Quiz Answers and Explanations
The Formation of Sales and Lease Contracts
1. The UCC attempts to provide which of the following:
  1. guidelines for making common law contracts that deal with the sale of land.
    Incorrect. The UCC does not deal with the sale of land at all.

  2. all international contracts for the sale of securities.
    Incorrect. The UCC does not cover many international sales. The CISG is applicable in many instances.

  3. a consistent and integrated framework of rules to deal with all aspects of commercial sales transactions.
    Correct. The UCC attempts to provide a logical framework for these kinds of commercial transactions - in contrast to many state rules the UCC provides one set of rules.

  4. a consistent body of rules for dealing with criminal violations of the law that involve either securities or government bonds.
    Incorrect. The UCC does not deal with criminal law at all.

2. The UCC has been adopted:
  1. by approximately half of the states in the US.
    Incorrect. All states have adopted some form of the UCC.

  2. by the industrialized states of the northeast and sw legal.
    Incorrect. The northeastern and western states are not the only ones to have adopted this uniform body of law.

  3. by a few states.
    Incorrect. Each state has adopted the UCC.

  4. by all states in one form or another.
    Correct. Because of the benefits offered by a consistent body of law, all states have adopted the UCC.

3. Article 2 of the UCC governs:
  1. the sale of land.
    Incorrect. The common law, not the UCC, governs the sale of land.

  2. sales contracts.
    Correct. Article 2 deals with the sale of goods.

  3. negotiable instruments.
    Incorrect. Article 3 deals with negotiable instruments.

  4. bulk sales.
    Incorrect. Article 6 deals with bulk sales.

4. Daniel contracts with Mary to provide him with expert legal advice on the sale of his business. Daniel's contract with Mary is governed by:
  1. Article 2 of the UCC.
    Incorrect. Article 2 does not cover contracts for service and Mary is providing Daniel with a service, not with a good.

  2. Article 6 of the UCC.
    Incorrect. Article 6 deals with bulk transfers of a major part of one's material, supplies, merchandise or other inventory not made in the ordinary course of business.

  3. Article 2A of the UCC.
    Incorrect. Article 2A deals with leases, not with the provision of services.

  4. the common law.
    Correct. The common law would apply in this case.

5. In order for the rules contained in the UCC to apply to a sale of goods, the goods must:
  1. be for retail use only.
    Incorrect. The goods do not need to be used for retail purposes only.

  2. consist of some unique personal service.
    Incorrect. The UCC does not govern contracts for the sale of personal services.

  3. be tangible, that is, have physical existence.
    Correct. The goods sold must be tangible, unlike stocks or bonds.

  4. be associated with real estate.
    Incorrect. If the goods are associated with real estate their sale will not be covered by the UCC.

6. If Jim sells Smith copper that he removed from land he owns in Colorado, this contract:
  1. will be covered by Article 2 of the UCC.
    Correct. Jim is selling a good associated with real estate, in this case, mineral rights, which he can separate from the land. Therefore, this contract will be covered by Article 2.

  2. will be covered by Article 2A of the UCC.
    Incorrect. Article 2A covers leases, and this is a sale.

  3. will be covered by Article 3 of the UCC.
    Incorrect. Article 3 covers negotiable instruments.

  4. will be covered by the common law.
    Incorrect. Because Jim is selling a good associated with real estate that is separable, this contract will not be covered by the common law.

7. Now assume that Jim sells Smith the right to remove the copper, not the copper itself. In this case, the contract:
  1. will be covered by Article 2 of the UCC.
    Incorrect. Because the buyer is separating the goods, this contract is governed by the common law, not by the UCC.

  2. will be covered by Article 2A of the UCC.
    Incorrect. Article 2A covers leases, not the sale of mineral rights.

  3. will be covered by the land provisions of Article 4.
    Incorrect. There are no land provisions in Article 4.

  4. will be covered by the common law.
    Correct. This contract is covered by the common law because Smith is responsible for separating the goods (the minerals) from the land.

8. When merchants are involved in commercial transactions that involve the sale of goods, they are held to certain standards. When casual buyers or sellers are involved:
  1. they are not held to the same standards but lesser ones.
    Correct. The UCC holds casual buyers and sellers to less rigorous standards than the standards under which merchants operate.

