Apply UCC Article 2 Sales Provisions
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CPA Regulation (REG) › Apply UCC Article 2 Sales Provisions
Under UCC Article 2, which of the following statements correctly describes the Statute of Frauds requirement for contracts for the sale of goods?
Contracts for the sale of goods valued at $500 or more must be evidenced by a writing signed by the party against whom enforcement is sought, but the writing need not include all terms.
Contracts for the sale of goods valued at $500 or more must be in writing, and the writing must include all essential terms.
Contracts for the sale of goods are enforceable regardless of whether they are in writing.
All contracts for the sale of goods must be in writing to be enforceable, regardless of price.
Explanation
Under UCC Section 2-201, a contract for the sale of goods for $500 or more is not enforceable unless evidenced by a writing sufficient to indicate a contract has been made, signed by the party against whom enforcement is sought. The writing need not include all material terms - it need only indicate a contract exists and state the quantity. Answer A is incorrect because the threshold is $500, not all contracts. Answer B is incorrect because contracts of $500 or more do require a writing. Answer C is incorrect because the UCC Statute of Frauds does not require all essential terms to be in writing; quantity is the only term that limits enforcement to what is stated.
Under UCC Article 2, a merchant's firm offer is irrevocable for a stated period without consideration. Which of the following requirements must be met for a firm offer to be valid?
The offer must be made by any party, in writing or orally, and must state a specific price and quantity.
The offer must be made by a merchant and may be irrevocable for any period specified in the offer, even if it exceeds one year.
The offer must be made by a merchant, must be in a signed writing, and must give assurances that the offer will be held open, for a period not to exceed three months without consideration.
The offer must be supported by consideration to be irrevocable for any period.
Explanation
Under UCC Section 2-205, a firm offer requires: (1) the offeror is a merchant, (2) the offer is made in a signed writing, and (3) the writing gives assurance the offer will be held open. Without separate consideration, the firm offer is irrevocable for the time stated or, if no time is stated, for a reasonable time, but in no event may the period exceed three months. Answer B is incorrect because firm offers require a merchant offeror and a signed writing. Answer C is incorrect because the UCC firm offer rule specifically eliminates the consideration requirement for merchants. Answer D is incorrect because the maximum irrevocability period without consideration is three months, not any period specified.
Under UCC Article 2, when does risk of loss pass from seller to buyer under an FOB shipping point (F.O.B. place of shipment) contract?
When the seller delivers the goods to the carrier at the shipping point.
When the seller ships the goods from its warehouse.
When the buyer pays for the goods, regardless of physical location.
When the buyer receives and inspects the goods at the buyer's location.
Explanation
Under UCC Section 2-319 and 2-509, in a shipment contract (FOB shipping point), risk of loss passes to the buyer when the seller duly delivers the goods to the carrier at the shipping point. From that moment, if the goods are damaged or destroyed in transit, the loss falls on the buyer. Answer A is incorrect because risk passes at delivery to the carrier, not upon the buyer's receipt or inspection. Answer B is incorrect because simply shipping from the warehouse is not sufficient; delivery to the carrier is the trigger. Answer D is incorrect because payment timing does not determine risk of loss under the UCC.
Under UCC Section 2-315, the implied warranty of fitness for a particular purpose arises when which of the following conditions are met?
The buyer expressly requests goods suitable for a specific use and the seller agrees in writing.
The goods are sold with an express warranty that they are suitable for any purpose.
The seller is a merchant and the goods are of the kind the seller normally sells.
The seller knows the buyer's particular purpose and knows the buyer is relying on the seller's skill or judgment to select suitable goods, and the buyer does in fact rely on that judgment.
Explanation
The implied warranty of fitness for a particular purpose under Section 2-315 requires three elements: (1) the seller has reason to know the buyer's particular purpose, (2) the seller knows the buyer is relying on the seller's skill or judgment to select suitable goods, and (3) the buyer actually relies on the seller's selection. This warranty may arise from any seller, merchant or not. Answer B describes conditions for the warranty of merchantability, not fitness for a particular purpose. Answer C is incorrect because no written agreement is required; the warranty arises by implication from the circumstances. Answer D describes an express warranty, not the implied fitness warranty.
Under UCC Section 2-609, a party to a sales contract who has reasonable grounds for insecurity about the other party's performance may demand adequate assurance of performance. What happens if the demanded assurance is not provided within a reasonable time, not to exceed 30 days?
The demanding party may only suspend its own performance but may not treat the contract as terminated.
The contract automatically terminates by operation of law after 30 days without assurance.
The failure to provide adequate assurance within 30 days is treated as a repudiation of the contract, allowing the demanding party to treat the contract as breached.
The demanding party must file suit within 30 days or forfeit all remedies.
Explanation
Under UCC Section 2-609(4), if a party fails to provide adequate assurance of due performance within a reasonable time not exceeding 30 days after receipt of a justified demand, the failure is treated as a repudiation of the contract. This allows the demanding party to exercise all remedies for anticipatory repudiation, including treating the contract as breached and seeking damages. Answer B is incorrect because no 30-day suit deadline exists; the failure to assure is treated as repudiation, not a litigation trigger. Answer C is incorrect because the demanding party may go beyond suspension and treat the contract as repudiated. Answer D is incorrect because the contract does not terminate automatically; the party must elect to treat it as repudiated.
