SC Bar Contracts and Sales 3 — Questions and Answers
Question 1: A seller ships nonconforming goods without any explanation in response to a buyer's purchase order. Under UCC Article 2, the shipment operates as:
- An acceptance and a simultaneous breach (Correct answer)
- A counteroffer the buyer may accept
- A rejection of the buyer's offer
- An accommodation excusing liability
Correct answer: An acceptance and a simultaneous breach
Under UCC 2-206, shipping nonconforming goods is an acceptance that also breaches the contract unless sent as a noted accommodation.
Question 2: Under a shipment contract designated F.O.B. seller's city, the goods are destroyed in transit through no one's fault. Who bears the risk of loss?
- The buyer, because risk passed when goods were duly delivered to the carrier (Correct answer)
- The seller, because the buyer never received the goods
- The carrier, as an absolute insurer
- The parties split the loss equally
Correct answer: The buyer, because risk passed when goods were duly delivered to the carrier
In a shipment contract, risk of loss passes to the buyer when the seller duly delivers conforming goods to the carrier.
Question 3: A buyer accepts a delivery of lumber, later discovers a latent defect, and wants to revoke acceptance. Revocation is proper only if:
- The nonconformity substantially impairs the goods' value and acceptance was reasonably induced (Correct answer)
- Any defect exists, however minor
- The seller consents to the revocation
- The buyer paid with a promissory note
Correct answer: The nonconformity substantially impairs the goods' value and acceptance was reasonably induced
UCC 2-608 permits revocation only for defects that substantially impair value and were undiscoverable or covered by assurances at acceptance.
Question 4: A dealer sells a used tractor "as is." The tractor fails within a week. The buyer sues on the implied warranty of merchantability. The buyer will likely:
- Lose, because "as is" effectively disclaims implied warranties (Correct answer)
- Win, because merchantability cannot be disclaimed
- Win, because the disclaimer did not mention merchantability
- Lose, because used goods carry no warranties ever
Correct answer: Lose, because "as is" effectively disclaims implied warranties
Under UCC 2-316, expressions like "as is" exclude implied warranties, including merchantability.
Question 5: A buyer of custom machinery learns the seller's factory burned down and demands adequate assurance of performance in writing. The seller ignores the demand for 45 days. The buyer may:
- Treat the contract as repudiated after 30 days without assurance (Correct answer)
- Do nothing until the delivery date passes
- Sue immediately for fraud
- Cancel only with court approval
Correct answer: Treat the contract as repudiated after 30 days without assurance
Under UCC 2-609, failure to provide adequate assurance within a reasonable time not exceeding 30 days is a repudiation.
Question 6: A seller repudiates a contract for 1,000 bushels of corn. The buyer reasonably purchases substitute corn at a higher price. The buyer's cover damages equal:
- Cover price minus contract price, plus incidental and consequential damages (Correct answer)
- Contract price minus market price at tender
- The full cover price paid
- Only incidental damages
Correct answer: Cover price minus contract price, plus incidental and consequential damages
Under UCC 2-712, a covering buyer recovers the difference between cover and contract price plus incidental and consequential damages, less expenses saved.
Question 7: Goods are sold to a buyer who pays with a check that later bounces, and the buyer resells the goods to a good-faith purchaser for value. The original seller may:
- Not recover the goods from the good-faith purchaser, who takes good title (Correct answer)
- Recover the goods because the buyer had void title
- Recover the goods within 10 days automatically
- Sue the good-faith purchaser for conversion
Correct answer: Not recover the goods from the good-faith purchaser, who takes good title
Under UCC 2-403, a buyer with voidable title can transfer good title to a good-faith purchaser for value.
SC Bar Contracts and Sales 3
A seller ships nonconforming goods without any explanation in response to a buyer's purchase order.
Under UCC Article 2, the shipment operates as: