Chapter 19: Formation of Sales and Lease Contracts
Multiple Choice


Under Article 2A of the UCC, a lease is defined as:

A lease is a transfer of the right to the possession and use of the named goods for a set term in return for certain consideration.
A lease is the transfer of title for consideration in an agreement in which the goods must be returned in perfect condition.
A lease is an agreement that allows one person to use someone else's real property for money.
A lease allows a person to use someone else's property without consideration.


An accommodation shipment is

a shipment to accommodate the shipper.
a shipment of nonconforming goods sent as an accommodation to the buyer.
a shipment that is sent early to help the buyer complete his transactions.
a shipment that is reshipped because of its original nonconforming status.


Which is NOT true about acceptance of an offer under the UCC Article 2?

The UCC allows acceptance by any reasonable manner or method of communication.
Both common law and the UCC provide that a contract is created when the offeree sends an acceptance rather than when the offeror receives the acceptance.
The offeree must accept in exactly the medium in which the offer was sent for it to be valid.
The offeree may accept in any manner that is reasonable.


The UCC consists of a number of articles dealing with sales contracts as well as other commercial subjects. Which of the following subjects is not covered by an article of the UCC?

Bulk transfers
Sales of property
Investment securities
Negotiable instruments


Under the common law's mirror image rule, the acceptance must exactly mirror the offer or a counteroffer is formed. Which of the following statements reflects the UCC's view of changes in terms between the offer and the acceptance?

The UCC also requires the mirror image rule. Any deviation creates a counteroffer.
The UCC allows acceptance even though the written confirmation contains terms that are additional to or different from the offered terms.
The UCC allows reasonable additions to a contract as long as they don't change the basic terms.
The UCC allows the additional terms to be considered proposed additions to the contract, but only if both parties are nonmerchants.


Which of the following terms to a contract may not be left open and still have a valid contract?

Price of the units
Payment terms
Subject of the contract
Delivery of the goods.


The Statute of Frauds provisions that apply to all sales and lease contracts are included in the UCC. Which statement is NOT true about the UCC and the Statute of Frauds?

All contracts for the sale of goods of more than $500 must be in writing.
All contracts for the lease of goods of more than $2000 must be in writing.
The writing must be sufficient to indicate that a contract has been made between the parties.
The writing must generally be signed by the party against which the contract is being enforced or by his agent or broker.


Which of the following are NOT defined as goods and subject to Article 2 of the UCC?

Stocks and bonds
A box of hair dye
Fifi the French poodle and her unborn puppies.


Is Joe a merchant when he sells the used refrigerator in his garage to his next door neighbor? Joe is an amateur repairman and brags about his expertise in appliances. Joe sells cars for a living.

Joe is a merchant because he sells cars for a living.
Joe is car salesman, but he is not a merchant regarding refrigerators.
Joe held himself out as an expert on used appliances; therefore, he is a merchant.
Joe is a repairman with expertise in mechanical things, so he will be found to be a merchant regarding the refrigerator.


The parol evidence rule under the UCC says that if a written contract is a complete and final statement of the parties' agreement, any prior or contemporaneous oral or written statement that alters, contradicts, or adds to the terms of the written contract is inadmissible in court regarding a dispute over the contract. However, in case of ambiguity, the UCC's version of the parol evidence rule allows three sources to assist in interpretation. Which of the following is NOT one of these sources of interpretation?

Course of performance.
Course of dealing.
Usage of trade.
Correspondence between the parties.


In which of the following does the UCC mirror common law exactly?

Statute of Frauds
Modification of contracts
None of the above.


Mable went to Judie's Beauty Salon to have her hair dyed. Her hairdresser, Sam, dyed her hair green by mistake. She would like to sue in breach of contract under the UCC. Can she?

Article 2 covers hair dye, so she can sue.
Article 2 does apply because this is a case of mixed goods and services where the goods in the form of hair dye predominate.
Article 2 does not apply because dying hair is a service.
Article 2 doesn't apply because this is a case of mixed goods and services where the service of dying hair predominates.


