Q&A Hero

Q: Quality Electrical, Inc., contracts with Regional Power Corporation (RPC) to make and install unique equipment in RPC's power plant. Quality is to design the equipment and service it on an ongoing basis, and the contract price is tied to the labor provided. This contract is a. equally for a sale of goods and a sale of services. b. neither for a sale of goods nor a sale of services. c. predominantly for a sale of goods. d. predominantly for a sale of services.

Q: Central Manufacturing Corporation orders twelve job-training and on-the-job safety DVDs from Delta Visuals, Inc., which delivers the disks to Central's plant. This is most likely a. a bailment of goods. b. a lease of goods. c. a sale of goods. d. a service contract.

Q: National Electronics, Inc., contracts to sell six computers to Office Leasing, which contracts to lease the computers to Peak Finance Company. Quinn, the owner of National Electronics, gives a computer to Rita. Article 2 of the UCC is generally held to apply to a. the gift only. b. the lease only. c. the sale only. d. the gift, the lease, and the sale.

Q: Essentially, the United Nations Convention on Contracts for the International Sale of Goods is to international sales contracts what Article 2 of the Uniform Commercial Code is to domestic sales contracts.

Q: An unconscionable contract is a contract so one-sided and unfair at the time it is made that enforcing it would be unreasonable.

Q: Two parties' prior dealing may be considered to resolve an ambiguity in a contract between them.

Q: Under the UCC, an agreement modifying a contract "needs new consideration to be binding."

Q: All oral contracts are enforceable under the UCC.

Q: If a sales contract is unilateral, the offeror need not be notified of the offeree's performance.

Q: Under the UCC, an offer to buy goods can be accepted only by a prompt shipment of the goods.

Q: The rules governing firm offers apply to certain merchants only.

Q: If a contract for a sale of goods does not include the quantity, it may still be enforced if it is a requirements contract.

Q: If a contract for a sale of goods does not include the delivery date, there is no basis for enforcing it.

Q: According to the UCC, one or more open terms will always cause a sales or lease contract to fail for indefiniteness.

Q: A lessor is one who sells the right to the possession and use of goods under a lease.

Q: Article 2A varies from Article 2 to reflect differences between sale and lease transactions.

Q: Article 2A covers any transaction that creates a lease, but not a sublease, of goods.

Q: The UCC does not impose different standards on merchants than it imposes on consumers.

Q: In a contract in which goods and services are combined, the contract is always considered an agreement for the sale of goods.

Q: If a seller is to remove a structure attached to land, the sale of the structure is treated as one involving goods.

Q: The UCC governs sales of services.

Q: A copyright is an example of property that does not come under Article

Q: Under the UCC, a sale of goods will be considered valid only if the goods are paid for with money.

Q: Alpha Products, Inc., offers to sell to United Sales Company one hundred MP3 players at $50 a piece, subject to certain specific delivery dates. United replies with a signed purchase order that reads, "Accept your offer for 100 I-appliances at $50 each. Must be delivered to our warehouse." Alpha does not respond or deliver the goods. United files a suit for breach of contract, to which Alpha answers that there is no contract because United's purchase order contained additional terms and is not signed by Alpha. Can United recover?

Q: Great Beverages Company (GBC) often sells coffee, tea, and related products to Hava Java, Inc. (HJI), which owns and operates a chain of coffee shops. Over the phone, representatives of the two firms negotiate a sale of 144 pounds of a certain kind of coffee bean. GBC sends a letter to HJI detailing the terms and ten days later ships the beans. Is there an enforceable contract between them? Explain.

Q: Overseas Corporation, an American firm, orally agrees to sell six large freezers to Pisa Pizza, Ltd., in Italy. Overseas fails to deliver. Under the CISG, Pisa Pizza can a. enforce the agreement. b. not enforce the agreement because it is not in writing. c. not enforce the agreement because the price term is not specified. d. not enforce the agreement because there is no consideration.

Q: Gail enters into a contract with Hi-Price Appliances, Inc. In a suit between the parties over payment under the contract, Gail claims that a certain clause is unconscionable. If the court agrees, it maya. enforce, limit, or refuse to enforce the contract or the disputed clause.b. enforce the contract without the disputed clause only.c. limit the application of the disputed clause only.d. refuse to enforce the entire contract only.

Q: Tasty Pastries, Inc., and other bakers refer to a "baker's dozen" as consisting of a collection of thirteen baked goods. This is an example of a. course of dealing. b. course of performance. c. square dealing. d. usage of trade.

Q: Rita, the manager of the State University (SU) soccer team, orally agrees to lease a certain number of specially made SU banners from Top Banners, Inc. This lease is enforceable only if Top has made a substantial start on making the banners and a. Rita agreed to the lease on behalf of the SU soccer team. b. SU does not have other, similar banners available. c. the banners are not suitable for others in the course of Top's business. d. the soccer season has not ended and SU goes to the finals.

