REG 10 - UCC Article 2 - Sales 3 - Seller/Buyer Remedies Flashcards Preview

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Flashcards in REG 10 - UCC Article 2 - Sales 3 - Seller/Buyer Remedies Deck (11):

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?
Demand assurance of performance
Cancel the contract
Collect punitive damages

Yes, yes, no
A party who has reasonable grounds to believe the other party will not perform as contracted may request, in writing, assurance of performance or as a remedy cancel the contract immediately. Punitive damages are not awarded in actions based on breach of contract.


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?

(Note: This is a comprehensive Article 2 question)
A. Smith is obligated to deliver the computer to Peters' home.
B. Peters is entitled to inspect the computer before paying for it.
C. Peters may not pay for the computer using a personal check unless Smith agrees.
D. Smith is not entitled to payment until 30 days after Peters receives the computer.

B. In the absence of a contrary agreement or a C.O.D. contract, the buyer has an absolute right to inspect goods before payment. Peters has a right to inspect the computer for damage.


Lopez contracts to sell 50 gallons of a described paint to Zeno. Zeno is to pick up the 50 gallons, which Zeno and Lopez had set aside from the other paints, before the contract and price was agreed. Due to a fire caused by lightning (no fault of Lopez), 25 of the 50 gallon cans were destroyed. Which of the following is correct?
A. Zeno can inspect the remaining 25 gallons and either accept the 25 gallons paying the contract rate, or avoiding the entire contract.
B. Since the risk of loss passed upon the making of the contract, the risk of the loss to the destroyed 25 gallons is on Zeno.
C. Since title to the goods passed to Zeno upon the making of the contract, risk of loss is on Zeno.
D. Zeno can accept the remaining 25 gallons and sue Lopez for failure to provide the full 50 gallons contracted.

A. The facts allow an excused performance under the Casualty to Identified Goods rule. If, at the time of contract formation, the goods were identified to the contract (here, set aside and identified by Lopez and Zeno before the contract was made), risk of loss had not yet passed to the buyer at the time of the making of the contract (for goods to be picked up - called a delivery by seller without physical movement of the goods not represented by a document of title, if seller is a merchant risk doesn't pass until buyer receives the goods), and the casualty is not the fault of the seller, if the loss is partial, the buyer can inspect the remaining goods and accept them paying the contract rate or avoid the contract.


Green has contracted to purchase 100 cartons of "deluxe" quality stationery paper identified as U23 from ABC Paper. Green had considered buying stationery paper identified as U2, which is slightly below the quality of U23, from ABC. ABC, by mistake, ships 100 cartons of U2 stationery paper to Green. The cartons arrive. Green pays ABC the purchase price and starts using the stationery. Green, two days later, on inspection discovers the delivered stationery is slightly below quality. Which of the following is correct?
A. Payment by Green is in and of itself acceptance of the U2 stationery.
B. Possession and use of the stationery is acceptance of the U2 stationery.
C. Failure to inspect upon delivery is acceptance of the U2 stationery.
D. Failure of Green to reject after inspection would constitute acceptance.

D. Failure of a buyer to reject after inspection of the goods and discovery of the nonconforming shipment is considered to be an acceptance of the goods.


T/F: A buyer contracts to purchase 100 cases of copy paper. The seller by mistake ships 200 cases of copy paper. The buyer could legally, and without liability, reject the entire 200 case shipment.



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

I. The injured party may collect any amount of liquidated damages provided for in the contract.

II. 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.

II only. Where the seller justifiably withholds delivery of goods and the buyer has made a deposit or payment and there is no liquidated damage clause, the seller may keep $500 or 20% of the purchase price, whichever is less.


Eagle Corporation solicited bids for various parts it uses in the manufacture of jet engines. Eagle received six offers and selected the offer of Sky Corporation. The written contract specified a price for 100,000 units, delivery on June 1 at Sky's plant, with payment on July 1.

On June 1, Sky had completed a 200,000 unit run of parts similar to those under contract for Eagle and various other customers. Sky had not identified the parts to specific contracts. When Eagle's truck arrived to pick up the parts on June 1, Sky refused to deliver claiming the contract price was too low. Eagle was unable to cover in a reasonable time. Its production lines were in danger of shutdown because the parts were not delivered.

Eagle would probably
A. Have as its only remedy the right of replevin.
B. Have the right of replevin only if Eagle tendered the purchase price on June 1.
C. Have as its only remedy the right to recover dollar damages.
D. Have the right to obtain specific performance.

C. Money damages are always available when a contract is breached. The remedies of replevin and specific performance are not available here because the units were not identified to the contract, nor are the units unique (200,000 run included units for various other customers).


T/F: A buyer contracts to purchase 50 cases of corn to be shipped by truck carrier. The seller delivers the corn to the carrier, who places the cases with other sellers' products onto a truck. Before the truck arrives at the buyer's destination, the buyer learns that he or she can buy cases of corn elsewhere more cheaply. The buyer repudiates the contract. The seller has a right to stop the goods in transit under these circumstances.

If buyer's repudiation is other than insolvency, seller can only stop if quantity shipped is a carload, truckload, planeload, or larger shipment.


T/F: For an action for a breach of warranty, the four-year statute of limitations begins to run the moment that the buyer suffers injury or loss due to the breach.

The statue of limitations is the time of the breach of warranty.
Time period from date of cause of action in which the party must file or be barred from recovery


T/F: If a seller refuses to deliver conforming goods, the buyer can in good faith purchase substitute goods on the open market and recover from the seller the difference between the cover and contract prices plus any incidental and consequential damages.



T/F: A seller is prohibited by contract from limiting a buyer's remedies to the repair or replacement of a defective or nonconforming product.

A contract limitation is allowed. However not for non-conforming product.
Parties can agree to limit (or even add) remedies otherwise available under the UCC. For example, by agreement a buyer's remedies can be limited to a seller's repair or replacement of defective goods - (UCC 2-719(1)).

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