True/False

Indicate whether the sentence or statement is true or false.

____ 1. The performance due in a contract may be conditioned on the occurrence or nonoccurrence of a specific event.

____ 2. A condition that must be fulfilled before a party's performance can be required is called a condition subsequent.

____ 3. Concurrent conditions occur only when the parties to a contract are required to perform their respective duties simultaneously.

____ 4. An innocent party is discharged when the other party alters a written contract without consent.

____ 5. The UCC defines a sale as occurring when title passes from the seller to the buyer for a price.

____ 6. A sale of a fixture is always considered a sale of realty.

____ 7. The UCC imposes a good faith limitation on requirements and output contracts.

____ 8. If a nonmerchant-seller's offer expressly conditions acceptance on a nonmerchant-buyer's agreement to the terms of the seller's offer, the buyer's positive response may constitute an acceptance even if it contains additional terms.

____ 9. If two parties have engaged in prior dealing, then this conduct may be considered in attempting to resolve an ambiguity in a contract between them.

____ 10. Expenses that are caused directly by a breach of contract-such as those incurred to obtain performance from another source-are known as incidental damages.

____ 11. When a party fails to deliver goods contracted for, the nonbreaching party may be awarded consequential damages for a loss of profit from a planned resale.

____ 12. Liquidated damage clauses typically require that the party who breaches a contract must pay a fixed amount of money damages to the nonbreaching party.

____ 13. The failure of one party to perform entitles the other party to rescind the contract without returning whatever goods, property, or money was previously conveyed.

____ 14. Courts generally grant specific performance of personal service contracts.

____ 15. Before any interest in specific goods can pass from the seller to the buyer, the goods must exist and be identified to the contract.

____ 16. Title to identified goods that the buyer is to pick up passes when a contract for their sale is signed, if no document of title is required.

____ 17. Entrusting goods to a merchant who deals in goods of the kind gives the merchant the power to transfer all rights to a buyer in the ordinary course of business.

____ 18. If a seller is not a merchant, the risk of loss passes to a buyer when the buyer takes physical possession of the goods.

____ 19. When a buyer breaches a contract, the risk of loss immediately shifts to the seller.

____ 20. Before a buyer can have an insurable interest in goods, the goods themselves must be identified to a contract.

____ 21. Generally, all goods called for by a contract must be tendered in a single delivery.

____ 22. A shipment contract requires or authorizes a seller to ship goods by carrier.

____ 23. Under the perfect tender rule, a buyer can reject an entire shipment of goods even if the nonconformity of the goods is inconsequential.

____ 24. Under the perfect tender rule, the buyer must reject the goods if they do not conform in every way with the terms of the contract.

____ 25. If, before the time for performance, a buyer communicates an intent not to perform, the seller can suspend performance and wait, hoping that the buyer will perform after all.

Multiple Choice

Identify the letter of the choice that best completes the statement or answers the question.

____ 26. Patty contracts to deliver a package for Doug for $15. If this is like most contracts, it will be discharged by

a.	agreement.
b.	operation of law.
c.	performance.
d.	rescission.

____ 27. Paul signs a lease that provides any change in the zoning law will result in an automatic termination of the lease. The zoning board adopts a new zoning classification before the lease expires. The change in zoning satisfies the

a.	condition precedent.
b.	concurrent condition.
c.	condition subsequent.
d.	illegal condition.

____ 28. Al and Shelia are parties to a contract. They subsequently agree that Bill should take the place of Al and assume all of his rights and duties under the contract. This is

a.	a novation.
b.	an accord and satisfaction.
c.	an assignment.
d.	a modification.

____ 29. Commercial Construction, Inc. (CCI), contracts to build a restaurant for Don, with Don's payment due on May 1. On May 1, Don's bank is closed, and for this reason, Don claims it cannot pay CCI on time. CCI files a suit against Don. In this situation

a.	CCI is in breach of contract.
b.	Don is in breach of contract.
c.	the contract is suspended until the bank opens.
d.	the contract is discharged.

____ 30. On July 1, General Contractors (GC) contracts to build a retail store for Sue at a specific location. On August 1, the zoning laws are changed to prohibit the construction of commercial buildings at that location. Sue files a suit against GC. In this situation

a.	GC is in breach of contract.
b.	Sue is in breach of contract.
c.	the contract is suspended until a new location is specified.
d.	the contract is discharged.

____ 31. Glen pays Eagle Electronics $1,200 for a new computer. For purposes of the UCC, this is

a.	a bailment.
b.	a consignment.
c.	a lease.
d.	a sale.

____ 32. U.S. Technologies, Inc., contracts to sell six computers to Office Leasing, which contracts to lease the computers to First National Bank. Nancy, the owner of U.S. Technologies, gives a computer to Frank. Article 2 of the UCC is generally held to apply to

a.	the sale only.
b.	the lease only.
c.	the sale and the lease only.
d.	the sale, the lease, and the gift.

____ 33. National Vehicles contracts to sell ten sport utility vehicles (SUVs) to Imperial Leasing, which contracts to lease the SUVs to Recreation Rentals. Don, the owner of National Vehicles, gives an SUV to Paula. Article 2A of the UCC applies to

a.	the sale only.
b.	the lease only.
c.	the sale and the lease only.
d.	the sale, the lease, and the gift.

