Question 1

TackMaker, Inc., and Silver Stallion Stables enter into a contract for a sale of bridles, saddlery, and other equine equipment. TackMaker delivers, but Silver Stallion does not pay. TackMaker can normally recover as damages
A) ​any profit lost minus any loss avoided.
B) ​whatever amount the seller wishes to claim.
C) ​the purchase price plus incidental damages.
D) ​the market price at the place at which the seller delivered the goods.

Accepted Answer

According to the Uniform Commercial Code (UCC), which governs sales contracts, the seller is entitled to recover the purchase price of the goods, along with incidental damages such as storage and transportation costs. Therefore, option C is the correct answer. Options A and D are incorrect because they do not account for the seller's right to recover the purchase price. Option B is also incorrect, as the amount claimed must be reasonable and directly related to the damages suffered by the seller.

Question 2

EconBank issues a letter of credit in favor of Facile Deals Inc., a U.S. firm, to facilitate an international sales contract to buy certain products from Global Goods, Ltd., a British company. Global is entitled to payment when it
A) ​enters into the contract with the buyer.
B) ​verifies that the buyer has the money to pay for the purchase.
C) ​complies with the terms and conditions of the letter of credit.
D) ​asks to be paid.

Accepted Answer

According to the scenario, EconBank issues a letter of credit in favor of Facile Deals Inc. for the purchase of products from Global Goods Ltd. Global Goods will only be entitled to payment when it complies with the terms and conditions of the letter of credit, which serves as a guarantee of payment to the seller. Therefore, the correct choice is C.

Question 3

River Gear Company and Scenic Trips, Inc., enter into a contract on August 1 for the sale of fifty inflatable river rafts. Scenic cancels the contract ten days later. River Gear is unable to sell the rafts to another buyer. River Gear can
A) ​force the buyer to accept the rafts and pay for them.
B) ​recover the contract price but must hold the rafts for the buyer.
C) ​recover the contract price and keep the rafts.
D) ​recover the contract price but must destroy the rafts.

Accepted Answer

Scenic Trips, Inc. breached the contract by canceling it after ten days, but River Gear Company cannot force them to accept the rafts and pay for them. Instead, River Gear Company can recover the contract price but must hold the rafts for the buyer. This is because River Gear Company has a duty to mitigate their damages, which means they must take reasonable steps to minimize the losses they suffer as a result of the breach. In this case, if River Gear Company sells the rafts to another buyer, they can recover the contract price from Scenic Trips, Inc. However, if they cannot sell the rafts to another buyer, they must hold onto them and wait for Scenic Trips, Inc. to pay the contract price.

Question 4

Owen and Pablo enter into a contract for a sale of irrigation equipment. Pablo pays, but Owen does not deliver. Pablo can normally recover as damages the difference between
A) ​any loss avoided and any profit gained.
B) ​the actual price and the hoped-for price.
C) ​the contract price and the market price.
D) ​the current prices in the parties' locations.

Accepted Answer

The normal measure of damages for a buyer who has paid but not received the goods is the difference between the contract price and the market price at the time and place where the goods should have been delivered. This is also known as the "cover" price, which is the cost of purchasing substitute goods on the market to replace the undelivered goods. Option A is incorrect as it refers to consequential damages which do not apply in this case. Option B refers to the seller's loss and not the buyer's loss. Option D is too vague and does not apply to the specific circumstances of this contract.

Question 5

Bayou Boats, Inc., contracts for the sale of seven swamp boats to Eventide Fishing Tours. Bayou repudiates the contract. Eventide's recovery is measured at the time
A) ​Bayou advertised the goods.
B) ​Eventide ordered the goods.
C) ​Eventide learned of the breach.
D) ​Bayou knew that it would repudiate the contract.

Accepted Answer

Eventide's recovery is measured at the time they learned of the breach, which is when Bayou repudiated the contract.

Question 6

Asian Noodle Company contracts to sell 1,000 cases of rice noodles to Bob's Bistros, Inc., but refuses to deliver. Due to a rice shortage, Bob's Bistros cannot obtain the noodles elsewhere. The buyer's right to recover the goods from the seller is the right of
A) ​cover.
B) ​cure.
C) ​tender.
D) ​specific performance.

Accepted Answer

The answer of Asian Noodle Company contracts to sell 1,000...

Question 7

Refined Mills orders "Grade A" oats from Sweet Valley Farm to grind and sell to Town Co-op Grocery. Sweet Valley ships "Grade B" grain, which Refined Mills accepts. To recover damages for the nonconformity, Refined Mills must give notice of the breach within a reasonable time to
A) ​Sweet Valley.
B) ​Town Co-op.
C) ​no one.
D) ​the appropriate state government agency.

Accepted Answer

Refined Mills must give notice of the breach within a reasonable time to Sweet Valley, the party responsible for shipping the nonconforming product. This allows Sweet Valley the opportunity to rectify the situation and potentially prevent future occurrences of nonconforming shipments.

Question 8

Precious Stones, Inc., and Sparkling Jewelry stores enter into a contract for a sale of gemstones. Precious Stones does not deliver. The buyer can normally recover as damages the difference between
A) ​any loss avoided and any profit gained.
B) ​the actual price and the hoped-for price.
C) ​the contract price and the market price.
D) ​the current prices in the parties' locations.

