.

Question 49

Question CPA-04988

Anson enters into a contract to buy computers from the Becker Computer Store. Before an interest in the computers can pass from Becker to Anson:

1. Becker must verify the credit rating of Anson.
2. Becker must obtain shipping information on the computers.

Ill. The computers must exist and be identified as the goods designated in the contract.

1. I only.
2. II only.
3. I, II, and Ill.
4. Ill only.

Answer 49

Explanation

Choice ‘‘d’’ is correct. Goods must be identified to the contract before the buyer can have any interest in the goods.

Question 50

Question CPA-05525

Thom purchased a used entertainment system from Sound Corp. The sales contract stated that the entertainment system was being sold ‘‘as is.’’ Under the Sales Article of the UCC, which of the following statements is (are) correct regarding the seller’s warranty of title and against infringement?

1. Including the term ‘‘as is’’ in the sales contract is adequate communication that the seller is conveying the entertainment system without warranty of title and against infringement.
2. The seller’s warranty of title and against infringement may be disclaimed at any time after the contract is formed.
3. Both I and II.
4. I only.

C. II only.

d. Neither I nor II.

Answer 50

Explanation

Choice ‘‘d’’ is correct. Under the Sales Article, all sales of goods include a warranty that the seller has title to the goods being sold unless the warranty is specifically disclaimed or the circumstances of the sale indicate that no such warranty is being made (e.g., a sheriffs sale). A disclaimer must be made before or contemporaneously with the sale. A later disclaimer would be ineffective. Thus, neither I nor II is correct.

Choices ‘‘b’’, ‘‘c’’, and ‘‘a’’ are incorrect, per the above.

Question 51

Question CPA-05539

Grill deals in the repair and sale of new and used clocks. West brought a clock to Grill to be repaired. One of Grill’s clerks mistakenly sold West’s clock to Hone, another customer. Under the Sales Article of the UCC, will West win a suit against Hone for the return of the clock?

1. Yes, because the clerk was negligent in selling the clock.
2. No, because the clerk was not aware that the clock belonged to West.
3. No, because Grill is a merchant to whom goods had been entrusted.
4. Yes, because Grill could not convey good title to the clock.

Answer 51

Explanation

Choice ‘‘c’’ is correct. Generally, a person cannot pass on better title than the person has. However, if the owner of goods entrusts them to a merchant who deals in goods of that kind, and the merchant sells them in the ordinary course of the merchant’s business, then the merchant has the power to transfer title to the goods. West was the owner of the clock and he entrusted the clock to Grill, who deals in new and used clocks. Grill sold the clock to Hone in the ordinary course of business. Thus, Grill had the power to pass on good title to the clock and did so when one of Grill’s clerks mistakenly sold the clock to Hone. Because Hone has title to the clock, West cannot recover it from Hone. However, West does have an action for damages against Grill.

Choice ‘‘b’’ is incorrect. Although ‘‘b’’ gives the correct result, it is irrelevant whether or not the clerk was aware that the clock belonged to West.

Choice ‘‘d’’ is incorrect. As discussed above, a seller can convey better title than he has under the entrustment doctrine, which applies under the facts here.

Choice ‘‘a’’ is incorrect. It is irrelevant whether the clerk was negligent.

Question 52

Question CPA-06901

Under the Sales Article of the UCC, which of the following statements is correct regarding the creation of express warranties?

1. Express warranties must be part of the basis of the bargain between buyer and seller.
2. Express warranties must contain formal words such as warranty or guarantee.
3. Express warranties are not enforceable if made orally.
4. Express warranties cannot be based on statements made in the seller’s promotional materials.

Answer 52

Explanation

Choice ‘‘a’’ is correct. To be an express warranty, the language must be part of the basis of the bargain.

Choice ‘‘b’’ is incorrect. An express warranty arises from any statement of fact or promise made by the seller, any description of the goods made by the seller, or any sample or model shown by the seller at a time when it could have become part of the basis of the bargain.

Choice ‘‘c’’ is incorrect. An express warranty may be made orally, in writing or by conduct (e.g., the showing of a model).

Choice ‘‘d’’ is incorrect. Express warranties can arise from any description of the goods given to the buyer before the contract is executed.

Question 53

Question CPA-07204

Under the Sales Article of the UCC, which of the following requirements must be met for a writing to be an enforceable contract for the sale of goods?

1. The writing must contain the signatures of all parties to the writing.
2. The writing must contain the signature of the party seeking to enforce the writing.
3. The writing must contain a term specifying the price of the goods.
4. The writing must contain a term specifying the quantity of the goods.

