REG 8 - UCC Article 2 - Sales 1 - Intro/Formation/Passage of Title Flashcards Preview

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Flashcards in REG 8 - UCC Article 2 - Sales 1 - Intro/Formation/Passage of Title Deck (19):
1

Under the UCC Sales Article, which of the following conditions will prevent the formation of an enforceable sale of goods contract?
A. Open price
B. Open delivery
C. Open quantity
D. Open acceptance

D. Under the UCC, many terms may be left "open," which means they will be determined at a later time. In this way, the UCC encourages the formation of agreements. Price, time of delivery and payment, and quantity may be left open. However, an acceptance must be made before a contract is enforceable. One can accept open terms, but the acceptance itself must be made. Before acceptance, the sides are merely carrying out unenforceable "preliminary negotiations."

2

Under the Sales Article of the UCC, which of following statements is correct?
A. The obligations of the parties to the contract must be performed in good faith.
B. Merchants and nonmerchants are treated alike.
C. The contract must involve the sale of goods for a price of more than $500.
D. None of the provisions of the UCC may be disclaimed by agreement.

A. All UCC sale of goods contracts must be performed in good faith. If either party does not meet these criteria, remedies will follow.

3

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?
A. Ram's shipment is an acceptance of Handy's offer.
B. Ram's shipment is a counteroffer.
C. Handy's order must be accepted by Ram in writing before Ram ships the socket sets.
D. Handy's order can only be accepted by Ram's shipping of conforming goods.

A. Under the UCC when a buyer orders (unilateral offer to buy) goods to be shipped by a seller, a seller can accept that offer by (1) shipment of conforming goods, (2) by a prompt promise to ship conforming goods, or (3) by the shipment of nonconforming goods without notice of accommodation. Here Ram, in response to Handy's offer, shipped nonconforming goods without notice ("explanation") of accommodation resulting in Ram's acceptance (and breach of contract).

(B) If Ram had notified Handy that the shipment was sent only as an accommodation, the shipment would constitute a counter offer.

4

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:
A. Correct, because Mason is not a merchant and was buying the appliances for household use.
B. Correct, because the agreement to change the delivery date was not in writing.
C. Incorrect, because the agreement to change the delivery date was binding.
D. Incorrect, because Acme's agreement to change the delivery date is a firm offer that cannot be withdrawn by Acme.

C. The modified agreement does not have to be in writing nor consideration paid for the modification to be binding. The underlying sale was for less than $500.
The Statute of Frauds requires a writing only for sales of goods of $500 or more. The modification only changed the delivery date and since the price has not changed, this is still a $480 contract, and the oral modification is valid.

5

T/F: The sale of oil or gas to be severed by the buyer is a sale of goods under the UCC.

False.
When the oil or gas is to be separated by the buyer, real estate law governs.

If they were to be severed by the seller, it would be considered a sale of goods under the UCC.

6

Y/N: A buyer orders 100 crates of romaine lettuce to be shipped via ABC Freight Express. The seller receives the order and by FAX tells the buyer, "order has been received and will be shipped as directed." At time of shipment, the seller only has 90 creates of romaine lettuce in stock. The seller ships 90 crates of romaine lettuce and ten crates of green leaf lettuce with a notice that the shipment is sent only as an accommodation. The seller is in breach of contract.

Yes

7

On May 2, Lace Corp., an appliance wholesaler, offered to sell appliances worth $3,000 to Parco, Inc., a household appliances 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: "FOB -- Parco's warehouse." On May 29, Parco mailed an acceptance of Lace's offer. Lace received the acceptance June 2.
Risk of loss for the appliances will pass to Parco when they are
A. Identified to the contract.
B. Shipped by Lace.
C. Tendered at Parco's warehouse.
D. Accepted by Parco.

C. In a contract which calls for delivery at the buyer's destination, risk of loss does not pass until the goods are tendered at Parco's warehouse. A destination contract is written: "F.O.B., (buyer's place of business)." If this were a shipment contract, then the risk of loss would pass as soon as the goods were delivered to the carrier for shipment.

8

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?
A. When the goods are identified and designated for shipment.
B. When the goods are given to a common carrier.
C. When the goods arrive at their destination.
D. When the goods are tendered to the buyer at their destination.

B. When there is a shipment contract, the obligation of the seller is to place the goods in the hands of a carrier to be delivered to the seller. The risk of loss passes (FOB place of shipment) when the goods are delivered to the carrier.

9

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?
A. The seller is required to arrange for the buyer to pick up the conforming goods at a specified destination.
B. The seller is required to tender delivery of conforming goods at a specified destination.
C. The seller is required to tender delivery of conforming goods at the buyer's place of business.
D. The seller is required to tender delivery of conforming goods to a carrier who delivers to a destination specified by the buyer.

