Business Law 2 - Test 2

Question 1

. A trust for the dissemination of a particular political doctrine cannot be a charitable trust.

a. True
b. False

Answer 1

False

Question 2

An express trust may be found if the intent of the grantor to create a trust is unmistakable.

a. True
b. False

Answer 2

True

Question 3

A trust may serve any purpose that is not against the law or public policy.

a. True
b. False

Answer 3

True

Question 4

. A totten trust is revocable by the creator.

a. True
b. False

Answer 4

True

Question 5

Constructive trusts are generally found where the creator clearly intended a trust to be formed.

a. True
b. False

Answer 5

False

Question 6

The powers of a trustee are determined solely by the trust instrument.

a. True
b. False

Answer 6

False

Question 7

. Consideration is necessary in order to enforce a trust.

a. True
b. False

Answer 7

False

Question 8

A minor’s declaration of trust is voidable.

a. True
b. False

Answer 8

True

Question 9

Creditors of the beneficiary of a spendthrift trust can attach the income of the trust before or after the beneficiary receives it, but they cannot reach the trust fund itself.

a. True
b. False

Answer 9

False

Question 10

A person’s written statement that he is leaving property “to Margaret in full confidence and with hope she will take care of Tina” is too indefinite to create a trust.

a. True
b. False

Answer 10

False

Question 11

The courts may not create implied trusts.

a. True
b. False

Answer 11

False

Question 12

A trust is presumed to be irrevocable unless the grantor reserves the power of revocation.

a. True
b. False

Answer 12

True

Question 13

. The death of the beneficiary will generally terminate the trust.

a. True
b. False

Answer 13

False

Question 14

There is no such thing as an irrevocable will.

a. True
b. False

Answer 14

True

Question 15

A resulting trust depends on a contract or agreement as evidenced by the parties’ acts.

a. True
b. False

Answer 15

False

Question 16

A witness to a will who is “interested” will be disinherited or disqualified.

a. True
b. False

Answer 16

True

Question 17

. In most states, there is no lower age limit for testators as long as they understand the extent of their property.

a. True
b. False

Answer 17

False

Question 18

A codicil to the will must be executed with all the formal requirements of a will.

a. True
b. False

Answer 18

True

Question 19

If a will was burned in an electrical fire that destroyed the testator’s home, it will be presumed to be revoked.

a. True
b. False

Answer 19

False

Question 20

A second will automatically revokes an earlier will if it is wholly inconsistent.

a. True
b. False

Answer 20

True

Question 21

Divorce or marriage will result in a revocation of a will.

a. True
b. False

Answer 21

False

Question 22

Renunciation is a statutory right of a surviving spouse to give up her statutory share in the estate.

a. True
b. False

Answer 22

False

Question 23

A completely handwritten will is valid only if witnessed.

a. True
b. False

Answer 23

False

Question 24

Rayshawn served as a witness to Samuel’s will, but died before Samuel. When Samuel’s will is probated, proof of Rayshawn’s handwriting is necessary unless there are enough other witnesses to meet the statutory requirements without Rayshawn.

a. True
b. False

Answer 24

True

Question 25

A photocopy of a will or a will written in pencil would not be valid for probate.

a. True
b. False

Answer 25

False

Question 26

A stepchild will not ordinarily inherit under intestacy statutes unless legally adopted.

a. True
b. False

Answer 26

True

Question 27

A totten trust may also be referred to as a savings account trust.

a. True
b. False

Answer 27

True

Question 28

A court will require witnesses’ signatures to be proven before a formal decree will be issued allowing the will.

a. True
b. False

Answer 28

True

Question 29

The executor or administrator does not occupy a fiduciary relationship with regard to the estate.

a. True
b. False

Answer 29

False

Question 30

A trust for the establishment and maintenance of a museum would be a charitable trust.

a. True
b. False

Answer 30

True

Question 31

As long as a decedent’s wishes are clear, the formalities of a will need not be strictly met in order for the will to be valid.

a. True
b. False

Answer 31

False

Question 32

A totten trust involves a bank account opened by the settlor of the trust.

a. True
b. False

Answer 32

True

Question 33

Once a trust is validly created, it is revocable.

a. True
b. False

Answer 33

False

Question 34

A will entirely in the handwriting of the testator is called what type of will?

a. Nuncupative.
b. Holographic.
c. Conditional.
d. Codicil.