There are three exceptions to the Statute of frauds under the UCC. Which of the following is NOT one of these exceptions?

In the case of oral contract for specially manufacture good, the Statute of Frauds will not protect the purchaser wishing to revoke the contract.
If the party against whom enforcement of an oral sales or lease contract is sought admits in pleadings, testimony or otherwise in court that a contract for the sale or lease of goods exists, the oral contract is enforceable against that party.
If a buy accepts part of the buyer's offer, the Statute of Frauds will not protect his as to that part.
The Statute of Frauds will not protect a buyer who accepts nonconforming goods then ships them back.


Which statement is NOT true about the "battle of the forms" in the process of offer and acceptance in the context of international sales of goods?

The battle of forms occurs when the seller sends an offer to the buyer and the buyer responds with an acceptance that modifies some of the terms of the offer. The battle of the forms refers to the fact that the fine print on the back of the forms frequently doesn't match up. This can result in additional terms and confusion about what is part of the contract and what is not.
The United Nations Convention on Contracts for the International Sale of Goods (CISG) deals with the battle of the forms by declaring that if the inconsistencies are material, the would-be acceptance is a counteroffer. Additions that are not material are considered to be proposal for incorporation into the contract unless the offeror promptly objects.
CISG's approach is closer to the UCC than the old common law mailbox rule.
CISG's approach is engineered to encourage the parties to negotiate and mutually agree on all the material terms of an international sales contract.


If a clause in a sales contract or lease is so unfair as to be unconscionable, the court may:

declare the contract a farce.
apply equitable remedies to it.
not interfere without the permission of the parties.
not reform the contract. It must stand as written.


Acceptance of goods and the formation of a contract often occurs after the buyer has had the opportunity to inspect the goods. Three situations can occur in this acceptance process. Which of the following is NOT one of the possible things that can happen to create an acceptance at this point?

The offeree may simply fail to reject the goods within a reasonable time after the tender or delivery of the goods.
The offeree may signal that he or she will take or retain the goods in spite of their nonconformity.
The buyer recognizes that the goods are nonconforming and makes a counteroffer.
The offeree may signal that the goods are conforming and the contract has been formed.


Under common law, the moment a contract was formed was usually quite clear because of the rules of offer and acceptance. Under the UCC Article 2, which of the following statements is true about the time a contract is formed?

It is not necessary under the UCC to be able to determine the exact time a contract is created.
Just as in common law, the exact moment of the making of a contract will be obvious under the UCC.
The UCC has a provision that creates a default rule for the time a contract is made.
The UCC is even more concerned than common law was with the moment the contract was entered into.


Which statement about the use of the term "good faith" in the UCC is NOT true?

The UCC 1-203 states that every contract or duty within this act imposes an obligation of good faith in its performance or enforcement.
Both parties hold a duty of good faith in the performance of a sales or lease contract.
Merchants are held to a higher standard than nonmerchants regarding good faith.
Nonmerchants are held to the subjective standard of honesty in fact while merchants are held to the objective standard of truth.


Barry needed to retile his bathroom. He went to a tile outlet where he selected his porcelain tiles. He then realized he would need a tile cutter. The salesman sold him a tile cutter for $50 but he said that if Barry brought the tile cutter back after he was done, it could be returned for $25 if it was in perfect condition. Does the UCC apply?

This is Article 2A because it is really a lease of real property.
This is a mixed goods and services contract, so the UCC does not apply.
This could be Article 2 or 2A depending on the terms of the agreement.
None of the above.


Under Article 2A, a consumer lease is:

a lease with a value of $50,000 or more between a lessor regularly engaged in the business of leasing or selling and a lessee who leases the goods primarily for a personal, family, or household purpose.
a lease with a value of $25,000 or less between a lessor regularly engaged in the business of leasing or selling and a lessee who leases the goods primarily for a personal, family, or household purpose.
a lease for consumer goods such as refrigerators, speedboats, etc.
a lease with a value of $5000 or less.

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