  2. they are held to higher standards.
    Incorrect. Casual or inexperienced buyers and sellers are not held to higher standards than are merchants.

  3. they are treated exactly like a merchant.
    Incorrect. Such casual or inexperienced buyers and sellers are held to lesser, not higher standards.

  4. their transactions are not covered by the UCC.
    Incorrect. Even if you are not a merchant, your contracts for the sale of goods may be covered by the UCC.

9. If you sublease your automobile to a friend, this contract is covered by:
  1. Article 2 of the UCC.
    Incorrect. Article 2 covers sales of goods, not leases or subleases of goods.

  2. Article 2A of the UCC.
    Correct. Article 2A, a new part of the UCC, covers leases and subleases.

  3. Article 6 of the UCC.
    Incorrect. Article 6 covers bulk transfers, not subleases.

  4. the common law because it involves an intangible good.
    Incorrect. This contract involves tangible, not intangible goods, and is not covered by the common law.

10. Ellen wants to lease a large tent for use in her catering business. Unfortunately, Ellen doesn't have the cash necessary to buy the tent. Instead, she convinces Lyn to buy the tent. Lyn then rents the tent to Ellen. What kind of a lease has been created?
  1. A finance lease.
    Correct. This arrangement between a lessor/financer (Lyn), a lessee (Ellen), and a supplier (the tent company) is a finance lease.

  2. A consumer lease.
    Incorrect. This is not a consumer lease because it involves three parties.

  3. A utility lease.
    Incorrect. Ellen may get much use (utility to economists) from the tent but this is not a utility lease.

  4. A trade usage lease.
    Incorrect. There is no such thing as a trade usage lease.

11. The effect of open terms on a contract covered by the UCC is that:
  1. the contract will be void because of the open terms.
    Incorrect. The UCC allows courts to will in certain open terms in contracts.

  2. the contract will be valid if it involves the sale of land.
    Incorrect. Remember the UCC does not cover contracts for the sale of land.

  3. the contract will be valid if the parties intended to contract and there is a reasonable basis for a court to grant a remedy.
    Correct. So long as both requirements are met, the contract will be valid.

  4. the contract will be valid so long as the parties expressed some interest in negotiating.
    Incorrect. The parties must do more than express an interest in negotiating; they must express an intent to contract.

12. Suppose that Keith and Frank contract for the sale of Frank's antique chest of drawers worth more than $2,500. Keith agrees to buy the chest and signs a contract for the purchase. However, the price of the chest is left out of the contract. In this case:
  1. there is a contract so long as the court can determine a reasonable price at the time of delivery.
    Correct. The UCC allows parties to have open price terms in contracts.

  2. there is contact only if Frank refuses to name a price.
    Incorrect. The validity of the contract does not depend upon Frank's refusal to set a price.

  3. there is contract only if Keith is able to produce evidence that Frank defrauded him.
    Incorrect. Keith does not need to produce evidence of fraud, open price terms are permitted.

  4. there is no contract because parties cannot leave price out of contract.
    Incorrect. The parties almost certainly DO have a contract, because it would not be difficult for a court to determine a reasonable market price for the drawers.

13. Assume that in question #12 Keith and Frank do set a price of $3,150 for the drawers, but they fail to specify when and where delivery will take place. Assume that Keith has a store where he sells antiques. Under the UCC, what happens?
  1. Nothing, the open delivery term invalidates the contract.
    Incorrect. The open delivery term will probably not invalidate this contract.

  2. Keith must deliver the drawers to his own home, where Frank will pick them up.
    Incorrect. Keith does not need to take the drawers to his home.

  3. The drawers must be delivered to Frank's home.
    Incorrect. The normal rule is that a buyer takes delivery of goods at the seller's place of business, not at the seller's home.

  4. Frank would take delivery of the drawers at Keith's store.
    Correct. Under UCC2-308A, Frank would take delivery of the drawers at Keith's store.

14. Now suppose that Frank doesn't purchase a chest of drawers from Keith, but instead buys "antique silver candlesticks." In their sales contract Frank and Keith do not specify just how many antique silver candlesticks Frank will purchase. In this case:
  1. they have a valid contract with an open delivery term.
    Incorrect. The problem here is an open quantity term, not an open delivery term.

  2. they have valid contract with an open price term.
    Incorrect. Although the price may not be specified, the more important problem with this contract is the open quantity term.