Answer 34

b. Holographic

Question 35

If a person dies intestate, his property will be:

a. given to his beneficiaries.
b. passed to his children.
c. kept by the state.
d. distributed as prescribed by the state.

Answer 35

d. distributed as prescribed by the state

Question 36

The owner of legal title to the property in a trust is the:

a. grantor.
b. settlor.
c. beneficiary.
d. trustee.

Answer 36

d. trustee

Question 37

. An attorney receives a check from the defendant in settlement of a lawsuit brought by his client, the plaintiff. Even if the check is made out in the name of the attorney, it will belong to the client as a:

a. resulting trust.
b. constructive trust.
c. totten trust.
d. spendthrift trust.

Answer 37

a. resulting trust

Question 38

An express trust is a trust:

a. established by law through the courts when the parties

’

conduct seems to warrant the creation of a trust.
b. established by voluntary action.
c. created only by an oral statement.
d. All of these.

Answer 38

b. established by voluntary action

Question 39

Of the following elements, which one is NOT required to create an enforceable trust?

a. Consideration.
b. Legal capacity.
c. Specific property.
d. A beneficiary.

Answer 39

a. Consideration

Question 40

Taxes imposed at death include:

a. income tax that the estate must pay on income received during estate administration.
b. federal estate tax on the transfer of property at death.
c. state inheritance tax on the privilege of an heir or beneficiary to receive the property.
d. All of these.

Answer 40

d. All of these

Question 41

Testamentary capacity refers to:

a. the age of the testator.
b. the same capacity as required to contract.
c. the ability to understand the nature and extent of one

’

s property, to appreciate the natural objects of one

’

s bounty, and the ability to formulate an orderly plan of disposition.
d. the influence of others over the testator.

Answer 41

c. the ability to understand the nature and extent of one’s property, to appreciate the natural objects of one’s bounty, and the ability to formulate an orderly plan of disposition.

Question 42

In order to be valid, a will must generally include all but which one of the following?

a. Signature of the testator.
b. A written document.
c. Signatures of witnesses.
d. Signature of the executor.

Answer 42

d. Signature of the executor

Question 43

Which of the following will be acceptable as a witness to a will?

a. The testator

’

s spouse.
b. The administrator of the estate.
c. The beneficiary of a testamentary trust.
d. The spouse of a beneficiary.

Answer 43

b. The administrator of the estate.

Question 44

. All of the following may, in general, revoke a will by operation of law EXCEPT:

a. subsequent marriage.
b. subsequent divorce.
c. birth of a child.
d. all of these will revoke a will by operation of law.

Answer 44

b. subsequent divorce

Question 45

The characteristics of a totten trust include:

a. it is a joint bank account opened by the settlor of the trust.
b. it is tentative.
c. transfer of ownership is complete only on the depositor

’

s death.
d. All of these.

Answer 45

d. all of these

Question 46

A trust created by will and effective after the death of a testator is called a(n):

a. charitable trust.
b. cy pres trust.
c. inter vivos trust.
d. testamentary trust.

Answer 46

d. testamentary trust

Question 47

Almost all jurisdictions require that:

a. express trusts of real property be in writing.
b. trusts have at least four witnesses.
c. an inter vivos trust have at least two trustees.
d. a charitable trust have at least two trustees.

Answer 47

a. express trusts of real property be in writing.

Question 48

In most states, a trustee’s investment decisions are usually governed by:

a. the prudent person rule.
b. judiciary determination.
c. the beneficiary

’

s intent.
d. The Uniform Principal and Income Act.

Answer 48

a. the prudent person rule

Question 49

Megan, who has no heirs or next of kin, makes a will leaving her estate to her best friend, Pat. If Megan’s will is witnessed by only two instead of three people as required by her state statute, upon her death her estate will:

a. go to Pat without court involvement.
b. escheat to the state.
c. go through probate, at which time the court will try to determine Megan’s intent as to disposition and follow that intent.
d. be given to a charity as determined by the probate court.

