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24-22 Chapter 24 - Remedies for Breach of Sales and Lease Contracts Chapter 24 Remedies for Breach of Sales

and Lease Contracts Answer Key True / False Questions


1. (p. 529) The UCC adopts several common law principles. TRUE The UCC adopts several common law principles.
AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 24-01 What constitutes a breach of a sales
contract? Topic: The Goal of Contract Remedies
2. (p. 529) Contract actions are created to enforce the intentions of the parties to the agreement, while tort law is
primarily designed to vindicate social policy. TRUE Contract actions are created to enforce the intentions of the
parties to the agreement, while tort law is primarily designed to vindicate social policy. 24-23 Chapter 24 - Remedies
for Breach of Sales and Lease Contracts AACSB: Analytic Bloom's: Understand Difficulty: Medium Learning
Objective: 24-01 What constitutes a breach of a sales contract? Topic: The Goal of Contract Remedies
3. (p. 530) The UCC does not allow a seller to cancel a contract if the buyer is in breach. FALSE UCC Sections 2703(f) and 2A-523(1)(a) allow a seller or lessor to cancel the contract if the buyer or lessee is in breach. AACSB:
Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 24-01 What constitutes a breach of a sales
contract? Topic: Remedies Available to Sellers and Lessors under the UCC
4. (p. 531) A seller or lessor is allowed to sell goods to another buyer when the original buyer is in breach and the
goods have not yet been delivered. TRUE Sellers or lessors are allowed to sell the goods to another buyer or dispose
of the goods when the buyer is in breach and the goods have not yet been delivered. AACSB: Analytic Bloom's:
Understand Difficulty: Medium Learning Objective: 24-02 What is resale? Topic: Remedies Available to Sellers and
Lessors under the UCC 24-24 Chapter 24 - Remedies for Breach of Sales and Lease Contracts
5. (p. 532) Liquidated damages are identified after a contract breach occurs. FALSE Liquidated damages are
damages identified before the breach occurs. AACSB: Analytic Bloom's: Understand Difficulty: Medium Learning
Objective: 24-04 What are liquidated damages? Topic: Remedies Available to Sellers and Lessors under the UCC
6. (p. 532) In transit means that the seller or lessor has delivered the goods to a carrier or bailee, but the carrier or
bailee has not yet turned them over to the buyer. TRUE In transit means that the seller or lessor has delivered the
goods to a carrier or bailee but the carrier or bailee has not yet turned them over to the buyer. AACSB: Analytic
Bloom's: Understand Difficulty: Medium Learning Objective: 24-03 What money damages are available for breach?
Topic: Remedies Available to Sellers and Lessors under the UCC
7. (p. 533) The term "cover" refers to buyers or lessees substituting goods for those due under a sales or lease
agreement. TRUE Under UCC Sections 2-712 and 2A-518, buyers and lessees are allowed to cover, or substitute,
goods for those due under the sales or lease agreement. AACSB: Analytic Bloom's: Understand Difficulty: Medium
Learning Objective: 24-05 What is cover? Topic: Remedies Available to Buyers and Lessees under the UCC 24-25
Chapter 24 - Remedies for Breach of Sales and Lease Contracts
8. (p. 533) Specific performance usually requires that the seller or lessor cover. FALSE Specific performance usually
requires that the seller or lessor deliver the particular goods identified in the contract. AACSB: Analytic Bloom's:
Understand Difficulty: Medium Learning Objective: 24-06 When is specific performance of the contract a remedy?
Topic: Remedies Available to Buyers and Lessees under the UCC
9. (p. 540) The case of Hill v. Gateway, discussed in the text, ruled that in order to be effective, a contract must be
verbally read to a consumer who purchases a computer over the telephone. FALSE The court ruled that a "contract
need not be read to be effective; people who accept take the risk that the unread terms may in retrospect prove
unwelcome." AACSB: Technology Bloom's: Understand Difficulty: Medium Learning Objective: 24-01 What constitutes
a breach of a sales contract? Topic: Modifications or Limitations to Remedies Otherwise Provided by the UCC
10. (p. 537) If a buyer accepts nonconforming goods, the buyer may not also seek damages. FALSE Under UCC
Sections 2-607, 2-714, and 2A-519, buyers or lessees are allowed to accept nonconforming goods and then seek
monetary damages to give them the benefit of the bargain. AACSB: Analytic Bloom's: Understand Difficulty: Medium
Learning Objective: 24-01 What constitutes a breach of a sales contract? Topic: Remedies Available to Buyers and

Lessees under the UCC 24-26 Chapter 24 - Remedies for Breach of Sales and Lease Contracts Multiple Choice
Questions

Obligations of sellers/lessors and buyers/lessees are determined by what three things 1. terms the parties agree on2. custom3. rules of UCCstatute of limitation=4 years
2.
Goal of contract remedies ----- to fulfill expectations and intentions of parties to agreement,
give them the benefit of the bargain negotiated
Remedies available to sellers and lessors under UCC ----- 1. Cancel the Contract (must notify
buyer/lessee)2. Withhold Delivery 3. Sell or otherwise dispose of goods (allows seller to
recover difference between resale...
Liquidated Damages -----damages identified before the breach occursParties are free to negotiate
a liquidated damages clause, but it cannot be punitive and must be reasonableIf not negotiated,
UCC allows non-breaching..
.
Remedies available to Buyers and Lessees under the UCC ------1. Cancel Contract2. Obtain
Cover (subsititute goods for those due under the sales or lease agreement)3. Sue to recover
damages (entitled to incidental and consequential.
..
Elements necessary to obtain legal cover ---- Buyer must:1. Demonstrate good faith in
obtaining the substitute goods2. Pay a reasonable amount for the substitute goods3. Act without
unreasonable delay in purchasing the substitute..
.
Modification of/Limitation to Remedies Otherwise Provided by UCC ----- Parties to sales and
lease contracts are allowed to modify/limit remediesCourts uphold modifications/limitations to
remedies, unless remedies fail in their essential purpose.
---------------------------------------------------------------------------------------------------------------------------------------------------11. (p. 529) The obligations of sellers/ lessors and buyers/ lessees are determined by which of the following? A.
Terms the parties outline in agreements B. Custom C. Rules outlined by the Uniform Commercial Code D. All the
above E. Terms the parties outline in agreements and rules outlined by the Uniform Commercial Code, but not
custom
Answer - The obligations of sellers/lessors and buyers/lessees are determined by (1) terms the parties outline in
agreements, (2) custom, and (3) rules outlined by the Uniform Commercial Code (UCC). AACSB: Analytic Bloom's:
Understand Difficulty: Medium Learning Objective: 24-01 What constitutes a breach of a sales contract? Topic: The
Goal of Contract Remedies
12. (p. 529) What is the basic premise of contract law? A. To effectuate the expectations of the parties to an
agreement B. To promote commerce C.To promote economic growth D.To promote interstate commerce E. To
encourage a free-market society and greater financial security for the parties
Answer - The basic premise of contract law is to effectuate the expectations of the parties to the agreement. AACSB:
Analytic Bloom's: Understand Difficulty: Medium Learning Objective: 24-01 What constitutes a breach of a sales
contract? Topic: The Goal of Contract Remedies 24-27 Chapter 24 - Remedies for Breach of Sales and Lease
Contracts