Q: All-Rite Clothiers, Inc., sells t-shirts to Brand Name Stores, Inc., under an existing contract. When textile costs increase, Brand agrees to a price increase, but later wants to cancel the contract. Brand may a. cancel the contract immediately. b. cancel the contract only after accepting a final shipment. c. cancel the contract only on reasonable notice. d. not cancel the contract.

Q: United Farms offers to sell Value Bakeries, Inc., fifty bushels of wheat. Value's representative Wendy responds, "We agree to buy fifty bushels only if the wheat is Grade A quality." Wendy's statement is a. a breach of the parties' contract. b. a counteroffer. c. a fulfillment of the parties' contract. d. an acceptance.

Q: Nina is an administrative assistant with Open Source Corporation, but has no authority to sign Open Source checks. Nina orders merchandise from Pleasant Retail Company delivered to her home and pays with an Open Source check, signing "Open Source Corp. by Nina, admin. assist." Pleasant does not know that Nina has no authority to sign the check. Who is liable on the check, and why?

Q: Retail Music, Inc., offers to buy from Super Products Corporation (SPC) 1,000 blank CDs of a certain brand. Without notifying Retail, SPC timely ships CDs of a different brand. This shipment is a. an acceptance of the offer and a breach of the parties' contract. b. an acceptance of the offer and a fulfillment of the parties' contract. c. a refusal of the offer and a breach of the parties' contract. d. a refusal of the offer and a fulfillment of the parties' contract.

Q: Commercial Credit Company has in its possession an instrument dated May 1, 2002. The instrument is payable to the order of Alpha Company "on June 1, 2002," for $5,000. In the upper left corner is an address for Beta Corporation10 Corporate Park Avenue, Chicago, Illinoisand in the lower right corner is the signature of "Delta, Inc., By Eve, President." In the lower left corner is stamped "ACCEPTED: Beta Corporation by Frank, President, May 5, 2002." On the back is the signature of "Alpha Company by Gail, President." Who, if anyone, is primarily liable on this instrument on May 1? On May 5? Who, if anyone, is secondarily liable on this instrument?

Q: Alpha Company offers to sell Beta, Inc., 1,000 computers for a $1 million, states that the offer will be open for six days, and asks for a response by fax. On the fourth day, Beta sends an acceptance to Alpha via the mail, which is received on the sixth day. In this deal a. a contract is formed. b. no contract is formed, because Alpha asked for a response by fax. c. no contract is formed, because Alpha received the acceptance late. d. no contract is formed, because Beta sent the acceptance late.

Q: Molly signs a promissory note payable to National Credit Corporation while mentally incompetent but before a court judges her to be mentally incompetent. The note is a. payable to any bearer of the note. b. payable to any holder of the note. c. payable to the court only. d. void or voidable.

Q: Roy's Chick"n Shack orders chicken from Standard Food Supplier, but Standard does not deliver. Roy's will probably be unable to enforce the agreement if the parties a. did not limit the duration of the deal. b. did not specify a payment term. c. did not specify a quantity term. d. have not begun to perform.

Q: Rich signs a promissory note after a court has adjudged him to be mentally incompetent. The note is a. assignable only. b. negotiable. c. void. d. voidable only.

Q: Fine Coffee Company agrees to buy an unspecified quantity of coffee beans from Global AgriCorp. Global breaches the contract. Fine can most likely a. enforce the agreement to the extent of a reasonable quantity. b. enforce the agreement to the extent of Fine's requirements. c. enforce the agreement to the extent of Global's output of coffee beans. d. not enforce the agreement.

Q: Allied Products, Inc., warrants its goods to be free of defects. If Bruce issues an instrument to obtain goods from Allied that prove defective, Bruce can avoid paying on the instrument a. only if it is a check. b. only if it is a note. c. whether it is a check or a note. d. under no circumstances.

Q: Regional Products, Inc., agrees to sell to Quantity Dealers Corporation a certain amount of goods but no mention is made of where the goods are to be delivered. In general, the UCC requires that the delivery take place at a. a neutral place of business halfway between the parties' locations.. b. a UCC-designated warehouse. c. Regional's place of business. d. Quantity's place of business.

Q: Dan applies to borrow $1,000 at 6 percent interest from Eagle Loan Company and signs a note for the amount. Without Dan's authorization, Eagle changes the rate on the note to 9 percent and attaches a copy of his application to the note. Material alteration of the note occurred a. only when Eagle attached a copy of Dan's application to the note. b. only when Eagle changed the interest rate on the note. c. under none of these circumstances. d. when Eagle changed the rate and attached the application.