Answer 49

b. escheat to the state.

Question 50

Which of the following is/are considered to be conduct to invalidate a will?

a. Duress.
b. Undue influence.
c. Fraud.
d. All of these.

Answer 50

d. All of these.

Question 51

A statement signed by the required number of witnesses who observe the execution of a valid will is called a(n):

a. validity clause.
b. ambulatory clause.
c. attestation clause.
d. fiduciary clause.

Answer 51

c. attestation clause.

Question 52

The characteristics of a spendthrift trust include which of the following?

a. Spendthrift provisions are not valid in most states.
b. Trust creditors can never seize income from a spendthrift trust.
c. A settlor may provide, in a spendthrift trust, that the beneficiary cannot, by assignment or otherwise, impair her rights to receive principal or income.
d. All of these.

Answer 52

c. A settlor may provide, in a spendthrift trust, that the beneficiary cannot, by assignment or otherwise, impair her rights to receive principal or income.

Question 53

An amendment to a will is called a(n):

a. stipulated addition.
b. statutory adjustment.
c. codicil.
d. attestation.

Answer 53

c. codicil.

Question 54

Which of the following is true about a constructive trust?

a. It normally contains detailed instructions for the trustee to follow.
b. The court imposes it to redress an injustice.
c. It is revocable by the trustee.
d. It carries out the intentions of the trustee.

Answer 54

b. The court imposes it to redress an injustice.

Question 55

A living will is a document that:

a. is videotaped.
b. contains the maker

’

s wishes regarding extraordinary medical treatment.
c. is capable of being changed from time to time, unlike other wills.
d. cannot be revoked.

Answer 55

b. contains the maker’s wishes regarding extraordinary medical treatment.

Question 56

Probate is the:

a. reading of a will by a lawyer.
b. actual property given away in a will.
c. process of declaring a person dead.
d. process of managing the distribution of a deceased person

’

s property.

Answer 56

d. process of managing the distribution of a deceased person’s property.

Question 57

Which of the following statements about wills is correct?

a. A will must be written on one piece of paper.
b. Another writing may be incorporated by reference into a will.
c. The testator must sign his or her full name.
d. The testator cannot have any

“

help

”

in signing a will.

Answer 57

b. Another writing may be incorporated by reference into a will.

Question 58

A valid will must be witnessed. Which of the following statements about witnesses is correct?

a. Most states require only one witness to a will.
b. The witnesses must see the testator write the will.
c. The witnesses must sign the will.
d. Under the law in all states, witnesses lose any bequests to them in a will they witness.

Answer 58

c. the witnesses must sign the will.

Question 59

A trustee has a duty to make proper allocation of benefits and burdens between income beneficiaries and remaindermen. Which of the following statements is true concerning this allocation?

a. Current expenses are chargeable to the remaindermen.
b. Extraordinary expenses are chargeable to the remaindermen.
c. Money paid for the use of trust property is chargeable to the remaindermen.
d. Any profit from the use of trust property is allocated to the remaindermen.

Answer 59

b. Extraordinary expenses are chargeable to the remaindermen.

Question 60

A trust will fail for lack of:

a. consideration.
b. a trustee.
c. definite and specific property forming the trust corpus.
d. All of these.

Answer 60

c. definite and specific property forming the trust corpus.

Question 61

. Rules for the distribution of property in a situation involving intestate succession:

a. do not apply to property held in joint tenancy.
b. apply where the testator has failed to name an administrator.
c. prevent disposition of property by a valid will.
d. have no application to real estate owned by the decedent.

Answer 61

a. do not apply to property held in joint tenancy

Question 62

Dan, a widower, dies intestate. He leaves two surviving children, Joe and Carrie, and two grandchildren who are children of his deceased daughter, Debra. If Joe and Carrie each take one-third of his estate and the grandchildren each take one-sixth of the estate, this is described legally by the statement that:

a. lineal descendants of predeceased children take property per stirpes.
b. lineal descendants take the property per capita.
c. collateral heirs take the property per stirpes.
d. lineal descendants and collateral heirs take the property per capita.

Answer 62

a. lineal descendants of predeceased children take property per stirpes.