  3. they probably do not have a contract at all.
    Correct. Because the quantity of goods to be sold is not specified, a court will not have a basis for providing a remedy - one of the requirements of an open term contract.

  4. they have an output contract.
    Incorrect. Frank and Keith do not have an output contract.

15. If Lisa offers to sell all of the white chocolate macadamia nut brownies that she makes to Pam, who then will resell them in her specialty foods store, Lisa and Pam have created:
  1. a requirements contract.
    Incorrect. A requirements contract involves a buyer agreed to buy and a seller agreeing to sell all the goods that the buyer needs or requires.

  2. an output contract.
    Correct. An output contract involves a seller agreeing to sell and a buyer agreeing to buy all the goods that the seller produces.

  3. a void contract.
    Incorrect. This contract is not void, despite the open quantity term.

  4. an invalid open quantity contract.
    Incorrect. Even though the quantity term is open, this contract would be a valid output contract.

16. If Pam, who sells specialty foods and kitchen equipment in her store, sends Martin a signed letter offering to sell him, and only him, all her stock of high-quality kitchen knives, so long as he responds within 10 days. This is known as:
  1. an output contract.
    Incorrect. Pam has not offered to sell Martin all of her output, so this is not an output contract.

  2. a requirement contract.
    Incorrect. Martin is not agreeing to not buy knives from anyone else so this would not be a requirements contract.

  3. a firm offer.
    Correct. This is a firm offer that Pam gives Martin.

  4. a revocable offer.
    Incorrect. Pam's offer is not revocable.

17. Suppose Sally offers to sell her sofa to her friend Brian. Sally does not sell furniture for a living. If, after Sally offers the sofa to Brian for $750, Brian says, "I'll take it and I want you to throw in coffee table along with it," under the UCC, what kind of contract do Sally and Brian have?
  1. They have no contract because of the mirror-image rule.
    Incorrect. The UCC does not have a mirror-image rule, unlike the common law of contracts.

  2. They have a contract for the sofa and coffee table.
    Incorrect. The additional term, in this case the coffee table, is not included in the contract.

  3. They have a contract for the sofa only.
    Correct. Because they are non-merchants the contract is formed according to the original, not the additional, terms.

  4. They have no contract.
    Incorrect. Brian and Sally do have a contract, despite Brian's additional terms.

18. The UCC has Statute of Frauds provisions governing:
  1. the sale of land.
    Incorrect. The UCC does not govern the sale of land.

  2. the sale of interests in land, such as rights-of-way.
    Incorrect. The UCC does not govern the sale of interests in land.

  3. the sale of intangible property.
    Incorrect. The UCC does not govern the sale of intangible property.

  4. the sale of goods worth more than $500.
    Correct. The UCC has Statute of Frauds provisions that require the sale of goods worth more than $500 to be in writing.

19. Edward agrees over the telephone to paint a sign for Miller's business. The sign will read "Miller's Mighty Muffin Shop." The cost of the sign will be $1,000. After Edward paints the sign Miller decides he doesn't want it. In this case:
  1. Edward is stuck with the sign.
    Incorrect. Because Edward performed and the good is unique, he may enforce this oral contract.

  2. the contract was invalid because it was oral.
    Incorrect. Even though the contract was oral (and should have been in writing) Edward may enforce it based on his performance and the good's unique nature.

  3. the contract, even though it was oral, is enforceable.
    Correct. This oral contract is enforceable, despite the UCC's Statute of Frauds provision, because Edward performed and because a sign reading "Miller's Mighty Muffin Shop" is quite unique.

  4. the contract is unconscionable.
    Incorrect. This contract is not unconscionable.

20. If Edward, who paints signs for a living and is located in Seattle, Washington sells a sign worth $2,000 to Claire, who lives in Vancouver, British Columbia, this contract would be governed by:
  1. the convention on Contracts for the International Sale of Goods.
    Correct. Contracts for the sale of goods between individuals or firms located in different countries are governed by this 1980 international law document.

  2. the UCC for the State of Washington.
    Incorrect. The UCC does not apply in this case.

  3. the UCC for Canada.
    Incorrect. The UCC is an American, not a Canadian statute.

  4. the common law.
    Incorrect. The common law does not govern in this case.

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