13. (p. 532) What type of remedy does the UCC give buyers and lessees when the other party has breached a
contract? A. The benefit of the bargain B. Any amounts of money lost plus 10% C. Any amounts of money lost plus
15% D. Any amounts of money lost plus 20% E. Any amounts of money lost plus 25% Sections 2-711(1) and 2A508(1)(a) of the UCC allow buyers and lessees to cancel the contract and then seek remedies that give them the
benefit of the bargain. AACSB: Analytic Bloom's: Understand Difficulty: Medium Learning Objective: 24-03 What
money damages are available for breach? Topic: Remedies Available to Buyers and Lessees under the UCC
14. (p. 531) Which of the following is a remedy available to the seller if the buyer fails to pay according to the terms of
the agreement? A. Sellers may withhold delivery of goods. B. Sellers may sell undelivered goods to another buyer. C.
Sellers may put a lien on any property of the buyer. D. Sellers may withhold delivery of goods, sellers may sell the
goods to another buyer, and sellers may put a lien on any property of the buyer. E. Sellers may withhold delivery of
goods and sellers may sell the goods to another buyer, but sellers may not put a lien on any property of the buyer.
Answer - UCC Sections 2-703(a) and 2A-523(1)(c) allow sellers or lessors to withhold delivery of goods when the
buyer or lessee is in breach. Sellers or lessors are allowed to sell the goods to another buyer or dispose of the goods
when the buyer is in breach and the goods have not yet been delivered. AACSB: Analytic Bloom's: Understand
Difficulty: Medium Learning Objective: 24-01 What constitutes a breach of a sales contract? Topic: Remedies
Available to Sellers and Lessors under the UCC 24-28 Chapter 24 - Remedies for Breach of Sales and Lease
Contracts
15. (p. 531) Which of the following was the result in the case in the text Troy Boiler Works, Inc. v. Sterile
Technologies, Inc., when the plaintiff, who was sued to recover amounts due on a sterilizer purchased from the
defendant, claimed that a six-year statute of limitations governing actions to collect money on account applied rather
than the four-year statute of limitations derived from the UCC? A. The court ruled that the six-year statute of
limitations applied because a sale of a good was the basis for the dispute. B. The court ruled that the four-year
statute of limitations applied because a sale of a good was the basis for the dispute. C. The court split the difference
and ruled that a five-year statute of limitations applied. D. The court ruled that the six-year statute of limitations
applied because an action on an account receivable was the basis for the dispute. E. The court ruled that the fouryear statute of limitations applied because an action on account receivable was the basis for the dispute.
Answer - The New York trial court dismissed the claim, stating that the four-year statute of limitations applied and that
the UCC drafters intended one limitation to apply to all transactions involving the sale of goods, as in that case.
AACSB: Analytic Bloom's: Understand Difficulty: Medium Learning Objective: 24-01 What constitutes a breach of a
sales contract? Topic: Remedies Available to Buyers and Lessees under the UCC 24-29 Chapter 24 - Remedies for
Breach of Sales and Lease Contracts
16. (p. 531) Which of the following damages may a seller receive who sells goods to another buyer when the original
buyer is in breach? A. The difference between the resale price and the contract price, plus incidental damages and
minus expenses saved. B. The difference between the resale price and the contract price only. C. The difference
between the resale price and the contract price minus expenses without any allowance for incidental damages. D.
The difference between the resale price and the contract price, plus incidental damages, with no deduction for
expenses saved. E. Nominal damages only. Sellers are allowed to sell the goods to another buyer or dispose of the
goods when the buyer is in breach and the goods have not yet been delivered. UCC Section 2-706 allows the seller
to recover the difference between the resale price and the contract price, plus incidental damages and minus
expenses saved. AACSB: Analytic Bloom's: Understand Difficulty: Medium Learning Objective: 24-02 What is resale?
Topic: Remedies Available to Sellers and Lessors under the UCC
17. (p. 531) Which of the following is true regarding the right of a lessor to seek incidental damages in the event of a
breach by a lessee of goods? A. A lessor may seek incidental damages only if the lessee agreed in writing to pay
them. B. A lessor may seek incidental damages only if the lessee agreed orally or in writing to pay them. C. A lessor
may seek incidental damages only if the damages are in an amount over $500. D. A lessor may seek incidental
damages only if the damages are in an amount over $1,000. E. A lessor may seek incidental damages. The lessor is
allowed to lease the goods to another party and recover unpaid lease payments and any deficiency between the
lease payments due under the original lease contract and those due under the new contract. The lessor can also
seek incidental damages. AACSB: Analytic Bloom's: Understand Difficulty: Medium Learning Objective: 24-02 What is

resale? Topic: Remedies Available to Sellers and Lessors under the UCC 24-30 Chapter 24 - Remedies for Breach of
Sales and Lease Contracts
18. (p. 532) Which of the following are damages identified before the breach occurs? A. Nominal damages B.
Compensatory damages C. Reliance damages D. Liquidated damages E. Consequential damages. Liquidated
damages are damages identified before the breach occurs. AACSB: Analytic Bloom's: Remember Difficulty: Easy
Learning Objective: 24-04 What are liquidated damages? Topic: Remedies Available to Sellers and Lessors under the
UCC
19. (p. 532) Which of the following is true regarding a liquidated damages provision? A. A provision for liquidated
damages is illegal. B. A provision for liquidated damages is void because of public policy. C. A provision for liquidated
damages is voidable because of public policy. D. A provision for liquidated damages is enforceable so long as it is not
punitive in nature. E. A provision for liquidated damages will be enforced regardless of whether it is punitive in nature.
Generally speaking, a court will enforce a liquidated-damage clause as long as it is not so far out of reasonable range
as to be punitive in nature. AACSB: Analytic Bloom's: Understand Difficulty: Medium Learning Objective: 24-04 What
are liquidated damages? Topic: Remedies Available to Sellers and Lessors under the UCC 24-31 Chapter 24 Remedies for Breach of Sales and Lease Contracts
20. (p. 532) What does the UCC provide regarding liquidated damages if the parties do not agree to them? A. That
the nonbreaching seller may claim against a breaching buyer 20 percent of the purchase price or $500, whichever is
less, as liquidated damages. B. That the nonbreaching seller may claim against a breaching buyer 20 percent of the
purchase price or $500, whichever is more, as liquidated damages. C. That the nonbreaching seller may claim
against a breaching buyer 30 percent of the purchase price or $1,000, whichever is less, as liquidated That damages.
D. the nonbreaching seller may claim against a breaching buyer 30 percent of the purchase price or $1,000,
whichever is more, as liquidated damages. E. Nothing because liquidated damages are unavailable unless the
parties have expressly agreed to them. The code provides for liquidated damages if the parties have not expressly
negotiated a liquidated-damage clause. UCC Section 2-718 pertains to liquidated damages and allows the
nonbreaching seller to claim against a breaching buyer 20 percent of the purchase price or $500, whichever is less,
as liquidated damages. AACSB: Analytic Bloom's: Understand Difficulty: Medium Learning Objective: 24-04 What are
liquidated damages? Topic: Remedies Available to Sellers and Lessors under the UCC 24-32 Chapter 24 - Remedies
for Breach of Sales and Lease Contracts
21. (p. 532) What does the UCC provide regarding the availability of punitive damages? A. That the nonbreaching
seller may claim against a breaching buyer who is guilty of malice 20 percent of the purchase price or $500,
whichever is less, as punitive damages. B. That the nonbreaching seller may claim against a breaching buyer who is
guilty of malice 20 percent of the purchase price or $500, whichever is more, as punitive damages. C. That the
nonbreaching seller may claim against a breaching buyer who is guilty of malice 30 percent of the purchase price or
$1,000, whichever is less, as punitive damages. D. That the nonbreaching seller may claim against a breaching buyer
who is guilty of malice 30 percent of the purchase price or $1,000, whichever is more, as punitive damages. E.
Nothing Although the UCC does not mention the availability of punitive damages, other than in its voiding of
liquidated damages that are punitive in nature, an issue that remains unsettled is the awarding of punitive damages
against a breaching party who intentionally or egregiously breaches the contract. AACSB: Analytic Bloom's:
Understand Difficulty: Medium Learning Objective: 24-04 What are liquidated damages? Topic: Remedies Available to
Sellers and Lessors under the UCC
22. (p. 536) Which of the following was the result in Almetals, Inc. v. Wickeder Westfalenstahl, GMBH, the case in the
text involving the sale of clad metal in which the plaintiff sued the defendant for breach of contract seeking specific
performance? A. That specific performance was unavailable because real estate was not involved. B. That specific
performance was unavailable because a foreign defendant was involved and jurisdiction for specific performance
was, therefore, lacking. C. That specific performance was unavailable because the goods at issue were scarce. D.
That specific performance was unavailable because a requirements contract was involved. E. That specific
performance was the appropriate remedy. According to the court, "Specific performance under UCC 2-716 is the
appropriate remedy because the varieties of clad metal supplied by Wickeder pursuant to the parties' requirements
contract are unique and there are no known alternative sources of supply, but only speculation as to a possible
alternative source for .2% or .3% of the product." AACSB: Analytic Bloom's: Understand Difficulty: Medium Learning