Question 63

Which of the following is untrue regarding the revocation of a will?

a. There can be a partial revocation.
b. An inadvertent destruction of a will acts as a revocation.
c. The execution of a second will does not of itself constitute a revocation of an earlier will.
d. Divorce does not ordinarily revoke a will.

Answer 63

b. an inadvertent destruction of a will acts as a revocation

Question 64

Which of the following would be charged to the life tenant’s interest in the course of administering a trust?

a. Expenses of selling a trust investment.
b. The costs of establishing the trust.
c. Ordinary repairs to trust property.
d. Permanent improvements to the trust property.

Answer 64

c. Ordinary repairs to trust property

Question 65

Curtis, a trustee, fraudulently purchases property with trust funds and puts title in his own name. What type of trust will a court create?

a. Constructive trust.
b. Implied trust.
c. Express trust.
d. Resulting trust.

Answer 65

a. Constructive trust.

Question 66

Gail dies intestate leaving two children, Benjamin and Christopher. Her daughter, Anna, died two years earlier. Anna had three children, Carolyn, Jeffrey and Scott. If Gail leaves an estate of $150,000, how much will Jeffrey’s share be under the usual statutes of descent and distribution?

a. $0.
b. $30,000.
c. $16,667.
d. $50,000.

Answer 66

c. $16,667

Question 67

Each trust has which of the following?

a. Executor.
b. Corpus.
c. Testator.
d. All of these.

Answer 67

b. Corpus

Question 68

The duties of a trustee are:

a. to carry out the purposes of the trust.
b. to act with prudence and care in the administration of the trust.
c. to exercise a high degree of loyalty toward the beneficiary.
d. All of these.

Answer 68

d. All of these

Question 69

For a memorandum to be incorporated into a will, which of the following conditions must be met? The memorandum must be:

a. in writing.
b. in existence when the will is executed.
c. adequately described in the will.
d. All of these.

Answer 69

d. All of these

Question 70

Which of the following is true regarding property distribution upon a person’s death intestate?

a. At common law, property lineally ascended to parents if there was no surviving spouse and there were no children.
b. Today, in all states, if there is a surviving spouse, he or she gets the entire estate.
c. Rules of descent vary widely from state to state.
d. All of these.

Answer 70

c. Rules of descent vary widely from state to state.

Question 71

In the case of Keeney v. Keeney, the court found:

a. a constructive trust is created by equity regardless of the intention of the parties to create a trust where legal title to property is obtained through fraud or undue influence rendering it unconscionable for the holder of legal title to retain the property.
b. intention of the parties is the sole consideration in determining the existence of a trust.
c. the existence of a confidential relationship prohibits the trustee from seeking any personal benefit.
d. a totten trust is a tentative trust and the transfer of ownership becomes complete only upon the depositor’s death.

Answer 71

a. a constructive trust is created by equity regardless of the intention of the parties to create a trust where legal title to property is obtained through fraud or undue influence rendering it unconscionable for the holder of legal title to retain the property.

Question 72

A merchant buyer of goods receives nonconforming goods. The merchant buyer rightfully rejects and appropriately notifies the seller, but the seller has no agent in the buyer’s city. The goods are perishable and threaten to decline in value speedily. The merchant buyer has no further duty to the seller other than to await the seller’s instructions.

a. True
b. False

Answer 72

False

Question 73

The delivery terms “ex-ship” and “no arrival, no sale” indicate that the contract is a shipment contract.

a. True
b. False

Answer 73

False

Question 74

A buyer’s or lessee’s right to reject nonconforming goods depends on the size or extent of the breach of the seller’s or lessor’s duty to tender conforming goods.

a. True
b. False

Answer 74

False

Question 75

In a sale of goods, the seller’s tender of performance does not have to conform to the Code’s perfect tender rule.

a. True
b. False

Answer 75

False

Question 76

In the absence of agreement, payment is due at the time and place the buyer is to receive the goods, even though the place of shipment is the place of delivery.

a. True
b. False

Answer 76

True

Question 77

Whitley ordered 800 Christmas trees from North Pines Tree Farm to be delivered on November 24. When the trees arrive, the North Pines must accept tender of payment by any means or in any manner current, such as a check, in the ordinary course of business unless North Pines demands cash and allows Whitley a reasonable time within which to obtain it..

