National American University

BUSINESS L 3100

Chapter 27-REMEDIES FOR BREACH OF SALES CONTRACTS

TRUE/FALSE

1)The UCC statute of limitations applies to actions brought for remedies on the breach of a sales contract.

2. An action for breach of warranty generally must be brought within three (3) years of the breach.

3. A buyer seeking damages because of a breach of the sales contract must give the seller notice of the breach within a reasonable time after the buyer discovers or should have discovered it.

4. The UCC statute of limitations applies when a party is seeking recovery on strict tort liability, fraud or negligence.

5. In the absence of an agreement for the extension of credit to the buyer for the purchase of goods, and until the buyer pays for the goods or performs whatever actions the contract requires, the seller has the right to retain possession of the goods.

6. When a sales contract is broken by the buyer, the seller has only the remedies of lien and resale available.

7. A seller does not have the right to stop shipment if the buyer has received goods on credit and the seller learns that the buyer is insolvent.

8. When a buyer has broken a sales contract, the seller may resell the goods or the balance of them in the seller's possession.

9. When a buyer materially breaches a contract, the seller may cancel it.

10. If goods are specially manufactured and the buyer refuses to take them, it is possible for the seller to recover as damages the full purchase price and keep the goods.

11. Some courts allow sellers to recover the profits they would have made if the buyer had completed the transaction.

12. If a buyer refuses to pay for goods after an acceptance that was not revoked, the seller may bring action to recover the purchase price and any incidental damages.

13. A cured transaction is a pledge of property by the buyer-debtor that enables the seller to take possession of the goods if the buyer fails to pay the amount owed.

14. Rejection of an improper tender of goods constitutes a revocation of acceptance on the part of the buyer.

15. A buyer may revoke acceptance because of a seller’s failure to complete promised repairs.

16. A buyer may reject the goods or revoke the acceptance for any defects in the goods.

17. Proof of substantial impairment of the value of a contract to the buyer is required to justify revocation of acceptance.

18. A buyer returning to the seller a raincoat that shrank in the rain is revoking acceptance.

19. If a buyer chooses to cover the substituted goods purchased must be substantially identical to the contract goods.

20. Consequential damages are available to the buyer but not to the seller.

21. In an action by a third party against the buyer that is based on the seller's breach of warranty, the buyer must give notice of the action to the seller.

22. A buyer who cancels a sales contract because the seller fails to deliver the goods is entitled to recover as much of the purchase price as had been paid.

23. The right of a buyer to cancel or rescind a sales contract is never impacted by a delay in exercising that right.

24. Under UCC Article 2, specific performance is a remedy available only to buyers in those circumstances in which the goods are specially manufactured, unique, or rare.

25. A defrauded buyer may avoid the contract and recover damages.

26. A liquidated damages clause is a contractual provision stipulating the amount of damages to be paid in the event of default or breach of contract.

27. A buyer who breaches a contract after making a down payment generally will be subject to the rule that the seller may retain the full down payment as damages.

28. A buyer can be barred from claiming a breach if the sales contract expressly states that the buyer will not assert any defenses against the seller.

29. Consumer protection law prohibits the waiver of defenses in consumer contracts.

30. Under both the CISG and the UCC, a buyer may reject goods only if the tender of the goods is a fundamental breach of the contract.

MULTIPLE CHOICE

1. The statute of limitations for breach of a sales contract:
   1. may be reduced between merchants to one year.
   2. may be expanded by the buyer and the seller to six years.
   3. begins to run from the signing of the contract.
   4. always requires a notice to the seller to activate the statute.

2. When a plaintiff sues on the basis of strict tort liability, the action is subject to:
   1. the UCC statute of limitations.
   2. the appropriate state’s tort statute of limitations.
   3. no statute of limitations.
   4. FTC approval.

3. The tort statutes of limitations tend to be                     the UCC statute of limitations.
   1. shorter than
   2. longer than
   3. equal to
   4. excluded by

4. A seller's right to retain possession of goods until the seller has been paid is called a:
   1. seller's lien.
   2. buyer's lien.
   3. merchandise estoppel.
   4. nonpayment tort.