Objective: 24-06 When is specific performance of the contract a remedy? Topic: Remedies Available to Sellers and
Lessors under the UCC 24-33 Chapter 24 - Remedies for Breach of Sales and Lease Contracts
23. (p. 532) Assuming a buyer that is insolvent has breached a contract by not paying for goods that are in transit,
which of the following may occur? A. The carrier may stop delivery on the entire shipment. B. The carrier may stop
delivery only if the quantity shipped is a large shipment. C. The carrier may stop delivery only if a signed writing exists
by which the buyer agreed to the remedy of stopping shipment. D. The carrier may stop delivery only if ordered to do
so by the bankruptcy judge. E. The carrier may not stop delivery under any circumstances. UCC Sections 2-705(1)
and 2A-526(1) allow a seller or lessor to stop delivery of goods that are in transit. If the buyer/lessee is insolvent, the
carrier/bailee can stop delivery regardless of the quantity shipped. AACSB: Analytic Bloom's: Apply Difficulty: Hard
Learning Objective: 24-03 What money damages are available for breach? Topic: Remedies Available to Sellers and
Lessors under the UCC
24. (p. 532) Assuming a buyer that is not insolvent has breached a contract by not paying for goods that are in transit,
which of the following may occur? A. The carrier may stop delivery on the entire shipment. B. The carrier may stop
delivery only if the quantity shipped is a large shipment. C. The carrier may stop delivery only if a signed writing exists
by which the buyer agreed to the remedy of stopping shipment. D. The carrier may stop delivery only if ordered to do
so by the bankruptcy judge. E. The carrier may not stop delivery under any circumstances. UCC Sections 2-705(1)
and 2A-526(1) allow a seller or lessor to stop delivery of goods that are in transit. If the buyer/lessee is solvent,
however, the carrier or bailee can stop delivery only if the quantity shipped is a large shipment (e.g., a carload or
truckload). AACSB: Analytic Bloom's: Apply Difficulty: Hard Learning Objective: 24-03 What money damages are
available for breach? Topic: Remedies Available to Sellers and Lessors under the UCC 24-34 Chapter 24 - Remedies
for Breach of Sales and Lease Contracts
25. (p. 532) Under UCC 2-702(2), under which of the following circumstances may a seller reclaim goods when a
buyer is in possession of goods and is in breach? A. When the seller discovers the buyer is insolvent B. When the
buyer is at least five days late on a payment C.When the buyer has received at least 10 days prior notification of
reclamation D.All of the above E. When the seller discovers the buyer is insolvent and when the buyer has received
at least 10 days prior notification of reclamation, but not when the buyer is five days late on a payment. UCC 2-702(2)
allows a seller to reclaim goods when it discovers the buyer is insolvent. AACSB: Analytic Bloom's: Apply Difficulty:
Hard Learning Objective: 24-03 What money damages are available for breach? Topic: Remedies Available to Sellers
and Lessors under the UCC
26. (p. 532) Under UCC 2A-525(2) when may a lessor reclaim goods when a lessese in possession of the goods is in
breach? A. When the lessor discovers the lessee is insolvent B. When the lessee fails to make payments according
to the lease terms C.When the lessee has received at least 10 days prior notification of reclamation D.All of the above
E. When the lessor discovers that the lessee is insolvent and when the lessee has received at least 10 days prior
notification of reclamation, but not when the lessee has failed to make payments according to the lease terms UCC
2A-525(2) allows a lessor to reclaim goods when the lessee fails to make payments according to the lease terms.
AACSB: Analytic Bloom's: Apply Difficulty: Hard Learning Objective: 24-03 What money damages are available for
breach? Topic: Remedies Available to Sellers and Lessors under the UCC 24-35 Chapter 24 - Remedies for Breach
of Sales and Lease Contracts
27. (p. 533) Which of the following is the right of a buyer and lessee to substitute goods for those due under a sales
or lease agreement? A. Swap B. Rearrange C. Cover D. Shift E. Reallocate Under UCC Sections 2-712 and 2A-518,
buyers and lessees are allowed to cover, or substitute, goods for those due under the sales or lease agreement.
AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 24-05 What is cover? Topic: Remedies
Available to Buyers and Lessees under the UCC
28. (p. 533) Which of the following must a buyer do in obtaining cover? A. Demonstrate good faith in obtaining the
substitute goods B. Pay a reasonable amount for the substitute goods C. Act without unreasonable delay in
purchasing the substitute goods D. All the above E. Pay a reasonable amount for the substitute goods and act without
unreasonable delay in purchasing the substitute goods, but there is no good faith requirement. In obtaining cover, the
buyer must (1) demonstrate good faith in obtaining the substitute goods, (2) pay a reasonable amount for the
substitute goods, (3) act without unreasonable delay in purchasing the substitute goods, and (4) purchase goods that