a. True
b. False

Answer 77

True

Question 78

If no place of tender is indicated by the contract, delivery is presumed to be made at seller’s place of business.

a. True
b. False

Answer 78

True

Question 79

In most sales, the buyer has the right to inspect the goods before he pays.

a. True
b. False

Answer 79

True

Question 80

Payment of a C.O.D. shipment constitutes an acceptance of the goods.

a. True
b. False

Answer 80

False

Question 81

After passage of a week, the buyer of six crates of strawberries will be deemed to have accepted the goods.

a. True
b. False

Answer 81

True

Question 82

Rejection is ineffective unless the buyer notifies the seller.

a. True
b. False

Answer 82

True

Question 83

Where goods are in the possession of a bailee and are to be delivered without being moved, in most instances the seller may either tender to the buyer a document of title or obtain an acknowledgment by the bailee of the buyer’s right to possess the goods.

a. True
b. False

Answer 83

True

Question 84

On April 18, Marco bought a sailboat from a local marina. The boat was defective and did not turn about properly. Marco used the boat extensively all summer and the boat was no longer in the same condition as when it was bought. By September 30, Marco had waived his right to revoke acceptance.

a. True
b. False

Answer 84

True

Question 85

Revocation and rejection give the buyer the same rights and duties with respect to the goods.

a. True
b. False

Answer 85

True

Question 86

A buyer is obliged to accept conforming goods and to pay for them according to the contract terms.

a. True
b. False

Answer 86

True

Question 87

Tender can be made any time of the day or night, when it is most convenient for the seller to deliver the goods.

a. True
b. False

Answer 87

False

Question 88

The Code does not excuse performance based upon commercial impracticability.

a. True
b. False

Answer 88

False

Question 89

In an installment contract, if the contract is silent about payment, the Code provides that the seller may demand the price, if it can be apportioned, for each lot.

a. True
b. False

Answer 89

True

Question 90

The buyer’s rejection of nonconforming goods or tender is rightful under the perfect tender rule.

a. True
b. False

Answer 90

True

Question 91

Under the CISG, a party may suspend performance of his obligations if, after the conclusion of the contract, it becomes apparent that the other party will not perform a substantial part of his obligations.

a. True
b. False

Answer 91

True

Question 92

Les contracts to the sell and deliver to Chan 300 rolls of insulation. Unless the parties agree otherwise, Les must tender all 300 rolls in a single delivery, and Chan’s payment is due at the time of the tender.

a. True
b. False

Answer 92

True

Question 93

A “commercial unit” is a unit of goods that by commercial usage is a single unit and that, if divided, would be materially impaired in character or value.

a. True
b. False

Answer 93

True

Question 94

Acceptance of goods, which disallows any later rejection of them, is accomplished only through express words.

a. True
b. False

Answer 94

False

Question 95

A carpenter ordered 500 sheets of 1/2-inch plywood from her supplier, but received 498 sheets of 1/4-inch plywood. If she rejects these goods, she has no further obligation to her supplier regarding these nonconforming goods.

a. True
b. False

Answer 95

False

Question 96

. In their contract for the sale of window shades, Lela Window Treatments, Inc. and Shane agree that Lela will have the right to replace any defective goods that are delivered to Shane. This contractual provision will not have any effect because the perfect tender rule of the UCC will control in a sale of goods transaction.

a. True
b. False

Answer 96

False

Question 97

Revocation of acceptance is effective without notice to the seller.

a. True
b. False

Answer 97

False

Question 98

Revocation of acceptance must be done as soon as the buyer discovers the grounds for the revocation.

a. True
b. False

Answer 98

False

Question 99

In the case of partial destruction of identified goods before risk of loss passes to the buyer, the buyer has the option to avoid the contract or to accept the goods with due allowance from the contract price for the deterioration or deficiency.

a. True
b. False

Answer 99

True

Question 100

Increased production costs will allow the seller to avoid a contract based upon commercial impracticability.

a. True
b. False

Answer 100

False

Question 101

A buyer who sells rejected goods on behalf of the seller is entitled to reasonable expenses and a reasonable selling commission not to exceed ten percent of the gross proceeds.