Accepted Answer

The buyer can normally recover as damages the difference between the contract price and the market price. This means that the buyer can recover the amount they paid for the gemstones minus the amount they could have sold the gemstones for in the market.

Question 9

Okay Markets, Inc., rejects a shipment of turkey that does not conform to its contract with Poultry Processing Corporation, but is unable to obtain instructions from the seller. Okay Markets can
A) ​destroy the goods.
B) ​cure the goods to make them conform to the contract.
C) ​retain the goods without paying for them.
D) ​reship or store the goods for the seller.

Accepted Answer

Under the Uniform Commercial Code (UCC), when a buyer rejects non-conforming goods and cannot obtain instructions from the seller, the buyer has the option to reship or store the goods for the seller's account. Destroying the goods, curing the goods, or retaining the goods without paying for them are not actions generally permitted without specific agreement or further instructions from the seller.

Question 10

Banquets & Parties (B&P) contracts to buy 1,000 uninflated balloons from Gas Bags, Inc., for $1 per item. When the market price decreases to 50 cents per balloon, B&P refuses to go through with the deal. Gas Bags can recover
A) ​$1,500.
B) ​$1,000.
C) ​$500.
D) ​$0.

Accepted Answer

Gas Bags can recover the difference between the contract price and the market price ($1 - $0.50 = $0.50) multiplied by the number of balloons that B&P contracted to buy (1,000), for a total recovery of $500.

Question 11

Erin contracts in writing to sell her Ford-brand pick-up truck to Garth for $10,500. Erin agrees to deliver the truck on Friday, and Garth promises to pay the $10,500 on the following Monday. On Thursday, Garth tells Erin that he changed his mind and will not buy the truck. Over the weekend, Garth changes his mind again and tenders $10,500 to Erin on Monday. Erin has not sold the truck to another party but refuses the tender and refuses to deliver. Garth claims that Erin has breached their contract. Erin contends that Garth's repudiation released her from her duty to perform under the contract. Who is correct, and why?

Accepted Answer

The answer of Erin contracts in writing to sell her...

Question 12

VuPlay Company contracts to deliver one hundred 60-inch 3D HD television sets to a new retail customer, Watchbox Store, on May 1, with payment to be made on delivery. VuPlay tenders delivery in its own truck. Watchbox's manager notices that some of the cartons have scrape marks. Watchbox's owner phones VuPlay's office and asks whether the sets might have been damaged as they were being loaded. VuPlay assures Watchbox that the sets are in perfect condition. Watchbox tenders VuPlay a check, which VuPlay refuses, claiming that the first delivery to new customers is always for cash. Watchbox promises to pay the cash within two days. VuPlay leaves the sets with Watchbox, which stores them in its warehouse pending its "Grand Opening Sale" on May 15. Two days later, Watchbox's stocker opens some of the cartons and discovers that a number of the sets are damaged beyond ordinary repair. VuPlay claims Watchbox has accepted the sets and is in breach by not paying on delivery. Will VuPlay succeed on these claims? Explain.

Accepted Answer

The answer of VuPlay Company contracts to deliver one hundred...

Quiz 14: Performance and Breach of Sales and Lease Contracts

TackMaker, Inc., and Silver Stallion Stables enter into a contract for a sale of bridles, saddlery, and other equine equipment. TackMaker delivers, but Silver Stallion does not pay. TackMaker can normally recover as damages

EconBank issues a letter of credit in favor of Facile Deals Inc., a U.S. firm, to facilitate an international sales contract to buy certain products from Global Goods, Ltd., a British company. Global is entitled to payment when it

River Gear Company and Scenic Trips, Inc., enter into a contract on August 1 for the sale of fifty inflatable river rafts. Scenic cancels the contract ten days later. River Gear is unable to sell the rafts to another buyer. River Gear can

Owen and Pablo enter into a contract for a sale of irrigation equipment. Pablo pays, but Owen does not deliver. Pablo can normally recover as damages the difference between

Bayou Boats, Inc., contracts for the sale of seven swamp boats to Eventide Fishing Tours. Bayou repudiates the contract. Eventide's recovery is measured at the time

Asian Noodle Company contracts to sell 1,000 cases of rice noodles to Bob's Bistros, Inc., but refuses to deliver. Due to a rice shortage, Bob's Bistros cannot obtain the noodles elsewhere. The buyer's right to recover the goods from the seller is the right of

Refined Mills orders "Grade A" oats from Sweet Valley Farm to grind and sell to Town Co-op Grocery. Sweet Valley ships "Grade B" grain, which Refined Mills accepts. To recover damages for the nonconformity, Refined Mills must give notice of the breach within a reasonable time to

Precious Stones, Inc., and Sparkling Jewelry stores enter into a contract for a sale of gemstones. Precious Stones does not deliver. The buyer can normally recover as damages the difference between

Okay Markets, Inc., rejects a shipment of turkey that does not conform to its contract with Poultry Processing Corporation, but is unable to obtain instructions from the seller. Okay Markets can

Banquets & Parties (B&P) contracts to buy 1,000 uninflated balloons from Gas Bags, Inc., for $1 per item. When the market price decreases to 50 cents per balloon, B&P refuses to go through with the deal. Gas Bags can recover