are reasonable substitutes. AACSB: Analytic Bloom's: Understand Difficulty: Medium Learning Objective: 24-05 What
is cover? Topic: Remedies Available to Buyers and Lessees under the UCC 24-36 Chapter 24 - Remedies for Breach
of Sales and Lease Contracts
29. (p. 534) Assuming proper proof, which of the following represents damages a buyer or lessee may recover in the
event of a breach? A. Incidental damages B. Consequential damages C. Remedial damages D. All the above E.
Incidental and consequential damages, but not remedial damages.
Buyers and lessees, are entitled to incidental
and consequential damages. AACSB: Analytic Bloom's: Understand Difficulty: Medium Learning Objective: 24-03
What money damages are available for breach? Topic: Remedies Available to Buyers and Lessees under the UCC
30. (p. 534) Which of the following includes lost profits so long as those damages are not too speculative? A. Punitive
damages B. Consequential damages C. Remedial damages D. Nominal damages E. Control damages
Consequential damages include damages for lost profits as long as these damages are not too speculative. AACSB:
Analytic Bloom's: Understand Difficulty: Medium Learning Objective: 24-03 What money damages are available for
breach? Topic: Remedies Available to Buyers and Lessees under the UCC 24-37 Chapter 24 - Remedies for Breach
of Sales and Lease Contracts
31. (p. 535) Under the UCC buyers and lessees may recover goods identified in the contract if the seller or lessor
becomes insolvent within ______ after receiving the first payment due under the agreement. A. 5 days B. 10 days C.
15 days D. 30 days E. 60 days UCC sections 2-502 and 2a-522 allow buyers and lessees to recover the goods
identified in the contract if the seller or lessor becomes insolvent within 10 days after receiving the first payment due
under the agreement. AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 24-03 What money
damages are available for breach? Topic: Remedies Available to Buyers and Lessees under the UCC
32. (p. 535) Which of the following usually requires that the seller or lessor deliver the particular goods identified in
the contract? A. Absolute order B. Absolute performance C. Specific performance D. Specific order E. None of the
above
Answer - Specific performance usually requires that the seller or lessor deliver the particular goods identified in the
contract. AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 24-06 When is specific
performance of the contract a remedy? Topic: Remedies Available to Buyers and Lessees under the UCC 24-38
Chapter 24 - Remedies for Breach of Sales and Lease Contracts
33. (p. 535) When does the UCC allow buyers and lessees to seek the remedy of specific performance? A. When
goods are unique B. When a remedy at law is inadequate C.When goods are worth more than $500 D. When goods
are unique, when a remedy at law is inadequate, or when goods are worth more than $500 E. When goods are
unique or when a remedy at law is inadequate, but not because the goods are worth more than $500
Answer - UCC Sections 2-716(1) and 2A-521(1) allow buyers and lessees to seek the remedy of specific
performance when either (1) the goods are unique or (2) a remedy at law is inadequate. AACSB: Analytic Bloom's:
Remember Difficulty: Easy Learning Objective: 24-06 When is specific performance of the contract a remedy? Topic:
Remedies Available to Buyers and Lessees under the UCC
34. (p. 533-534) Which of the following was the result in U.S.A. Coil & Air, Inc. v. Hodess Building Co., the case in the
text in which the seller of cooling coils sued for the contract price and the defendant counterclaimed for breach of
contract? A. That the seller was liable to the buyer for replacement costs. B. That the buyer did not have to pay the
seller contract costs but that the buyer was not liable for replacement costs. C. That neither party owed the other
anything. D. That the buyer was liable to the seller for the contract price. E. That the buyer was liable to the seller for
the contract price plus attorney's fees.
According to the court, "Having found USA [the seller] breached the contract, this court also concludes that USA is
liable for the resulting damages incurred by Hodess [the buyer]." AACSB: Analytic Bloom's: Understand Difficulty:
Medium Learning Objective: 24-05 What is cover? Topic: Remedies Available to Buyers and Lessees under the UCC
24-39 Chapter 24 - Remedies for Breach of Sales and Lease Contracts

35. (p. 536) Which of the following may a buyer/lessee do when the seller/lessor delivers nonconforming goods? A.
Reject the goods only B. Obtain cover only C. Cancel the contract only D. Reject the goods, and then obtain cover or
cancel the contract E. Reject the goods and obtain cover, but the buyer may not cancel the contract.
UCC Sections 2-601 and 2A-519 allow the buyer or lessee to reject the goods. The buyer or lessee may then obtain
cover or cancel the contract. AACSB: Analytic Bloom's: Understand Difficulty: Medium Learning Objective: 24-05
What is cover? Topic: Remedies Available to Buyers and Lessees under the UCC
36. (p. 536-537) Which of the following is true regarding revocation of accepted nonconforming goods? A. A buyer
may revoke acceptance of nonconforming goods under some circumstances, but a lessee may not. B. A lessee may
revoke acceptance of nonconforming goods under some circumstances, but a buyer may not. C. Neither a buyer nor
a lessee may revoke acceptance of nonconforming goods. D. Neither a buyer nor a lessee may revoke acceptance of
nonconforming goods after the goods have remained accepted for a period of 24 hours. E. A buyer or lessee may
revoke acceptance of nonconforming goods if, for example, the buyer/lessee made a reasonable assumption that the
nonconformity would be cured, but then the nonconformity was not cured within a reasonable time.
Answer - A buyer is allowed to revoke acceptance if the buyer makes a reasonable assumption that the
nonconformity will be cured but then the nonconformity is not cured within a reasonable amount of time. AACSB:
Analytic Bloom's: Understand Difficulty: Medium Learning Objective: 24-06 When is specific performance of the
contract a remedy? Topic: Remedies Available to Buyers and Lessees under the UCC 24-40 Chapter 24 - Remedies
for Breach of Sales and Lease Contracts
37. (p. 537) What was the result in the case in the text Dunleavy v. Paris Ceramics USA, Inc., the case in which
French limestone was found to be defective and the buyer sued the seller for a refund? A. The buyer was not allowed
to recover because the buyer refused the defendant the right to cure. B. The buyer was allowed to recover
compensatory damages because the seller's efforts to cure were unsuccessful, and in addition the buyer was allowed
to recover punitive damages based on misrepresentations. C. The buyer was allowed to recover because the seller
did not offer to cure. D. The buyer was allowed to recover because the buyer had accepted the goods and resold
them to another party, and no right to cure existed. E. The buyer was not allowed to recover because the seller
properly cured the problem.
The court held that when the offer to cover was made, the goods had already been accepted and resold, and that
there was no right to cover once the goods had been accepted. AACSB: Analytic Bloom's: Understand Difficulty:
Medium Learning Objective: 24-05 What is cover? Topic: Remedies Available to Buyers and Lessees under the UCC
24-41 Chapter 24 - Remedies for Breach of Sales and Lease Contracts
38. (p. 537) Which of the following is true regarding buyers or lessees who want to accept nonconforming goods and
then seek monetary damages? A. Buyers and lessees are allowed to do so in order to receive the benefit of the
bargain, but they must give the seller/lessor reasonable notice of the defect. B. Buyers and lessees are allowed to do
so in order to receive the benefit of the bargain, and there is no requirement that they give the seller/lessor prior
notice of the defect. C. Buyers may do so in order to receive the benefit of the bargain so long as reasonable notice
of the defect is given, but lessors may not. D. Lessors may do so in order to receive the benefit of the bargain so long
as reasonable notice of the defect is given, but buyers may not. E. Buyers and lessors may do so only if the
seller/lessee agrees to the retention of the nonconforming goods and does not request their return.
Under UCC Sections 2-607, 2-714, and 2A-519, buyers or lessees are allowed to accept nonconforming goods and
then seek monetary damages to give them the benefit of the bargain. The buyer/lessee must give the seller/lessor
reasonable notice of the defect. AACSB: Analytic Bloom's: Apply Difficulty: Hard Learning Objective: 24-03 What
money damages are available for breach? Topic: Remedies Available to Buyers and Lessees under the UCC
39. (p. 539) Which of the following provide remedies to buyers of defective cars? A. Apple laws B. Lemon laws C.
Clunker laws D. Roadside laws E. Peach laws
Answer - In the United States, lemon laws exist to provide remedies for buyers of defective cars when sellers have
limited the remedies otherwise provided by the UCC. AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning

Objective: 24-06 When is specific performance of the contract a remedy? Topic: Modifications or Limitations to
Remedies Otherwise Provided by the UCC 24-42 Chapter 24 - Remedies for Breach of Sales and Lease Contracts
40. (p. 540-541) Regarding the "Case Opener," what did the court rule regarding the liability of Abbott Industries
following its supply of 1.2 million tubes of bad eye medication to Altana, a customer, for resale? A. That Abbott
industries was liable for the cost of the recall and destruction of the defective medication, for the costs of employee
overtime, and for lost future sales because Altana was unable to meet its contractual obligations. B. That Abbott
industries was liable for the cost of the recall and destruction of the defective medication, for the costs of employee
overtime, and for lost future sales even though Altana was able to meet its contractual obligations. C. That Abbott
industries was liable for the cost of the recall and destruction of the defective medication and for the costs of
employee overtime, but not for lost future sales because Altana was able to meet its contractual obligations. D. That
Altana was only entitled to receive cover, meaning substitution for the defective medication. E. That Altana was
unable to recover anything because business people take a risk that some shipments will be bad.
Answer - Employing a test that requires the breaching party (Abbott) to put the nonbreaching party (Altana) in the
position it would have been in had there not been a breach, the court found that Abbott was indeed liable to Altana for
the overtime payments to employees in order to make up the lost batch and satisfy Altana's contractual customers.
However, when the issue of future sales was considered, the court ruled that despite Abbott's breach, Altana was still
able to fulfill all of its existing contracts. To award any money to Altana on loss of future sales would be speculative
and an unfair windfall to Altana. AACSB: Analytic Bloom's: Understand Difficulty: Medium Learning Objective: 24-01
What constitutes a breach of a sales contract? Topic: Modifications or Limitations to Remedies Otherwise Provided by
the UCC 24-43 Chapter 24 - Remedies for Breach of Sales and Lease Contracts
41. (p. 539) Which of the following is true of lemon laws in Canada? A. They are generally the same as lemon laws in
the U.S. B. They allow for replacement of defective parts but not a new car unless the plaintiff agrees to pay the
difference between the amount received for the used car when sold and the amount charged for the new car. C. They
guarantee a buyer of a lemon a new car. D. They guarantee the buyer of a lemon a return of all consideration. E.
Canada does not have a lemon law such as is known in the U.S.
Answer - Instead, an arbitration program is run through which a buyer may lodge complaints. Canada does not have
lemon laws. Instead, each province runs an arbitration program through which a buyer can lodge complaints against
a carmaker for selling a car that the consumer perceives as being damaged goods. AACSB: Diversity Bloom's:
Remember Difficulty: Medium Learning Objective: 24-06 When is specific performance of the contract a remedy?
Topic: Modifications or Limitations to Remedies Otherwise Provided by the UCC 24-44 Chapter 24 - Remedies for
Breach of Sales and Lease Contracts
42. (p. 532) Sam contracted with Sharon, his cousin, to build a building to house Sam's new restaurant. Sam wanted
the building completed by October 15th so that he could advertise and get holiday business. Sam and Sharon
entered into an agreement by which Sharon would pay Sam $300 per day for every day she was late. Which of the
following is true regarding their agreement? A. It is known as a liquidated damages provision which will be enforced
by a court so long as it is not so far out of reasonable range as to be punitive in nature. B. It is known as a penalty
provision which will be enforced by a court so long as the plaintiff can establish proof of compensatory damages in at
least the amount of recovery requested. C. It is known as a punitive damages provision which will be enforced by a
court only if wrongdoing or fraud on the part of the defendant can be established. D. It is known as a consequential
damages provision which will be enforced by a court only if incidental damages can be established. E. It is known as
an invalid provision which will not be enforced.
Liquidated damages are damages identified before the breach occurs. Generally speaking, a court will enforce a
liquidated-damage clause as long as it is not so far out of reasonable range as to be punitive in nature. AACSB:
Diversity Bloom's: Evaluate Difficulty: Hard Learning Objective: 24-04 What are liquidated damages? Topic:
Remedies Available to Sellers and Lessors under the UCC
43. (p. 537) Under which of the following circumstances will a court refuse to uphold modifications or limitations to
remedies agreed upon by the parties? A. When they seem unfair. B. When one party is a corporation. C. When

neither party is a corporation. D. When one side was not represented by an attorney. E. When the remedies fail in
their essential purpose.
Courts uphold modifications or limitations to remedies unless the remedies fail in their essential purpose. AACSB:
Analytic Bloom's: Understand Difficulty: Medium Learning Objective: 24-03 What money damages are available for
breach? Topic: Modifications or Limitations to Remedies Otherwise Provided by the UCC 24-45 Chapter 24 Remedies for Breach of Sales and Lease Contracts
44. (p. 538) What does the UCC provide regarding a limitation on consequential damages allowing for repair, replace,
or refund in the event of equipment malfunction? A. That consequential damages may be limited or excluded unless
the limitation or exclusion benefits one party over the other. B. That consequential damages may be limited or
excluded unless the limitation or exclusion is unconscionable. C. That consequential damages may be limited but not
excluded entirely. D. That consequential damages may be limited but not excluded entirely, and the limit must not
benefit one party over the other. E. That consequential damages may be limited but not excluded entirely, and the
limit must not be unconscionable
. Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. AACSB:
Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 24-03 What money damages are available for
breach? Topic: Modifications or Limitations to Remedies Otherwise Provided by the UCC
45. (p. 538) What does the UCC say regarding a limitation of consequential damages for injury to the person in the
case of consumer goods? A. A limitation of consequential damages for injury to the person is acceptable so long as
both parties are represented by an attorney. B. A limitation of consequential damages for injury to the person is
acceptable so long as any consumer was represented by an attorney. C. A limitation of consequential damages for
injury to the person is prima facie unconscionable. D. A limitation of consequential damages for injury to the person is
analyzed in the same way as a limitation of consequential damages where the loss is commercial. E. A limitation of
consequential damages for injury to the person is acceptable so long as the injuries are not life threatening.
Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie
unconscionable. AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 24-03 What money
damages are available for breach? Topic: Modifications or Limitations to Remedies Otherwise Provided by the UCC
24-46 Chapter 24 - Remedies for Breach of Sales and Lease Contracts
46. (p. 538) What does the UCC say regarding a limitation of consequential damages for commercial losses? A. A
limitation of consequential damages for commercial losses is acceptable so long as both parties are represented by
an attorney. B. A limitation of consequential damages for commercial losses is acceptable so long as any consumer
was represented by an attorney. C. A limitation of consequential damages for commercial losses is prima facie
unconscionable. D. A limitation of consequential damages for commercial losses is analyzed in the same way as a
limitation of consequential damages for personal injury. E. A limitation of consequential damages for commercial
losses is not prima facie unconscionable.
Limitation of consequential damages where the loss is commercial is not prima facie unconscionable. AACSB:
Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 24-03 What money damages are available for
breach? Topic: Modifications or Limitations to Remedies Otherwise Provided by the UCC
47. (p. 538) What are the rights of the parties under the UCC to provide for remedies in addition to those provided by
the UCC? A. Parties to a commercial sales agreement may provide for remedies in addition to those provided by the
UCC. B. Parties to a commercial sales agreement may not provide for remedies in addition to those provided by the
UCC. C. Parties to a commercial sales agreement may provide for remedies in addition to those provided by the UCC
only if both sides are represented by an attorney. D. Parties to a commercial sales agreement may provide for
remedies in addition to those provided by the UCC only if both parties are merchants. E. Parties to a commercial
sales agreement may provide for remedies in addition to those provided by the UCC only in transactions involving
over $10,000 in value.
Parties to a commercial sales agreement may provide for remedies in addition to those provided by the UCC.
AACSB: Analytic Bloom's: Understand Difficulty: Medium Learning Objective: 24-03 What money damages are

available for breach? Topic: Modifications or Limitations to Remedies Otherwise Provided by the UCC 24-47 Chapter
24 - Remedies for Breach of Sales and Lease Contracts
48. (p. 539) Which of the following is true regarding whether usage of trade may impose a remedy in the event of a
breach? A. Usage of trade may not impose a remedy in the event of a breach. B. Usage of trade may impose a
remedy in the event of a breach but it may not impose an exclusive remedy. C. Usage of trade may impose an
exclusive remedy in the event of a breach. D. Usage of trade may impose an exclusive remedy in the event of a
breach only if both sides are represented by an attorney. E. Usage of trade may impose an exclusive remedy in the
event of a breach only if a contract signed by both parties specifically provides as such.
Usage of trade will supplement agreements and may indeed impose an exclusive remedy in the event of a breach.
AACSB: Analytic Bloom's: Understand Difficulty: Medium Learning Objective: 24-03 What money damages are
available for breach? Topic: Modifications or Limitations to Remedies Otherwise Provided by the UCC
49. (p. 539) What was the result in the case of Figgie International, Inc. v. DestileriaSerralles, Inc., the case in the
book involving a dispute over bottle-labeling equipment? A. The court ruled that the remedy of repair, replacement, or
a refund failed of its essential purpose. B. The court ruled that the remedy of repair, replacement, or a refund did not
fail of its essential purpose, and the remedy was enforced. C. The remedy of repair, replacement, or a refund was
found unconscionable and not enforced. D. The remedy of repair, replacement, or a refund was found
unconscionable but enforced anyway. E. The remedy of repair, replacement, or a refund was not enforced because
the buyer had not agreed to that remedy in writing. The decision of the district court that the limited remedy of repair,
replacement, or return did not fail of its essential purpose was upheld. AACSB: Analytic Bloom's: Understand
Difficulty: Medium Learning Objective: 24-03 What money damages are available for breach? Topic: Modifications or
Limitations to Remedies Otherwise Provided by the UCC 24-48 Chapter 24 - Remedies for Breach of Sales and
Lease Contracts
50. (p. 530) Reference: "Missed Payments." Robin purchased a hot tub on an installment plan and was to pay the
seller monthly. Her last payment was made on January 2, 2002. The seller brought a lawsuit against her for sums
remaining on the account on January 3, 2007. Robin defended on the basis that the statute of limitations had run.
The seller claimed, however, that appropriate time remained because a state law six-year statute of limitations to
collect money on account applied. Robin also arranged to purchase a personal watercraft but failed to pay the deposit
to the seller, and the seller refused to deliver the watercraft. Robin claimed that the seller was required to deliver the
watercraft and allow her the opportunity to cover. Under the UCC, how long does a plaintiff have to bring an action for
breach of contract for the sale of goods once the cause of action accrues? A. One year B. Two years C. Three years
D. Four years E. Five years The UCC creates a statute of limitations for bringing a lawsuit arising under a breach of
contract for the sale of goods. UCC Section 2-725(1) states that four years is the time frame for a plaintiff to file suit
once a cause of action accrues. AACSB: Reflective Thinking Bloom's: Remember Difficulty: Easy Learning Objective:
24-01 What constitutes a breach of a sales contract? Topic: The Goal of Contract Remedies 24-49 Chapter 24 Remedies for Breach of Sales and Lease Contracts
51. (p. 531) Reference: "Missed Payments." Robin purchased a hot tub on an installment plan and was to pay the
seller monthly. Her last payment was made on January 2, 2002. The seller brought a lawsuit against her for sums
remaining on the account on January 3, 2007. Robin defended on the basis that the statute of limitations had run.
The seller claimed, however, that appropriate time remained because a state law six-year statute of limitations to
collect money on account applied. Robin also arranged to purchase a personal watercraft but failed to pay the deposit
to the seller, and the seller refused to deliver the watercraft. Robin claimed that the seller was required to deliver the
watercraft and allow her the opportunity to cover. Assuming that the state in which Robin lived had adopted the UCC
statute of limitations for the sale of goods, which of the following is true regarding whether the court would likely apply
the UCC statute, the six-year statute applicable to accounts, or reach another result? A. The court would likely apply
the six-year statute applicable to accounts. B. The court would likely apply the UCC statute of limitations for the sale
of goods. C. The court would likely apply the six-year statute applicable to accounts but only because Robin is not a
merchant. D. The court would likely apply the UCC statute of limitations for the sale of goods but only because Robin
is not a merchant. E. The court would likely disregard any statute of limitation on equitable grounds because
consumers should pay their debts. According to the court in Troy Boiler Works, Inc. v. Sterile discussed in the text, "To
hold that the UCC limitation period does not apply to actions on account, despite the underlying sale of goods, would

run counter to the drafters' purpose of providing consistency and predictability in commercial transactions." AACSB:
Reflective Thinking Bloom's: Apply Difficulty: Hard Learning Objective: 24-01 What constitutes a breach of a sales
contract? Topic: Remedies Available to Sellers and Lessors under the UCC 24-50 Chapter 24 - Remedies for Breach
of Sales and Lease Contracts
52. (p. 533) Reference: "Missed Payments." Robin purchased a hot tub on an installment plan and was to pay the
seller monthly. Her last payment was made on January 2, 2002. The seller brought a lawsuit against her for sums
remaining on the account on January 3, 2007. Robin defended on the basis that the statute of limitations had run.
The seller claimed, however, that appropriate time remained because a state law six-year statute of limitations to
collect money on account applied. Robin also arranged to purchase a personal watercraft but failed to pay the deposit
to the seller, and the seller refused to deliver the watercraft. Robin claimed that the seller was required to deliver the
watercraft and allow her the opportunity to cover. Which of the following is true regarding Robin's claim that the
watercraft should have been delivered to her because she had a right to cover? A. She had no right to cover and the
seller should have delivered the personal watercraft to her. B. She had a right to cover only because she was a
consumer, not a merchant. C. She had a right to cover but she was required to cover before the personal watercraft
had to be delivered. D. She had no right to cover only because she was not a merchant. E. She had no right to cover,
and the merchant was not required to deliver the personal watercraft. Under UCC Sections 2-712 and 2A-518, buyers
and lessees are allowed to cover, or substitute, goods for those due under the sales or lease agreement, not delay
payment. AACSB: Reflective Thinking Bloom's: Apply Difficulty: Hard Learning Objective: 24-01 What constitutes a
breach of a sales contract? Topic: Remedies Available to Buyers and Lessees under the UCC 24-51 Chapter 24 Remedies for Breach of Sales and Lease Contracts
53. (p. 530-531) Reference: "Refused Furniture." Selina arranges to sell furniture from her furniture store to Roland
for $3,000. Roland was supposed to give Selina a $500 deposit on February 1 and pay the remainder in monthly
installments. Selina was to deliver the furniture by February 7. Roland did not pay Selina as promised on February 1.
He asked her to wait until March 1, but she refused. She told him that the contract was cancelled, and she refused to
deliver the furniture. Selina was able to sell the furniture for only $2,500 because of a downturn in the economy.
Roland told Selina that she had no right to withhold or sell his furniture and that he was suing. Selina also incurred
$100 in additional amounts in advertising costs to advertise the furniture that Roland initially purchased. Selina saved
$40 in delivery costs because she did not have to deliver the furniture to Roland. The subsequent purchaser picked
up her own furniture. Which of the following is true regarding Roland's claim that Selina had no right to withhold his
furniture? A. Roland is correct. Selina was required to deliver the furniture, but she retained the right to sue him for
any deficiency. B. Roland is correct but only because of the special UCC exception for consumer goods. C. Roland is
incorrect. Selina had a right to withhold the furniture. D. Roland is incorrect but only if Selina can prove that she had
no reason to believe that he was a credit risk prior to signing the contract of sale. E. Roland is correct because of
federal consumer protection laws. Sometimes a buyer breaches the contract or lease before the seller has delivered
the goods. For instance, the buyer or lessee might fail to pay according to the terms of the agreement. UCC Sections
2-703(a) and 2A-523(1)(c) allow sellers or lessors to withhold delivery of goods when the buyer or lessee is in breach.
AACSB: Reflective Thinking Bloom's: Evaluate Difficulty: Hard Learning Objective: 24-01 What constitutes a breach
of a sales contract? Topic: Remedies Available to Sellers and Lessors under the UCC 24-52 Chapter 24 - Remedies
for Breach of Sales and Lease Contracts
54. (p. 531) Reference: "Refused Furniture." Selina arranges to sell furniture from her furniture store to Roland for
$3,000. Roland was supposed to give Selina a $500 deposit on February 1 and pay the remainder in monthly
installments. Selina was to deliver the furniture by February 7. Roland did not pay Selina as promised on February 1.
He asked her to wait until March 1, but she refused. She told him that the contract was cancelled, and she refused to
deliver the furniture. Selina was able to sell the furniture for only $2,500 because of a downturn in the economy.
Roland told Selina that she had no right to withhold or sell his furniture and that he was suing. Selina also incurred
$100 in additional amounts in advertising costs to advertise the furniture that Roland initially purchased. Selina saved
$40 in delivery costs because she did not have to deliver the furniture to Roland. The subsequent purchaser picked
up her own furniture. Which of the following is true regarding Roland's claim that Selina had no right to sell the
furniture he initially purchased? A. Roland is correct. Selina had no right to sell the furniture, but she retained the right
to sue him for any deficiency. B. Roland is correct but only because of the special UCC exception for consumer
goods. C. Roland is incorrect. Selina had a right to resell the furniture. D. Roland is incorrect but only if Selina can
prove that she had no reason to believe that he was a credit risk prior to signing the contract of sale. E. Roland is

