MODULE 24 SALES
34. (a) In this situation, since Wool is not a merchant
seller, the risk of loss passed to Bond on Wool's tender of
delivery. If Wool had been a merchant seller, then the risk
of loss would not have passed until the buyer received the
goods. Answers (c) and (d) are incorrect because the risk of
loss passed when the nonmerchant seller (Wool) tendered
delivery of the painting. Answer (b) is incorrect because the
risk of loss would not pass at the time the contract was
formed since the seller still had possession of the painting
and had not attempted to deliver it to the buyer.
35. (b) Common carriers are not liable for losses due to
causes deemed acts of God. Although a common carrier
may limit its damages to a dollar amount specified in the
contract, it is not liable at all in this case. Funston, not the
customer, had the risk of loss due to the FOB terms.
E.5. Seller's Remedies
36. (b) Statement I is incorrect because a liquidated
damages provision is enforced if it is not punitive but
amounts to a reasonable estimate of what the loss will be in
the event of a breach of contract. If a reasonable estimate of
the loss from a breach of contract cannot be estimated with a
reasonable degree of certainty, the parties can agree on an
amount, but still the amount cannot be punitive. Statement
IT is correct because a seller is allowed to retain a deposit of
up to $500 when a buyer defaults even if the parties had not
agreed to a liquidated damages clause.
37. (b) The seller generally discharges his obligation to
the buyer by placing conforming goods at the buyer's dispo-
sition and giving the buyer reasonable notice to enable the
buyer to take delivery.
38. (a) Under the Sales Article of the UCC, the seller
has the following remedies against the buyer upon breach:
withhold delivery of the goods; stop delivery of the carrier
of the goods; resell the goods; recover compensatory and
incidental damages; recover the goods from the buyer upon
the buyer's insolvency; cancel the contract. Therefore, an-
swer (a) is correct as the seller has the rights' of contract
cancellation and damage recovery available to himlher.
39. (a) The UCC gives the seller a choice of many
remedies when the buyer breaches the contract.involvingea
sale of goods. These remedies include allowing the seller to
resell the goods identified to the contract and to recover the
amount that the seller receives that is less than the contract
price. Also, once the buyer breaches, the seller may suspend
his/her performance and may prevent the carrier from mak-
ing the delivery of the goods.
40. (b) A seller has the right to resell goods to another if
the buyer refuses to accept the goods upon delivery. An-
swer (a) is incorrect because specific performance is not a
remedy available to the seller. Baker cannot force Lazur to
accept the word processor. Answer (c) is incorrect because
Baker has a couple of additional remedies available. Baker
can recover the full contract price plus incidental damages if
he is unable to resell the identified goods. Alternatively, if
the difference between the market value and contract price is
inadequate to place Baker in as good a position asperfor-
mance would have, then Baker can sue for lost profits plus
incidental damages. Answer (d) is incorrect because Baker
could sue for consequential damages that Lazur had reason
to know Baker would incur as a result of Lazur'sbreach.
183
41. (a) By advising Mazur on June 1 that it would not
accept or pay for the wheat, Good has engaged in anticipa-
tory repudiation. Anticipatory repudiation occurs when a
party renounces the duty to perform the contract before the
party's obligation to perform arises. Anticipatory repudia-
tion discharges the nonrepudiating party (Mazur) from the
contract and allows this party to sue for breach immediately.
In this situation, Mazur could successfully sue Good for the
difference between the resale price and the contract price on
June 2. Answer (b) is incorrect because Mazur was dis-
charged from the contract on June 1 and would not have to
wait until after June 23 to resell the wheat. Answer (c) is
incorrect because Good would only be allowed to retract its
anticipatory breach if.Mazur had ignored this breach and
awaited performance at the appointed date. Answer (d) is
incorrect because specific performance is only allowed for
unique goods or for other situations in which monetary dam-
ages are not appropriate.
E.6. Buyer's Remedies
42. (c) Pickens has committed an anticipatory breach of
contract. Thus, Crocket, as the aggrieved party, has differ-
ent options. Crocket may treat it as a present breach of con-
tract with the remedies available for breach of contract. One
of these remedies is that the aggrieved party (Crocket) may
cancel the contract. Another option is that Crocket may wait
for a reasonable time to see if Pickens will change hislher
mind and still deliver. ,
43. (b) The buyer has the following rem~dies against
the seller: upon receipt of nonconforming goods, the buyer
may reject the goods, accept the goods, or accept any unit
and reject the remainder; the buyer has the right to cover
(purchase goods elsewhere upon the seller's breach); the
buyer may recover damages (not punitive) for nondelivery
of goods or repudiation of the sales contract by the seller;
the buyer may recover damages (not punitive) for breach in
regard to accepted goods; the buyer may recover goods
identified in the contract in possession of the seller upon the
seller's insolvency; the buyer may sue for specific perfor-
mance when the goods are unique; the buyer has the right of
replevin (form of legal action to recover specific goods from
the seller which are being withheld from the buyer wrong-
fully); the buyer can cancel the contract; the buyer has a
security interest in the goods after the seller's breach; the
buyer canrecover liquidated damages.
44. (d) UCC Section 2-719(3) states that a limitation of
damages for personal injury in the case of consumer goods
is considered to be unconscionable and thus not allowed.
Although limitations of damages for personal injury in the
case of nonconsumer goods can be allowed, answer (d) is
correct since one limits "personal injury" to the stove which
was apparently being used for consumer use in this fact pat-
tern. Answer (a) is incorrect because under the UCC, the
spouse, being a member of the household expecting to use
the stove, may recover for damages. Answer (b) is incorrect
because Larch was notified shortly after the explosion. This
notice, however, was not required. Answer (c) is incorrect
because even though the disclaimer did not disclaim allli-
ability, it did attempt to disclaim personal injury. This dis-
claimer for personal injuries, however, is not allowed for the
reasons mentioned above. Answer (d) is chosen as being
more specific than answer (c).
45. (d) Either party in a sales contract under the Sales
Article of the UCC may demand adequate assurance of
per-
formance when reasonable grounds for insecurity exist
with
respect to the performance of the other party. Refusal to
give written assurance will release the other party from all

obligations from the sales contract. Answer (a) is

incorrect
because the buyer has assumed the risk of loss. Answer
(b)
is incorrect because a seller may substitute another
reason-
able delivery method if the method of delivery specified in

the contract has been made impracticable. A seller may

recover damages based on a buyer'S repudiation of the
agreement, but here the repudiation has been retracted
and
the obligations of buyer and seller remain intact.
46. (c) The Sales Article of the Uc'C provides that a '
buyer has the right to reject goods which are not in
confor-
mity with the terms of contract between seller and buyer.
The buyer also has the option to accept nonconforrning
goods and recover damages resulting from the
nonconfor-
mity. The UCC allows the buyer to inspect the goods
before
payment except when they are shipped COD. When
goods
are shipped COD, the buyer'S payment for the goods is
re-
quired for delivery.

E.7. Statute of Limitations

47. (c) The statute oflimitations for the sale of goods is
generally four years; however, the parties may agree to
re-
duce the statute to a period of not less than one year.
There-
fore, Sklar will lose because the clause providing that the
statute of limitations would be limited to eighteen months
is
enforceable, and the action was not brought within the re-

quired time period. Answer (b) is incorrect because a

breach
of warranty occurs upon the tender of delivery, not upon
the
discovery of the defect, and the statute begins running at
the
time the breach occurs. Answer (d) is incorrect because
the
statute is eighteen months as outlined in the contract.