Q: Metro Daily and New City Newsstand enter into a contract under which Metro agrees to deliver a certain quantity of newspapers to New City each day. The contract does not include a price term. In a suit between the parties over the price, a court will a. determine a reasonable price. b. impose the lowest market price. c. refuse to enforce the agreement. d. return the parties to the positions they held before the contract.

Q: Pete, a Quality Company employee, is authorized to use Quality checks to buy supplies. Pete alters one of the checks to increase its $700 amount by $100, and exchanges it at Retail Office Supply for $700 worth of supplies and $100 cash. He keeps the cash. On the check, Retail may obtain payment for a. $0. b. $100. c. $700. d. $800.

Q: ABC Motors, Inc., sells the right to the possession and use of a motor vehicle under a lease. As defined in the UCC, ABC is a. a bailor. b. a dealer. c. a lessor. d. a seller.

Q: Alan gives Beth a $500 check as payment for a debt. Beth crudely raises the amount of the check to $5,000 and transfers it to Cool Sportz Store for a new bike. Cool deposits the check in its Downtown Bank account. Alan is liable for the payment of $5,000 to a. Beth, Cool Sportz, and Downtown Bank. b. Beth only. c. Cool Sportz and Downtown Bank only. d. no one.

Q: Standard Office Corporation pays Tech Products $1,000 to use a Tech computer for a month. For purposes of the UCC, this is a. a bailment. b. a consignment. c. a lease. d. a sale.

Q: Burt, a mentally impaired person, is asked by Carl to sign a piece of paper that Carl says is an autograph book. In fact, the document is a note. If later sued by an HDC, Burt's best defense would be a. duress. b. mistake. c. fraud in the inducement. d. fraud in the execution.

Q: Cleo sells kitchen appliances, and occasionally cleaning supplies, to persons who come into her store, Discount Appliances. One afternoon, Cleo sells a used display shelf to Earl. Under the UCC, Cleo is a merchant of a. cleaning supplies and kitchen appliances only. b. cleaning supplies, display shelves, and kitchen appliances. c. cleaning supplies only. d. kitchen appliances only.

Q: Moe, the owner of National Sales Company, stores blank National checks in an unlocked office drawer. Owen, an employee, forges Moe's signature on one of the blank checks and indorses it to Payday Loans, Inc. With respect to Payday, Moe a. is definitely liable. b. is definitely not liable. c. may be liable if the forgery is not obvious. d. may be liable if the storage of the checks facilitated the forgery.

Q: In a dispute over a sales contract involving skis, Dave argues that as to this deal, Elle is a merchant. A court may determine whether Elle is a merchant by assessing whether she a. enjoys skiing. b. has sold any skis within the last year. c. holds herself out by occupation as having knowledge or skill unique to the skis in the transaction. d. subscribes to Skis, a biweekly trade magazine.

Q: Bob writes a check on his account at County Bank to Dona, a famous singer. The person claiming to be Dona is an imposter, however, named Eve. Eve indorses the check to Frank, for whom County Bank cashes the check. Ultimately, the loss will most likely fall on a. Bob. b. County Bank. c. Dona. d. Frank.

Q: Alpha Café, which is moving to a new location, sells its used tables and chairs to Beta Furnishings Corporation. This is most likely a. a bailment of goods. b. a lease of goods. c. a sale of goods. d. a service contract.

Q: Ira is Jill's authorized agent. On any negotiable instrument that Ira signs on behalf of Jill, Ira will be personally liable a. if he signs with a clear indication that he is Jill's agent. b. if he signs without indicating that he is Jill's agent. c. under all circumstances. d. under no circumstances.

Q: Normal Assembly Company agrees to sell a storage tank on its premises to Owen. The tank can be removed by disconnecting a pipe. This deal is governed by a. neither real property law nor the UCC. b. real property law and the UCC. c. real property law only. d. the UCC only.

Q: Sara agrees to cosign a promissory note for Tom to buy a sport utility vehicle. The note is payable to City Bank. Sara is an accommodation a. drawee. b. indorser. c. maker. d. signatory.

Q: Omega Systems, Inc., contracts with Petro Oil Corporation to make special pipe and install it in Petro's refinery. There is no separate price in the contract for the installation. This contract is a. equally for a sale of goods and a sale of services. b. neither for a sale of goods nor a sale of services. c. predominantly for a sale of goods. d. predominantly for a sale of services.

Q: Fact Pattern 26-3 Jake is the maker of a $2,000 promissory note payable to Kim. Kim indorses the note to Lou who, in turn, indorses it to Mona, who then indorses it to Nat, the present holder. Refer to Fact Pattern 26-3. Suppose that Mona pays Nat on the note. With timely notice to the proper parties, Mona may collect payment on the note from a. Jake, Kim, or Lou. b. Jake or Kim only. c. Lou only. d. no one.