correct because of federal consumer protection laws. Sellers or lessors are allowed to sell the goods to another buyer
or dispose of the goods when the buyer is in breach and the goods have not yet been delivered. AACSB: Reflective
Thinking Bloom's: Evaluate Difficulty: Hard Learning Objective: 24-01 What constitutes a breach of a sales contract?
Topic: Remedies Available to Sellers and Lessors under the UCC 24-53 Chapter 24 - Remedies for Breach of Sales
and Lease Contracts
55. (p. 530) Reference: "Refused Furniture." Selina arranges to sell furniture from her furniture store to Roland for
$3,000. Roland was supposed to give Selina a $500 deposit on February 1 and pay the remainder in monthly
installments. Selina was to deliver the furniture by February 7. Roland did not pay Selina as promised on February 1.
He asked her to wait until March 1, but she refused. She told him that the contract was cancelled, and she refused to
deliver the furniture. Selina was able to sell the furniture for only $2,500 because of a downturn in the economy.
Roland told Selina that she had no right to withhold or sell his furniture and that he was suing. Selina also incurred
$100 in additional amounts in advertising costs to advertise the furniture that Roland initially purchased. Selina saved
$40 in delivery costs because she did not have to deliver the furniture to Roland. The subsequent purchaser picked
up her own furniture. Which of the following is true regarding whether Selina had a right to cancel the contract? A.
Roland was in breach giving Selina the right to cancel the contract. B. Roland was only in partial breach, and Selina
had not right to cancel the contract. C. Roland was in breach, but Selina had no right to cancel the contract because
Roland had the right to cover. D. Roland was in breach, but Selina had no right to cancel the contract because a
consumer transaction was involved. E. Roland was in breach, but Selina had no right to cancel the contract because
Roland was available for service of process. UCC Sections 2-703(f) and 2A-523(1)(a) allow a seller or lessor to
cancel the contract if the buyer or lessee is in breach. AACSB: Reflective Thinking Bloom's: Evaluate Difficulty: Hard
Learning Objective: 24-01 What constitutes a breach of a sales contract? Topic: Remedies Available to Sellers and
Lessors under the UCC 24-54 Chapter 24 - Remedies for Breach of Sales and Lease Contracts
56. (p. 531) Reference: "Refused Furniture." Selina arranges to sell furniture from her furniture store to Roland for
$3,000. Roland was supposed to give Selina a $500 deposit on February 1 and pay the remainder in monthly
installments. Selina was to deliver the furniture by February 7. Roland did not pay Selina as promised on February 1.
He asked her to wait until March 1, but she refused. She told him that the contract was cancelled, and she refused to
deliver the furniture. Selina was able to sell the furniture for only $2,500 because of a downturn in the economy.
Roland told Selina that she had no right to withhold or sell his furniture and that he was suing. Selina also incurred
$100 in additional amounts in advertising costs to advertise the furniture that Roland initially purchased. Selina saved
$40 in delivery costs because she did not have to deliver the furniture to Roland. The subsequent purchaser picked
up her own furniture. Which of the following is true regarding any right of Selina to recover the additional advertising
fees she incurred from Roland? A. She is entitled to recover the damages only if she can show that Roland agreed to
pay such damages in his contract with her. B. She is entitled to recover the damages only if she can show that
Roland orally agreed to pay such damages. C. She is entitled to recover the damages only if she can show that
Roland has a history of breaching contracts of sale. D. She cannot recover the damages because consumer goods
are involved. E. Selina will be able to recover the damages so long as they were reasonably incurred because of
Roland's breach.
UCC Section 2-706 allows the seller to recover the difference between the resale price and the contract price, plus
incidental damages and minus expenses saved. AACSB: Reflective Thinking Bloom's: Evaluate Difficulty: Hard
Learning Objective: 24-01 What constitutes a breach of a sales contract? Topic: Remedies Available to Sellers and
Lessors under the UCC 24-55 Chapter 24 - Remedies for Breach of Sales and Lease Contracts
57. (p. 531) Reference: "Refused Furniture." Selina arranges to sell furniture from her furniture store to Roland for
$3,000. Roland was supposed to give Selina a $500 deposit on February 1 and pay the remainder in monthly
installments. Selina was to deliver the furniture by February 7. Roland did not pay Selina as promised on February 1.
He asked her to wait until March 1, but she refused. She told him that the contract was cancelled, and she refused to
deliver the furniture. Selina was able to sell the furniture for only $2,500 because of a downturn in the economy.
Roland told Selina that she had no right to withhold or sell his furniture and that he was suing. Selina also incurred
$100 in additional amounts in advertising costs to advertise the furniture that Roland initially purchased. Selina saved
$40 in delivery costs because she did not have to deliver the furniture to Roland. The subsequent purchaser picked
up her own furniture. Which of the following is true regarding any deduction in damages to which Roland is entitled?
A. Roland is not entitled to any deduction because he was the breaching party. B. Roland is entitled to a deduction for