a. True
b. False

Answer 101

True

Question 102

Revocation of acceptance requires notice to the seller, whereas rejection does not.

a. True
b. False

Answer 102

False

Question 103

Ryan is interested in purchasing two dozen L.E.D. signs from Superior Sign Co. If the signs are damaged:

a. and destroyed before Ryan’s offer to buy them is accepted, Superior must create new signs to replace the ones Ryan wanted.
b. after the contract of sale is formed and after the risk of loss passed to Ryan, then Ryan has no option but must pay the entire contract price of the signs.
c. without fault of either party before the risk of loss passes to Ryan and the goods were identified when the contract was made, the contract is avoided whether the signs are totally or partially destroyed.
d. All of these.

Answer 103

b. after the contract of sale is formed and after the risk of loss passed to Ryan, then Ryan has no option but must pay the entire contract price of the signs.

Question 104

. If an anticipatory repudiation substantially impairs the value of the contract, the aggrieved party may:

a. await performance for a commercially reasonable time.
b. resort to any appropriate remedy for breach.
c. Both are correct.
d. None of these.

Answer 104

c. Both are correct

Question 105

Which of the following illustrates a shipment contract?

a. Ex-ship.
b. F.O.B. place of shipment.
c. No arrival, no sale.
d. All of these are shipment contracts.

Answer 105

b. F.O.B. place of shipment

Question 106

Tender of delivery requires:

a. only that the seller put and hold goods that conform to the contract at the buyer’s disposition.
b. that the goods be made available to the buyer for at least one week if they are not perishable.
c. that the seller give the buyer reasonable notice of the tender.
d. that tender occur during the buyer’s normal business hours.

Answer 106

c. that the seller give the buyer reasonable notice of the tender.

Question 107

A buyer in Atlanta enters into a sales contract with a seller in Chicago. If the contract does not mention the place for delivery of the goods, the place of delivery will be:

a. at the seller

’

s business or residence in Chicago.
b. as stated in all destination contracts.
c. at the buyer

’

s business or residence in Atlanta.
d. irrelevant since the contract is void.

Answer 107

a. at the seller’s business or residence in Chicago.

Question 108

If the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may:

a. reject the whole.
b. accept the whole.
c. accept any unit(s) and reject the rest.
d. Any of these.

Answer 108

d. any of these.

Question 109

The court in Furlong v. Alpha Chi Omega Sorority held that:

a. the UCC did not apply to this situation.
b. the design specifications were part of the basis of the bargain and as such became an express warranty.
c. rejection of the goods was not rightful even though the sorority seasonably notified the seller within a reasonable time since notice was by phone.
d. the law required the sorority to accept Furlong’s offer of compromise.

Answer 109

b. the design specifications were part of the basis of the bargain and as such became an express warranty.

Question 110

. The CISG:

a. does not follow the perfect tender rule.
b. provides that the seller must, in all cases, deliver the goods within a reasonable time after the conclusion of the contract.
c. provides that in most instances the buyer must pay the contract price before examining the goods.
d. provides no right of “cure.”

Answer 110

a. does not follow the perfect tender rule.

Question 111

Which of the following terms would indicate a destination contract?

a. F.O.B. city of buyer.
b. F.O.B. city of seller.
c. C.I.F.
d. F.A.S. seller

’

s port.

Answer 111

a. F.O.B. city of buyer

Question 112

When is a buyer deemed to have accepted goods that are delivered pursuant to a contract?

a. If he fails to reject the goods after he has had a reasonable opportunity to inspect them.
b. Immediately upon delivery.
c. Only when he pays for them.
d. Only after an express acceptance.

Answer 112

a. If he fails to reject the goods after he has had a reasonable opportunity to inspect them.

Question 113

The perfect tender rule requires that the seller’s tender of performance must conform exactly to the contract subject to:

a. installment contracts.
b. cure by the seller.
c. Both of these.
d. Neither of these.

Answer 113

c. both of these.

Question 114

. A manifestation by the buyer of his unwillingness to become the owner of the goods is:

a. cure.
b. revocation.
c. rejection.
d. tender.