Q: Suzy pays Triple-A Office Supply Company $1,500 for a new laptop computer. According to the UCC, this is a. a gift. b. a lease. c. a sale. d. not a gift, a lease, or a sale.

Q: Fact Pattern 26-3 Jake is the maker of a $2,000 promissory note payable to Kim. Kim indorses the note to Lou who, in turn, indorses it to Mona, who then indorses it to Nat, the present holder. Refer to Fact Pattern 26-3. Nat properly presents the note to Jake for payment, but Jake dishonors it. With timely notice to the proper parties, Nat may collect payment on the note from a. Kim, Lou, or Mona. b. Kim or Lou only. c. Mona only. d. no one.

Q: In effect, the United Nations Convention on Contracts for the International Sale of Goods requires that the terms of the acceptance mirror those of the offer.

Q: Fact Pattern 26-2 Attempting to cash a check drawn on First Bank, Gina, who is not a First Bank customer, refuses to provide a thumbprint. First Bank refuses to cash the check. Gina files a suit against the bank.Refer to Fact Pattern 26-2. On the basis of the determination in Case 26.1, Messing v. Bank of America, N.A., the court in the case of Gina v. First Bank is most likely to reason that requiring a thumbprint is a. a "reasonable response to the rising incidence of check fraud." b. not "reasonable identification" for a non-customer to cash a check. c. "unreasonably inconvenient" for any party to cash a check. d. unreliable "to authenticate a writing on a negotiable instrument."

Q: A court can refuse to enforce a contract that the court deems to have been unconscionable at the time it was made.

Q: Fact Pattern 26-2 Attempting to cash a check drawn on First Bank, Gina, who is not a First Bank customer, refuses to provide a thumbprint. First Bank refuses to cash the check. Gina files a suit against the bank.Refer to Fact Pattern 26-2. Under the decision in Case 26.1, Messing v. Bank of America, N.A., the court is most likely to rule that a thumbprint "signature" is a. lawful under the UCC. b. not relevant under the UCC because Gina is not the bank's customer. c. not subject to the UCC because a thumbprint is not a signature. d. unlawful under the UCC.

Q: An oral contract for goods that are specially manufactured for a particular buyer may be enforceable.

Q: First State Bank receives a check drawn by Guy. The check is received after the established "cutoff" hour. Payment can be postponed without dishonor a. indefinitely. b. under no circumstances. c. unless Guy personally demands acceptance. d. until the close of the next business day.

Q: No oral contract is enforceable under the UCC.

Q: Fact Pattern 26-1 Alpha Office Properties signs a check payable to Beta Landscape Design, Inc., drawn on Alpha's account at City Bank and dated June 1. Beta indorses the check to Delta Lawn Care Corporation. Refer to Fact Pattern 26-1. To hold Beta secondarily liable, Delta must present the check for payment within a. one year. b. six months. c. thirty days. d. ten business days.

Q: Under the UCC, an agreement modifying a contract needs no consideration to be binding.

Q: Fact Pattern 26-1 Alpha Office Properties signs a check payable to Beta Landscape Design, Inc., drawn on Alpha's account at City Bank and dated June 1. Beta indorses the check to Delta Lawn Care Corporation. Refer to Fact Pattern 26-1. To hold Alpha secondarily liable, Delta must present the check for payment within a. one year. b. six months. c. thirty days. d. ten business days.

Q: If a nonmerchant's offer expressly conditions acceptance on a nonmerchant's agreement to the terms of the offer, a positive response may constitute an acceptance even if it contains additional terms.

Q: Don writes a check to Eve drawn on Don's account at First Town Bank. Eve presents the check for payment to the bank, which accepts the check. The bank is a. not liable for payment. b. primarily liable for payment. c. secondarily liable for payment. d. simultaneously liable, with Don, for payment.

Q: Under the mirror image rule, an offer must be accepted in its entirety without modification or reservation or else no contract can be formed.

Q: Amy draws a check payable to Bright Properties, Inc., which makes a note payable to Credit Finance Corporation. Primarily liable parties include a. Amy and Bright only. b. Amy only. c. Bright only. d. Credit only.

Q: When an offer does not specify a means of acceptance, it can be accepted by any means reasonable under the circumstances.

Q: If the holder of an instrument strikes out the names of several of the indorsers, any liability those parties had on the instrument is canceled.

Q: The UCC imposes a good faith limitation on output contracts.

Q: When a party that is primarily liable on an instrument pays to a holder the amount due in full, all parties to the instrument are discharged.

Q: If a contract for a sale of goods does not include the terms for payment, there is no basis for enforcing it.

Q: Breach of contract is a defense to payment of a negotiable instrument against an HDC.