5. If a seller elects to resell the goods remaining in the seller's possession after the buyer breaks the contract, the seller:
   1. must always give notice of the sale to the original buyer.
   2. is never required to give notice of the sale to the original buyer.
   3. is required to follow strict standards in the resale of the goods.
   4. is not required to give notice of the sale to the original buyer when the goods are perishable.

6. A seller may cancel a sales contract if the buyer:
   1. wrongfully rejects the goods.
   2. repudiates the contract.
   3. fails to make a payment due on or before delivery.
   4. all of the above.

7. The commercially reasonable charges incurred by a seller in caring for goods after the buyer's breach are recoverable by the seller in an action for damages as:
   1. contract damages.
   2. punitive damages.
   3. additional damages.
   4. incidental damages.

8. Which of the following is not an example of incidental damages recoverable by a seller?
   1. expenses for the care of the goods after the buyer's breach
   2. expenses for transportation of the goods after the buyer's breach
   3. expenses for resale of the goods after the buyer's breach

1. 4. expenses for the attorney's fees after the buyer's breach

9. A buyer may reject a tender of delivery:
   1. if the goods do not conform to the contract in some way .
   2. only if the goods have a substantial defect.
   3. unless the seller promises to cure the defective tender.
   4. unless the goods have been sold on credit.

10. To revoke acceptance of goods:
    1. any defect or nonconformity must be discovered.
    2. the goods must be dangerously defective.
    3. the nonconformity must substantially impair the value of the goods.
    4. action must be taken by the buyer within 60 days of delivery.

11. If a buyer procures the same or similar goods as those involved in the sales contract breached by the seller, the buyer:
    1. loses all rights to prosecute for breach.
    2. is said to have validated the seller's action.
    3. is said to have covered.
    4. is also in breach.

12. In the case of a breach of warranties, the buyer:
    1. should not notify the seller.
    2. is required to notify the seller.
    3. does not have the option to resell the goods.
    4. is not able to recover consequential damages.

13. The buyer may cancel the contract if the:
    1. seller fails to deliver the goods.
    2. seller has repudiated the contract.
    3. goods have been rightfully rejected.
    4. all of the above.

14. When a buyer has possession of goods after rightfully rejecting them, the buyer is treated:
    1. the same as a seller in the possession of goods after default by a buyer.
    2. as being strictly liable for the safety of the goods.
    3. the same as if an entrustment had been created.
    4. as an insurer of the goods until the seller retakes possession.

15. When a seller breaches a contract for the sale of goods to a buyer, the buyer is entitled to specific performance of the contract if the:
    1. goods are unique.

1. 2. market cost of the goods has increased.
   3. goods can be purchased in any major city in the country.
   4. buyer's customers will be disappointed if the buyer does not obtain the goods.

16. A liquidation of damages clause in a consumer contract is enforceable if it:
    1. is not in excess of twice the provable damages.
    2. is agreed to by both parties to the contract.
    3. reasonably attempts to estimate the actual harm caused by a breach.
    4. is a reasonable amount designed to punish the breaching party.

17. When goods are sold for consumer use and personal injuries are sustained, a total exclusion of liability in the sales contract is:
    1. enforceable.
    2. unenforceable.
    3. unconscionable.
    4. both b. and c.

18. In the absence of a liquidated damages clause and in the absence of proof of greater damages, the seller’s damages are computed as
    1. 25% of the purchase price or $500, whichever is less.
    2. 25% of the purchase price or $500, whichever is greater.
    3. 20% of the purchase price or $500, whichever is greater.
    4. 20% of the purchase price or $500, whichever is less.

19. Consumer defenses:
    1. are preserved by a FTC regulation.
    2. are provided for by the CISG.
    3. are contained in UCC Article 2.
    4. none of the above.

20. Under the CISG, a buyer may reject goods
    1. consistent with the right of rejection set forth in the UCC.
    2. if the goods are nonconforming to the contract in any way.
    3. only if the tender is a fundamental breach of the contract.
    4. only if the tender is illegal in subject matter and/or purpose.

CASE

1. On January 15, 2012, Anders brought an action against Barnes for breach of a contract for the sale of electronic parts. The breach occurred on January 10, 2008, and Anders discovered the breach on January 20, 2008. The state statute of limitations for contract actions is five years. Barnes raised the UCC statute of limitations as a defense to the action. Is this defense valid?