Answer 114

c. rejection

Question 115

Under the __________, a buyer may reject goods for even the slightest defect.

a. revocation of acceptance rule
b. perfect tender rule
c. rules for inspection
d. excuses for nonperformance

Answer 115

b. perfect tender rule

Question 116

In which of the following situations does the seller have the right to cure?

a. Where the time for performance under the contract has not yet expired.
b. After the time for performance has expired if the seller had reasonable grounds for believing the buyer would accept a nonconforming tender with or without monetary adjustment.
c. Where the buyer has revoked acceptance.
d. Two of these are correct but not all three.

Answer 116

d. Two of these are correct but not all three.

Question 117

Vernon is an accountant for a major accounting firm. One day at work, he is discussing his collection of rare coins with one of his co-workers. Vernon tells his co-worker that he keeps his collection at home and that he has recently purchased several Chinese gold Panda coins at an exceptional price. The co-worker expresses an interest in buying two of the coins at a price of $250, and a contract is duly formed. If no place for delivery is expressed, where are the coins to be delivered?

a. At the office of the major accounting firm where the parties to the contract work.
b. At Vernon

’

s home.
c. At the co-worker

’

s home.
d. In the parking lot of the major accounting firm.

Answer 117

b. At Vernon’s home.

Question 118

Goods are to be sent from Buffalo, NY to Raleigh, NC by UPS using the delivery terms F.O.B. Buffalo, NY. Where does tender occur?

a. Where the goods are identified.
b. Where the goods are shipped.
c. Where the goods are delivered and picked up by the buyer.
d. Where the goods are taken by the buyer.

Answer 118

b. Where the goods are shipped.

Question 119

The concept of the “right to cooperation” includes that:

a. where one party

’

s required cooperation is not timely, the other party is excused from any resulting delay in her own performance.
b. where one party

’

s required cooperation is untimely, the other party is required to tender performance as if the first party had tendered in a timely manner.
c. where neither party is at fault and the agreed manner of delivery becomes impracticable, both parties are required to negotiate a new price.
d. None of these.

Answer 119

a. where one party’s required cooperation is not timely, the other party is excused from any resulting delay in her own performance.

Question 120

Sam agrees to sell Bill one 18-cubic-foot, yellow refrigerator for $700. It is to be delivered to Bill’s home on July 7. Under the perfect tender rule, which one of the following cases would permit Bill to rightfully reject the goods?

a. Sam delivered an 18-cubic-foot, silver refrigerator on July 7, and Bill calls Sam to complain.
b. Sam sent an 18-cubic-foot, yellow refrigerator with a small dent in it on July 7. Bill refuses delivery but never bothers to call Sam.
c. Sam sent his truck to Bill

’

s home with the 18-cubic-foot, yellow refrigerator on July 7, but Bill was not home.
d. Sam sent 18-cubic-foot, yellow refrigerator without ice cube trays on July 5 and notifies Bill of the defect.

Answer 120

a. Sam delivered an 18-cubic-foot, silver refrigerator on July 7, and Bill calls Sam to complain.

Question 121

J & J Co. offers a “subscription” for baby toys to be delivered every two months from the birth of a child. Payment must be made within two weeks of delivery. The Markham family accepted the J & J plan when their son, Timmy, was born. When Timmy was four months old, one J & J toy arrived smashed to pieces. Markham:

a. can treat the whole contract as breached and refuse to pay for past installments as well as future installments.
b. can reject the installment and cancel the contract immediately.
c. can reject the installment and refuse to pay for it if J

&

J cannot cure it.
d. cannot reject the installment since it is part of a series.

Answer 121

c. can reject the installment and refuse to pay for it if J & J cannot cure it.

Question 122

Bill orders a custom-made suit from Rooks to be delivered by Friday at 5 p.m. When the suit is delivered to his office on Friday afternoon, he is in conference with a client. He accepts delivery and hangs the suit in his closet. When Bill tries on the suit Saturday evening, he discovers that the pants are cuffed. He had ordered cuffless trousers. What can he do?

a. He cannot revoke acceptance since the cuffs are not difficult to discover.
b. He can revoke acceptance if the cuffs substantially impair the value of the goods to him and Rooks will not remove the cuffs.
c. He can reject the goods since he had not yet accepted them prior to inspection.
d. He cannot reject the goods because the cuffs are curable.