B. If the shipment terms require the seller to deliver goods under an F.O.B. destination contract, the seller is required to properly "tender" the goods to the buyer at the specific destination stated in the contract (not a destination specified by the buyer). This place can be other than the buyer's place of business.

10

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, "F.O.B. Union Suppliers, Inc. Loading Dock."
Which of the parties bears the risk of loss during shipment?
A. Union, because the risk of loss passes only when Quick receives the typewriters.
B. Union, because both parties are merchants.
C. Quick, because title to the typewriters passed to Quick at the time of shipment.
D. Quick, because the risk of loss passes when the typewriters are delivered to the carrier.

D. In an F.O.B. place of shipment contract, the risk passes from seller to buyer when the goods are placed in the possession of the carrier. From that point on, Quick bears risk of loss.

11

West purchased a painting from Noll, who is not in the business of selling art. West is picking up the painting from Noll. Noll tendered delivery of the painting after receiving payment in full from West. West informed Noll that West would be unable to take possession of the painting until later that day. Thieves stole the painting before West returned.
The risk of loss
A. Remained with Noll, because West had not yet received the painting.
B. Remained with Noll, because the parties agreed on a later time of delivery.
C. Passed to West at the time the contract was formed and payment was made.
D. Passed to West on Noll's tender of delivery.

D. In this case, there is a contract for delivery of goods without physical movement not represented by a document of title. Since Noll is a nonmerchant, risk of loss passes to West upon Noll's tender of delivery. Thus, delivery need not be actually made for risk of loss to pass from seller to buyer. Delivery is tendered when, as was the case in this question, the goods are made available for a reasonable time for pick-up by the buyer.

12

On September 10, Bell Corp. entered into a contract to purchase 50 lamps from Glow Manufacturing to be used in Bell Corp's executive company offices. Bell prepaid 40% of the purchase price. Glow became insolvent on September 19 before segregating, in its inventory, the lamps to be delivered to Bell. Bell will not be able to recover the lamps because
A. Bell is regarded as a merchant.
B. The lamps were not identified to the contract.
C. Glow became insolvent fewer than 10 days after receipt of Bell's prepayment.
D. Bell did not pay the full price at the time of purchase.

B. The seller is the one who must identify goods by segregating them from general inventory and associating them with a specific contract before title would pass to the buyer. Since this has not yet been done, the buyer will have no rights in the goods under the contract.

13

T/F: On Monday, Daisy contracts to purchase a dress from Fashion Galore. The dress needs to be altered and Daisy is to pick up the dress on Friday. On Thursday, the dress is destroyed by a fire, through no fault of Fashion Galore. Between Daisy and Fashion Galore, Fashion Galore suffers the loss.

True.
Daisy is in a contract to purchase the dress after it has been altered. No payment was made, therefore the risk of loss remains with Fashion Galore

14

T/F: For a contract in which the delivery terms call for delivery at a buyer's destination, the title passes upon the seller's shipment and risk of loss passes upon the buyer's receipt of the goods.

False.
Title does not pass until the goods are tendered at their destination. Risk of loss passes to the buyer at the time of tender in this contract.

15

Y/N: Is it possible for title to pass immediately upon the goods (equipment) identification to the contract and risk of loss to pass two months later after the goods are delivered to the buyer's plant, installed, and in running order?

Yes.

16

T/F: A contract in which the delivery terms are FAS is a delivery by the seller to the buyer's destination contract. Risk of loss passes upon seller's tender of conforming goods at the point of destination.

False.
FAS (free alongside vessel) - place of shipment. Title and risk of loss pass upon seller's delivery of conforming goods alongside the vessel in the manner usual in that port, or on a dock designated and provided by the buyer.

17

Y/N: A creditor, I. Lend Money Inc., lends money to Guy Yachtman believing that Yachtman owns a particular boat. Yachtman is in default on the debt and Money is in the process of securing a judgment (which would allow for Money to put a judgment lien on the boat). Before the judgment is issued, Yachtman sells the boat to his daughter at 60% of the market value and spends the purchase money on a trip to Europe. Yachtman retains possession and use of the boat. Can the sale to the daughter be set aside?

Yes.
??

18

T/F: On Monday, Daisy contracts to purchase a dress from Fashion Galore. The dress needs to be altered and Daisy is to pick up the dress on Friday. On Wednesday, Fashion Galore files for Chapter 7 bankruptcy. Between Daisy and the trustee in bankruptcy, Daisy has title to the dress.

False.
Until the buyer accepts the goods, title and risk of loss remain with the seller.

19

T/F: ABC Yard Care offers to sell Jim a lawn mower, allowing Jim to take the mower home for a ten-day trial period. The mower is stolen during the ten-day trial period, through no fault of Jim. Risk of loss is on Jim and Jim must pay ABC the contract price.

False.
Until the buyer accepts the goods, title and risk of loss remain with the seller.

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