the delivery expenses only if he can show that Selina agreed in writing to deduct those in the event of a breach. C.
Roland is entitled to a deduction for the delivery expenses only if he can show that Selina agreed orally or in writing to
deduct those in the event of a breach. D. Roland is entitled to a deduction for the delivery expenses because that was
a savings to Selina. E. Roland is entitled to a deduction for the delivery expenses because Selina breached the
contract by not delivering the furniture to him and then pursuing an action for damages. UCC Section 2-706 allows
the seller to recover the difference between the resale price and the contract price, plus incidental damages and
minus expenses saved. AACSB: Reflective Thinking Bloom's: Evaluate Difficulty: Hard Learning Objective: 24-01
What constitutes a breach of a sales contract? Topic: Remedies Available to Sellers and Lessors under the UCC 2456 Chapter 24 - Remedies for Breach of Sales and Lease Contracts
58. (p. 533) Reference: "Fixture Mishap." Trudy owns a hardware shop that also sells expensive bathroom fixtures.
Danny, a home contractor in residential real estate, purchased for $500 some expensive powder room fixtures from
her for a custom home he was building for Theresa. Danny installed the fixtures and sold the home to Theresa. A
month later, Theresa called Danny and told him that the fixtures were corroding and looked terrible. Danny offered to
fix the problem, but Theresa told him that she did not want him setting foot in her home. She told him that she had
already had the fixtures replaced and that he could pick up the corroded fixtures at her front door. Danny picked up
the fixtures. They were obviously defective, but he was able to sell them for $100. Danny told Trudy about the
problem and requested a refund. Trudy told him that she would provide replacement fixtures that would not corrode
but that she would not provide a refund. Which of the following is a UCC term referring to Theresa's action in
obtaining replacement fixtures? A. Breach of contract B. Cover C. Exchange D. Settlement E. Trade modification
Under UCC Sections 2-712 and 2A-518, buyers and lessees are allowed to cover, or substitute, goods for those due
under the sales or lease agreement. AACSB: Reflective Thinking Bloom's: Apply Difficulty: Hard Learning Objective:
24-05 What is cover? Topic: Remedies Available to Buyers and Lessees under the UCC 24-57 Chapter 24 Remedies for Breach of Sales and Lease Contracts
59. (p. 537) Reference: "Fixture Mishap." Trudy owns a hardware shop that also sells expensive bathroom fixtures.
Danny, a home contractor in residential real estate, purchased for $500 some expensive powder room fixtures from
her for a custom home he was building for Theresa. Danny installed the fixtures and sold the home to Theresa. A
month later, Theresa called Danny and told him that the fixtures were corroding and looked terrible. Danny offered to
fix the problem, but Theresa told him that she did not want him setting foot in her home. She told him that she had
already had the fixtures replaced and that he could pick up the corroded fixtures at her front door. Danny picked up
the fixtures. They were obviously defective, but he was able to sell them for $100. Danny told Trudy about the
problem and requested a refund. Trudy told him that she would provide replacement fixtures that would not corrode
but that she would not provide a refund. Is Trudy correct in that her only obligation under the circumstances is to
provide replacement fixtures? A. Yes, Trudy is correct but only because Danny was a contractor in residential real
estate. B. Yes, but only because the fixtures were incorporated into real property. C. Yes, because that is the only
remedy she must provide under any circumstances. D. Yes, because she is entitled to an attempt to recover. A refund
or damages are only available if she cannot provide appropriate replacement fixtures. E. No, she is not entitled to that
remedy because the fixtures had been accepted and resold. According to the court in the case in the text, Dunleavy v.
Paris Ceramics USA, Inc., there is no right to cure once goods have been accepted. AACSB: Reflective Thinking
Bloom's: Apply Difficulty: Hard Learning Objective: 24-05 What is cover? Topic: Remedies Available to Buyers and
Lessees under the UCC 24-58 Chapter 24 - Remedies for Breach of Sales and Lease Contracts
60. (p. 532) Reference: "Fixture Mishap." Trudy owns a hardware shop that also sells expensive bathroom fixtures.
Danny, a home contractor in residential real estate, purchased for $500 some expensive powder room fixtures from
her for a custom home he was building for Theresa. Danny installed the fixtures and sold the home to Theresa. A
month later, Theresa called Danny and told him that the fixtures were corroding and looked terrible. Danny offered to
fix the problem, but Theresa told him that she did not want him setting foot in her home. She told him that she had
already had the fixtures replaced and that he could pick up the corroded fixtures at her front door. Danny picked up
the fixtures. They were obviously defective, but he was able to sell them for $100. Danny told Trudy about the
problem and requested a refund. Trudy told him that she would provide replacement fixtures that would not corrode
but that she would not provide a refund. What is the effect of Danny reselling the defective fixtures for $100? A. That
is the only remedy Danny will receive. B. The $100 will be deducted from the $500 he is entitled to receive from
Trudy. C. He will be allowed to keep the $100 and is still entitled to receive $500 from Trudy. D. He will be required to
deduct half of the $100 from any recovery he receives from Trudy. E. He will be required to return the $100 to

Theresa but will be able to receive $500 from Trudy. As recognized by the court in the case in the text, Dunleavy v.
Paris Ceramics USA, Inc., a buyer in such cases has the right to receive the contract price less the salvage fee.
AACSB: Reflective Thinking Bloom's: Apply Difficulty: Hard Learning Objective: 24-05 What is cover? Topic:
Remedies Available to Buyers and Lessees under the UCC 24-59 Chapter 24 - Remedies for Breach of Sales and
Lease Contracts Essay Questions
61. (p. 531) Discuss the damages a seller and lessor may recover when a buyer or lessee is in breach, and the
goods have not yet been delivered. Sellers or lessors are allowed to sell the goods to another buyer or dispose of the
goods when the buyer is in breach and the goods have not yet been delivered. The seller/lessor then holds the
buyer/lessee liable for any loss. UCC Section 2-706 allows the seller to recover the difference between the resale
price and the contract price, plus incidental damages and minus expenses saved. Although the buyer is liable for
these damages, the seller gets to keep any profits it makes on the resale. UCC Section 2A-527(2) outlines a similar
rule for lease agreements. The lessor is allowed to lease the goods to another party and recover unpaid lease
payments and any deficiency between the lease payments due under the original lease contract and those due under
the new contract. The lessor can also seek incidental damages. In some cases lost profit will be awarded, especially
if the goods cannot be resold in the usual course of business. AACSB: Analytic Bloom's: Understand Difficulty:
Medium Learning Objective: 24-02 What is resale? Topic: Remedies Available to Sellers and Lessors under the UCC
62. (p. 532) Define punitive damages, set forth how the UCC handles the issue of punitive damages, and discuss
whether you believe they should be available in breach of contract actions. Punitive damages are awarded typically in
tort cases when a tort is committed either intentionally or recklessly. In such cases, the court may infer legal malice
and instruct a jury that it may consider the awarding of punitive damages in addition to compensatory damages. The
UCC does not mention the availability of punitive damages other than in its voiding of liquidated damages that are
punitive in nature. Students will differ in whether they believe such damages should be available in breach of contact
actions. AACSB: Analytic Bloom's: Create Difficulty: Hard Learning Objective: 24-04 What are liquidated damages?
Topic: Remedies Available to Sellers and Lessors under the UCC 24-60 Chapter 24 - Remedies for Breach of Sales
and Lease Contracts
63. (p. 535) Discuss when specific performance is available as a remedy against a seller or lessor when the sale of
goods is involved, and what is involved if specific performance is decreed. UCC Sections 2-716(1) and 2A-521(1)
allow buyers and lessees to seek the remedy of specific performance when either (1) the goods are unique or (2) a
remedy at law is inadequate. Specific performance usually requires that the seller or lessor deliver the particular
goods identified in the contract. AACSB: Analytic Bloom's: Understand Difficulty: Medium Learning Objective: 24-04
What are liquidated damages? Topic: Remedies Available to Buyers and Lessees under the UCC
64. (p. 538-539) Bernice purchased a new trampoline from ABC Trampolines. The purchase agreement signed
provided that she released ABC Trampolines from any consequential damages for personal injury. Unfortunately, the
trampoline ripped while she was using it causing Bernice to fall and break her leg. She asked ABC for damages but
the manager refused. The manager referenced her agreement whereby she signed away her rights to consequential
damages for personal injury. Is the manager right, and why or why not? The manager is incorrect because while
under the UCC the parties may limit damages, a limitation of consequential damages for injury to the person in the
case of consumer goods is prima facie unconscionable. AACSB: Reflective Thinking Bloom's: Evaluate Difficulty:
Hard Learning Objective: 24-04 What are liquidated damages? Topic: Modifications or Limitations to Remedies
Otherwise Provided by the UCC 24-61 Chapter 24 - Remedies for Breach of Sales and Lease Contracts
65. (p. 532-537) List the various options discussed in the text that may be available to a buyer/lessee when the
seller/lessor is in breach. When the seller/lessor is in breach, the buyer/lessee can (1) cancel the contract, (2) obtain
cover, (3) sue to recover damages, (4) recover the goods, (5) obtain specific performance, (6) reject nonconforming
goods, (7) revoke acceptance of nonconforming goods, (8) accept the nonconforming goods and seek damages.
AACSB: Analytic Bloom's: Apply Difficulty: Hard Learning Objective: 24-04 What are liquidated damages? Topic:
Remedies Available to Buyers and Lessees under the UCC 24-62

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