BLT&E-7e: Practice Quiz

Chapter 18:

Introduction to Sales and Lease Contracts

1. Article 2 of the Uniform Commercial Code (UCC) governs:

a. contracts for the sale of land.

b. contracts for the sale of goods.

c. negotiable instruments.

d. bulk sales.

Answers:

a. Incorrect. The common law, not the UCC, governs contracts for the sale of land.

b. Correct. Article 2 covers contracts for the sale of goods.

c. Incorrect. Article 3 deals with negotiable instruments.

d. Incorrect. Article 6 deals with bulk sales.

2. 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:

a. Article 2 of the UCC.

b. Article 6 of the UCC.

c. Article 2A of the UCC.

d. the common law of contracts.

Answers:

a. Incorrect. Article 2 does not cover contracts for services, and Mary is providing Daniel with a service, not with a good.

b. 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.

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

d. Correct. The common law would apply in this case.

3. In order for the rules contained in the UCC to apply to a contract for the sale of goods, the goods must:

a. be for retail use only.

b. consist of some unique personal service.

c. be tangible—that is, have physical existence.

d. be considered real property.

Answers:

a. Incorrect. The goods do not need to be used for retail purposes only.

b. Incorrect. The UCC does not govern contracts for the sale of personal services.

c. Correct. The goods sold must be tangible, unlike stocks or bonds.

d. Incorrect. Goods are personal property, not real property, and contracts for the sale of real property are not covered by the UCC.

4. If Jim sells Smith copper that he removed from land that he owns in Colorado, this contract:

a. will be covered by Article 2 of the UCC.

b. will be covered by Article 2A of the UCC.

c. will be covered by Article 3 of the UCC.

d. will be covered by the common law.

Answers:

a. Correct. Jim is selling a good that he has separated from the land. Therefore, this contract will be covered by Article 2.

b. Incorrect. Article 2A covers leases, and this is a sale.

c. Incorrect. Article 3 covers negotiable instruments.

d. Incorrect. Although Jim is selling a good associated with real estate, the copper has been separated from the land; thus, the sale of the copper will be governed by the UCC.

5. When merchants are involved in commercial transactions that involve the sale of goods, they are held to certain standards. When casual (nonmerchant or consumer) buyers or sellers are involved:

a. they are held to less rigorous standards than merchants.

b. they are held to more rigorous standards than merchants.

c. they are treated exactly like merchants.

d. their transactions are not covered by the UCC.

Answers:

a. Correct. The UCC holds casual (nonmerchant) buyers and sellers to less rigorous standards than the standards that apply to merchants.

b. Incorrect. Casual or inexperienced (nonmerchant) buyers and sellers are not held to higher standards than those applied to merchants.

c. Incorrect. Such casual or inexperienced (nonmerchant) buyers and sellers are held to less rigorous, not more rigorous, standards than merchants.

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

6. If you lease an automobile from an automobile dealer, this contract is covered by:

a. Article 2 of the UCC.

b. Article 2A of the UCC.

c. Article 6 of the UCC.

d. the common law, because it involves an intangible good.

Answers:

a. Incorrect. Article 2 covers contracts for the sale of goods, not leases or subleases of goods.

b. Correct. Article 2A covers leases of goods.

c. Incorrect. Article 6 covers bulk transfers, not subleases.

d. Incorrect. This contract involves the lease of tangible goods, not intangible goods, and leases of goods are covered by Article 2A of the UCC.

7. The effect of open terms on a contract covered by the UCC is that:

a. the contract will be void because of the open terms.

b. the contract will be valid if it involves the sale of land.

c. the contract will be valid if the parties intended to form a contract and there is a reasonable basis for a court to grant a remedy.

d. the contract will be valid as long as the parties expressed some interest in negotiating.

Answers:

a. Incorrect. The UCC provides “gap-filling” provisions that the courts apply to contracts with open terms.

b. Incorrect. Remember, the UCC does not cover contracts for the sale of land.

c. Correct. As long as both requirements are met, the contract will be valid.

d. Incorrect. The parties must do more than express an interest in negotiating; they must express an intent to form a contract.

8. Pam, who sells specialty foods and kitchen equipment in her store, sends Martin a signed letter offering to sell him, and only him, all of her stock of high-quality kitchen knives. Pam specifies that her offer will be open for ten days only. Pam’s offer is known as:

a. an output contract.

b. a requirements contract.

c. a merchant’s firm offer.

d. a revocable offer.

Answers:

a. Incorrect. Pam has not offered to sell Martin all of her output, so this is not an output contract.

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

c. Correct. This is a merchant’s firm offer.

d. Incorrect. Pam’s firm offer is not revocable.

9. Joe Allen, who is in the business of painting commercial signs, 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 Allen paints the sign, Miller decides that he doesn’t want it. In this case:

a. Allen is stuck with the sign.

b. the contract is invalid because it was oral.

c. the contract, even though it was oral, is enforceable.

d. the contract is unconscionable.

Answers:

a. Incorrect. Because the contract was for a specially manufactured good that is unsuitable for resale to others, the oral contract is enforceable.

b. Incorrect. Because the contract was for a specially manufactured good that is unsuitable for resale to others, the oral contract is enforceable.

c. Correct. Under an exception to the UCC’s Statute of Frauds, an oral contract is enforceable if it is for goods that are specially manufactured for the buyer and if the goods are not suitable for resale to others.

d. Incorrect. This contract is not unconscionable.

10. The UCC has Statute of Frauds provisions governing:

a. the sale of land.

b. the sale of interests in land, such as rights-of-way.

c. the sale of intangible property.

d. the sale of goods priced at more than $500.

Answers:

a. Incorrect. The UCC does not govern the sale of land.

b. Incorrect. The UCC does not govern the sale of interests in land.

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

d. Correct. The UCC’s Statute of Frauds requires that a contract for the sale of goods priced at more than $500 must be in writing.