Sales

Question 1

T/F

Whether the Uniform Commercial Code (Statutory Law) is involved in a contract depends on the price of the goods

Answer 1

FALSE

Whether UCC is involved in sales does NOT depend on the price of the goods

Question 2

What are the 3 necessary elements of a firm offer?

Answer 2

1) Must be a merchant
2) must be in writing
3) must guarantee that the offer will be held open

Question 3

T/F

In sales, like in contracts, you can make minor changes between merchants and still have a valid acceptance

Answer 3

FALSE

In sales you can make minor changes between merchants and still have a valid acceptance, however this is DIFFERENT from contracts, in which even the slightest change causes a counteroffer to be established

Question 4

What is a COD Sale?

Answer 4

This is a Collect on Delivery sale, in which case the buyer will not have the right to inspect the purchase prior to payment

Question 5

T/F

A buyer may reject nonconforming goods for any nonconformity, even if it is immaterial (wrong shipping method)

Answer 5

TRUE

Question 6

T/F

If a buyer rejects nonconforming goods, they must reject all of the goods - they cannot pick and choose.

Answer 6

FALSE

They can reject all of the goods, some of the goods, or none of the goods

Question 7

T/F

When a buyer rejects nonconforming goods, this substantially ends the sales contract

Answer 7

FALSE

The seller has the right to cure/correct by notifying the buyer that the problem will be correct in time to be within the originally agreed-upon deadline.

Question 8

This is when a party states that they won’t perform prior to the time of performance.

Answer 8

An Anticipatory Breach

Question 9

T/F

Sale of goods of $500 or more requires a writing which must include a quantity. This is known as the Statute of Frauds.

Answer 9

TRUE

Question 10

What are the 4 exceptions to the Statute of Frauds? (no writing required, even if $500 or more)

Answer 10

1) Specially manufactured goods for the buyer (seller can’t sell the goods to anyone else)
2) Payment of goods or Receipt of Goods
3) Admissions in Court make the oral contract enforceable
4) Merchants Confirming Letter (no objection within 10 days binds both merchants)

Question 11

When it is unclear whether a contract is FOB Shipping or FOB Destination, which is it?

Answer 11

UCC says it is FOB Shipping

Question 12

If there is no common carrier, when does title and risk of loss pass?

Answer 12

Title passes as soon as the contract is made with identified goods. Risk of loss with MERCHANTS passes when the buyer takes possession. Risk of loss with NON-MERCHANTS passes on tender of delivery.

Question 13

With nonconforming goods, when does title and risk of loss pass?

Answer 13

Title passes when the seller completes delivery requirements. Risk of loss is always on the seller.

Question 14

What does CIF mean?

Answer 14

This means the quoted price includes the Cost of goods, Insurance, and Freight

Question 15

What does Sale on Approval mean?

Answer 15

Neither risk of loss nor title pass until the buyer approves. The buyer is a non-merchant and buying for good use.

Question 16

What does Sale on Return mean?

Answer 16

Buyer gets risk of loss and title on delivery, but may return the goods. Buyer is buying for resale - the buyer is a merchant

Question 17

This is a merchant’s promise that goods are fit and safe in normal uses

Answer 17

Merchantability

Question 18

T/F

Merchantability can be disclaimed but must be done in writing

Answer 18

FALSE

Merchantability can be disclaimed orally by saying the sale is an “as is” sale

Question 19

What are the 3 warranties of Title?

Answer 19

Title - Seller implies good title
Encumbrances - Sellers promise no unstated liens
Infringments - Sellers promise no patent/trademark violations

Question 20

T/F

Like merchantability, disclaiming the title can be done orally with general language

Answer 20

FALSE

Disclaiming the title requires very specific language, the seller must specifically tell the buyer that they do not guarantee title

Question 21

This is when a buyer relies on the seller to select suitable goods, the seller knows of the reliance, and therefore the goods must be fit for the buyer’s purpose.

Answer 21

Fitness for a Particular Purpose

Question 22

T/F

Fitness for a particular purpose can be disclaimed orally

Answer 22

FALSE

This must be disclaimed in writing

Question 23

When can a buyer get better title than a seller has to give?

Answer 23

1) When a rightful owner leaves goods with a merchant who sells them by error - an innocent buyer gets good title
2) When a seller has fraudulent title and passes the goods on to an innocent purchaser

Question 24

T/F

In sales a buyer may recover for any loss, and may collect punitive damages depending on the severity of the loss

Answer 24

FALSE

A buyer cannot collect punitive damages in sales

Question 25

A remedy of a buyer in sales is that the buyer may purchase suitable goods elsewhere and charge the seller for any loss. What is this called?

Answer 25

Cover

Question 26

If in a credit sale the buyer becomes insolvent, the seller may stop delivery and demand cash. If the goods were already delivered, how long does the seller have to collect the items? Is there an exception to this limit?

Answer 26

10 days If the buyer misrepresented their solvency there is no 10 day limit.

Question 27

The Statute of Limitations in sales states suit must be brought within how many years of the breach?

Answer 27

4 years

Question 28

T/F If the parties agree, the Statute of Limitations can be limited to a minimum of 2 years, and also can be extended to a maximum of 6 years

Answer 28

FALSE The Statute of Limitations can be limited to a minimum of 1 year but cannot be extended beyond 4 years

Question 29

In sales under Strict Privity Rules, who can sue whom?

Answer 29

Only the original buyer can sue the original seller

Question 30

In sales under the UCC rules, who can sue whom?

Answer 30

Users and those reasonably affected by the product may sue

Question 31

In sales under Negligence situations, who can sue whom?

Answer 31

Those injured may sue negligent sellers, but must show the 4 elements of negligence

Question 32

What are the 4 elements of negligence?

Answer 32

Duty of Care - seller owed the buyer a duty of due care Breach - seller failed to use reasonable care Damages - buyer suffered damages Causality - buyers damages were caused by the seller's breach

Question 33

This is a liability without fault by sellers of defective products

Answer 33

Strict Liability in Tort

Question 34

What are the 5 elements of Strict Liability in Tort?

Answer 34

1) Defective products 2) Cause - must show the defect caused injury 3) Unreasonably Dangerous - must show the defect was unreasonably dangerous to users and consumers 4) Business - must show seller was engaged in that business (seller is a merchant) 5) Changes - must show it reached the user without substantial changes

Question 35

T/F Privity and negligence are irrelevant for strict liability in tort

Answer 35

TRUE

Question 36

How is a firm offer created?

Answer 36

A firm offer is a written, signed offer concerning the sale of goods, by a merchant, giving assurance that it will be held open for a specified time and is irrevocable for that period, not to exceed three months. If the firm offer does not state a period of time, it will remain open for a reasonable period of time, not to exceed three months.

Question 37

T/F In a firm offer, both the offeror and the offeree must be merchants

Answer 37

FALSE Only the offeror need be a merchant

Question 38

Under the UCC the place of tender is ____ unless the parties alter the place of tender in their contract

Answer 38

The seller's place of business