Answer 53

Explanation

Choice ‘‘d’’ is correct. Under the Sales Article, if parties’ contracts are incomplete, the Article has many gap filling provisions through which the contract may be completed. However, the courts will not enforce a contract that does not state the quantity of the goods bought and sold, either specifically or in terms of output of the seller or requirements of the buyer.

Choice ‘‘c’’ is incorrect. If the price term is missing from a contract, the Sales Article provides that the price shall be a reasonable one.

Choice ‘‘a’’ is incorrect. Generally, a contract for the sale of goods need not be in writing to be enforceable, so no signature is required. If the contract is for the sale of goods for $500 or more (i.e., it is within the Statute of Frauds), the contract is unenforceable unless its material terms are evidenced by a writing signed by the party ‘‘to be charged’’ (i.e., the party being sued).

Choice ‘‘b’’ is incorrect. As explained above, generally a writing and signature are not required at all. And even if the contract is within the Statute of Frauds, the signature needed is the partying being sued, not the party seeking to enforce the contract.

Question 54

Question CPA-07205

When do title and risk of loss for conforming goods pass to the buyer under a shipment contract covered by the Sales Article of the UCC?

1. When the goods are given to a common carrier.
2. When the goods are tendered to the buyer at their destination.
3. When the goods are identified and designated for shipment.
4. When the goods arrive at their destination.

Answer 54

Explanation

Choice ‘‘a’’ is correct. In a shipment contract, risk of loss and title pass to the buyer when the goods are placed in the hands of the carrier.

Choice ‘‘c’’ is incorrect. At identification, the buyer gains some rights in the goods (e.g., an insurable interest), but title and risk of loss do not pass at that time.

Choices ‘‘d’’ and ‘‘b’’ are incorrect. Risk of loss and title pass to the buyer when the goods reach their destination and are tendered only in a destination contract. The question here asks about a shipment contract, which is governed by a different rule.

Question 55

Question CPA-08224

Under the Sales Article of the UCC, which of the following circumstances best describes how the implied warranty of fitness for a particular purpose arises in a sale of goods transaction?

1. The buyer is purchasing the goods for a particular purpose and is relying on the seller’s skill or judgment to select suitable goods.
2. The seller knows the particular purpose for which the buyer will use the goods and the seller is a merchant in such goods.
3. The buyer is purchasing the goods for a particular purpose and the seller is a merchant in such goods.
4. The seller knows the particular purpose for which the buyer will use the goods and knows the buyer is relying on the seller’s skill or judgment to select suitable goods.

Answer 55

Explanation

Choice ‘‘d’’ is correct. The implied warranty of fitness for particular purpose arises when the seller knows the particular purpose for which the buyer will use the goods and that the buyer is relying on the seller to choose suitable goods.

Choice ‘‘a’’ is incorrect. This choice is not as good as choice ‘‘d’’ because it does not include the idea that the seller must know a particular purpose to which the buyer is to put the goods. It is not enough merely that the buyer has a particular purpose in mind. The buyer must inform the seller of the purpose for the warranty to arise.

Choice ‘‘c’’ is incorrect. This choice is incorrect not only for the same reason that choice ‘‘a’’ is incorrect, but also because the seller need not be a merchant for the warranty of fitness to arise; nonmerchant sellers can make the warranty.

Choice ‘‘b’’ is incorrect. The warranty does not arise unless both prongs are present; the buyer must inform the seller of a particular purpose and must rely on the seller to select suitable goods. The seller need not be a merchant.

Question 56

Question CPA-01729

Under the Sales Article of the UCC, which of the following rights is(are) available to the buyer when a seller commits an anticipatory breach of contract?

Answer 56

Explanation

Choice ‘‘c’’ is correct. On an anticipatory breach of contract (or repudiation) the nonbreaching party has a right to demand assurances of performance or to cancel the contract. There is no right to punitive damages under contract law in general, even on anticipatory breach.

Question 57

Question CPA-01744

Under the Sales Article of the UCC, which of the following rights is available to a seller when a buyer materially breaches a sales contract?

Answer 57

Explanation

Choice ‘‘d’’ is correct. When a buyer materially breaches a contract, the seller may cancel and seek damages.

Question 58

Question CPA-01764

Under the Sales Article of the UCC, which of the following events will result in the risk of loss passing from a merchant seller to a buyer?

Answer 58

Explanation

Choice ‘‘a’’ is correct. In a noncarrier case, risk of loss passes from a merchant seller on actual delivery of the goods into the buyer’s possession. Mere tender at the seller’s place of business does not pass the risk. Neither does the seller’s using its truck to deliver the goods. (Note that since the seller is using its own truck, this is a noncarrier case, no common carrier was inv0lved.)