____ 34. Folger contracts to purchase coffee from Max but does not specify the payment terms. Max subsequently breaches the contract. Folger will probably be

a.	unable to enforce the agreement under any circumstances.
b.	unable to enforce the agreement if Max has not begun to perform his obligations.
c.	able to enforce the agreement against Max.
d.	none of the above.

____ 35. Grey contracts to purchase tea from Lipton but does not specify an exact amount of tea. Lipton subsequently breaches the contract. Grey will probably be

a.	unable to enforce the agreement under any circumstances.
b.	unable to enforce the agreement only if Lipton's breach is material.
c.	able to enforce the agreement against Lipton for failing to sell Grey its output.
d.	able to enforce the agreement against Lipton for failing to supply Grey's requirements.

____ 36. Consumer Goods, Inc., breaches its contract with Local Stores Company. Local Stores files a suit to recover compensatory damages, which are typically assessed

a.	only in contracts for the sale of goods valued in excess of $500.
b.	to compensate the nonbreaching party the loss of the bargain.
c.	to penalize a party for failing to carry out its contractual obligations.
d.	none of the above.

____ 37. Dick and Jane sign an agreement that provides for the payment of "$1,000 by whichever party commits a material breach of the contract that creates damages difficult to estimate but approximately $1,000." This clause is an example of

a.	a penalty clause.
b.	a liquidated damages clause.
c.	a rescissionary clause.
d.	a nominal damages clause.

____ 38. For Don's breach of their contract, Lyle seeks restitution. Restitution is

a.	the canceling of a contract.
b.	the loss of a bargain.
c.	the performance of an act promised in a contract.
d.	the recapture of a benefit conferred on a contracting party through which the party has been unjustly enriched.

____ 39. Dale and Biff sign an agreement in which Dale agrees to deliver ten tons of sheet metal in three days to Biff, even though the parties mean for delivery to take place within thirty days. If Dale cannot convince Biff to agree to amend the contract, then Dale should seek to

a.	reform the contract.
b.	rescind the contract.
c.	cancel the contract.
d.	none of the above.

____ 40. As part of a sale of a business, Max signs a covenant not to compete that is unreasonable in its essential terms. To prevent undue hardship, a court will most likely

a.	do nothing.
b.	declare the entire contract illegal.
c.	order the sale of the business to be undone.
d.	convert the unreasonable terms into reasonable ones.

____ 41. County Farm Supply, Inc., sells farming machinery and tools to local grain farmers. Of these products, fungible goods include

a.	farming machinery.
b.	grain.
c.	tools.
d.	all of the above.

____ 42. Miguel buys 1,000 bales of hay from Grain Farms. The parties agree that the hay will be transported F.A.S. The truck carrying the hay explodes just as it is pulling into the port where the ship is waiting. The loss is suffered by

a.	Miguel.
b.	Grain Farms.
c.	the carrier.
d.	both a and b.

____ 43. Phil pays Global Goods, Inc., $1,200 for a new computer. Global pays American Storage $50 to store the computer until Phil picks it up. For purposes of the UCC, the arrangement between Global and American is

a.	a bailment.
b.	a consignment.
c.	a lease.
d.	a sale.

____ 44. Lee purchases a bicycle from his brother, Kim, who is a used car dealer. Kim agrees to keep the bike at his house until Lee picks it up. A tree falls on Kim's garage and destroys the bike. The loss is suffered by

a.	Lee.
b.	Kim.
c.	both a and b.
d.	none of the above.

____ 45. Ace Tools, Inc., agrees to sell construction tools to Baker Equipment Company, F.O.B. Baker's warehouse. After Ace identifies the tools, but before they are shipped, insurance coverage on the tools can be obtained by

a.	Ace only.
b.	Baker only.
c.	Ace and Baker.
d.	none of the above.

____ 46. Variety Products Company sells its goods to grocery wholesalers in the Midwest. For Variety, exceptions to the perfect tender rule include

a.	performance that is commercially impracticable.
b.	situations in which Variety can cure an imperfect tender within the time allotted for performance under the contract.
c.	an agreement between Variety and its buyer.
d.	all of the above.

____ 47. National Cable Company delivers to International Communications Corporation goods that are slightly nonconforming to their contract. If the time for performance has passed, International can reject the goods

a.	entirely, due to the perfect tender rule.
b.	only if International honestly believes that the nonconformity is significant.
c.	only if prompt notice is given in writing to National.
d.	only with National's consent.

____ 48. United Tin Company contracts to provide several manufacturers with tin. A cartel of tin-producing countries embargoes future shipments of tin to United so that it cannot fulfill its contractual obligations. Under the circumstances, the company

a.	is liable for breach of contract.
b.	must take whatever steps are necessary to supply the needs of its customers.
c.	is excused from the performance of its contracts.
d.	none of the above.

____ 49. National Costume Company (NCC) agrees to sell theatrical costumes to the Shakespeare Drama Festival. After the goods are identified to the contract but before the risk of loss passes to the Festival, the costumes are partially destroyed by fire. Neither NCC nor the Festival was responsible for the fire. The Festival may

a.	accept the goods at a reduced price.
b.	cancel the contract.
c.	either a or b.
d.	none of the above.

____ 50. National Sales Corporation ships goods to A-One Products Company. Except for goods shipped C.O.D., A-One may exercise a right of

a.	acceptance.
b.	accommodation.
c.	inspection.
d.	rejection.

sample test

Answer Section

TRUE/FALSE

1. T

2. F

3. T

4. T

5. T

6. F

7. T

8. T

9. T

10. T

11. T

12. T

13. F

14. F

15. T