Under UCC Article 2, when risk of loss passes under a destination contract (FOB destination), when does risk shift to the buyer?
When the goods are loaded onto the carrier's vehicle at the seller's location.
When the seller tenders delivery of the goods at the specified destination.
When the buyer pays for the goods, regardless of delivery status.
When the seller ships the goods from its warehouse.
Explanation
In a destination contract (FOB destination) under UCC Section 2-509, risk of loss passes to the buyer when the seller tenders delivery of the goods at the destination specified in the contract. Until the seller makes a proper tender at the destination, the risk remains with the seller. Answer A is incorrect because in a destination contract, shipment from the seller's warehouse does not transfer risk; the seller bears risk during transit. Answer C is incorrect because payment timing is irrelevant to risk of loss under the UCC. Answer D describes the shipment contract (FOB shipping point) rule, not the destination contract rule.
Under UCC Article 2, an express warranty is created in which of the following ways?
By any affirmation of fact or promise about the goods, any description of the goods, or any sample or model that becomes part of the basis of the bargain.
Only by a merchant who deals in goods of that kind.
Only when the seller uses the specific words 'warrant' or 'guarantee.'
Only by a formal written statement labeled 'warranty' in the contract.
Explanation
Under UCC Section 2-313, express warranties are created by (1) any affirmation of fact or promise about the goods that becomes part of the basis of the bargain, (2) any description of the goods that becomes part of the basis of the bargain, or (3) any sample or model that becomes part of the basis of the bargain. No formal language is required, and the seller need not use the words 'warrant' or 'guarantee.' Answer A is incorrect because no written label or formal document is required. Answer C is incorrect because any seller, merchant or not, may create an express warranty. Answer D is incorrect because specific warranty language is expressly not required under Section 2-313(2).
Under UCC Article 2, which of the following correctly describes the requirements for an effective rejection of non-conforming goods by a buyer?
The buyer must reject goods within 24 hours of receipt to be effective.
The buyer may reject goods at any time before or after acceptance, provided rejection is communicated in writing.
The buyer must reject within a reasonable time after delivery or tender and must seasonably notify the seller of the rejection.
Rejection requires the buyer to return the goods to the seller at the seller's expense before notifying the seller.
Explanation
Under UCC Section 2-602, a rejection of goods must be made within a reasonable time after delivery or tender, and the buyer must seasonably notify the seller of the rejection. If the buyer fails to reject within a reasonable time or fails to notify the seller, the rejection is ineffective and the buyer is deemed to have accepted the goods. Answer A is incorrect because rejection must occur before acceptance; once accepted, the buyer's remedy shifts to a claim for damages with notice under Section 2-607. Answer B is incorrect because there is no 24-hour rule; the standard is reasonable time based on the circumstances. Answer D is incorrect because the buyer is not required to return the goods before notifying; the seller must provide instructions for the goods after notification.
Under UCC Section 2-201, which of the following qualifies as an exception to the Statute of Frauds requirement for contracts of $500 or more?
An oral agreement that has been partially discussed by the parties at a business meeting.
An email exchange where the subject line says 'Purchase Discussion' but no specific quantity is mentioned.
A written confirmation sent by one merchant to another that is not objected to within 10 days after receipt, binding the recipient even without a signed contract.
A contract where the buyer has made a mental commitment to purchase but not yet communicated it to the seller.
Explanation
Under UCC Section 2-201(2), the merchant's confirmatory memo exception provides that if one merchant sends a written confirmation of an oral agreement to another merchant, and the recipient does not object within 10 days of receipt, the confirmation satisfies the Statute of Frauds against the recipient even though the recipient did not sign it. Additional exceptions include: goods specially manufactured for the buyer, partial performance (for the quantity delivered and accepted), and judicial admissions. Answer B (partial oral discussion) does not satisfy the Statute of Frauds. Answer C (mental commitment) creates no binding obligation. Answer D (email without quantity) does not satisfy the writing requirement because quantity is essential.
Under UCC Section 2-316, which of the following correctly describes how a seller may disclaim the implied warranty of merchantability?
By making any oral statement that the goods are sold without warranty.
By stating 'as is' in the contract, which is sufficient to disclaim the fitness warranty but not the merchantability warranty.
By providing a written disclaimer that is reviewed and signed by the buyer prior to delivery.
By using the word 'merchantability' in the disclaimer, and if the disclaimer is in writing, it must be conspicuous.
Explanation
Under UCC Section 2-316(2), to disclaim the implied warranty of merchantability, the disclaimer must mention the word 'merchantability' and, if in writing, must be conspicuous. The word 'merchantability' specifically is required; a general disclaimer is not sufficient for this warranty. Answer A is incorrect because an oral disclaimer is permitted for merchantability but must still use the specific word 'merchantability.' Answer C is incorrect because an 'as is' clause under Section 2-316(3) effectively disclaims all implied warranties, including merchantability, not just the fitness warranty. Answer D is incorrect because buyer review and signature are not specifically required by the UCC; conspicuousness and the specific word are what matter.