Answer 122

b. He can revoke acceptance if the cuffs substantially impair the value of the goods to him and Rooks will not remove the cuffs.

Question 123

If Mary allows the seller, Sellmart Co., four weeks to repair the defects in her kitchen set and they have tried but have not done a good job at it, she may revoke her acceptance if she:

a. notifies Sellmart of revocation.
b. does not use the table and chairs.
c. could not discover the defects easily.
d. inspected the goods herself.

Answer 123

a. notifies Sellmart of revocation

Question 124

A buyer’s cancellation of a contract based on the seller’s anticipatory repudiation is effective:

a. only if the buyer expressly notifies the seller of the cancellation.
b. if the cancellation precedes the seller

’

s attempt to retract her repudiation.
c. only if bond has been obtained.
d. All of these are correct.

Answer 124

b. if the cancellation precedes the seller’s attempt to retract her repudiation

Question 125

Which of the following is correct with respect to the Code’s approach to impossibility of performance?

a. A significant drop in demand for the goods will excuse the buyer’s performance.
b. Increased production costs will excuse performance by the seller.
c. Performance will be excused when it is impractical as a result of one or more unforeseen supervening events that are more than mere hardship or increased cost of performance.
d. All of these are correct.

Answer 125

c. Performance will be excused when it is impractical as a result of one or more unforeseen supervening events that are more than mere hardship or increased cost of performance.

Question 126

On June 1, Supertread Tire Company entered into a contract to provide 100 tires per month to ZYX Cycle Company at $30 per tire for the next two years. The October shipment consisted of 100 badly defective tires. ZYX Cycle Company:

a. can treat the whole contract as breached.
b. can reject the October shipment if it cannot be cured in a timely manner by Supertread.
c. cannot reject the October shipment since it is part of the installment series.
d. must pay for the defective tires, but Supertread must provide 200 tires in November.

Answer 126

b. can reject the October shipment since it is part of the installment series.

Question 127

The Code’s remedies are cumulative, therefore, a seller may both withhold delivery of the goods and identify goods to the contract. T/F

Answer 127

True

Question 128

A company may be considered insolvent under the Code only if it is unable to pay its debts as they are due T/F

Answer 128

False

Question 129

. Robert paid William $1,000 for a rare first edition of an Edgar Allen Poe novel. The sales contract states that the book is to be delivered within ten days. William, however, refused to deliver the book as promised. In order to sue for specific performance under the UCC, Robert must prove that money damages will not be adequate compensation for his loss. T/F

Answer 129

False

Question 130

Landview Appliances sells a stove to Evan for his home. The contract of sale excludes liability for consequential damages. When Evan turns on the stove, it catches fire, burning Evan severely. Evan cannot recover for his injuries because of the exclusion of damages clause. T/F

Answer 130

False

Question 131

Since the purpose of remedies under the Code is compensation, punitive damages are generally available.

a. True
b. False

Answer 131

False

Question 132

The recovery for a lessee’s wrongful repudiation of a lease is the difference between the present values of the old rent due under the original lease and the market rent.

a. True
b. False

Answer 132

True

Question 133

A buyer who does not cover is precluded from consequential damages that could have been prevented if the buyer did obtain cover.

a. True
b. False

Answer 133

True

Question 134

One hundred crystal flower vases have been identified to the contract and a down payment of $1,000 of the $10,000 purchase price has been paid. If the seller becomes insolvent, the buyer may still pay $9,000 and get the goods.

a. True
b. False

Answer 134

True

Question 135

If the seller has the right to cancel, he may recover damages for breach without having to tender any further performance.

Answer 135

True

Question 136

. Breach of one installment of an installment contract never gives rise to breach under the whole contract.

a. True
b. False

Answer 136

False

Question 137

Powers sells 5,000 insulators to Falconbury and issues a negotiable document of title for the goods. The insulators are stored in the Southside Warehouse. When Powers discovers that Falconbury is insolvent, he may effectively stop delivery of the goods by notifying Southside not to deliver the goods to Falconbury.

a. True
b. False

Answer 137

False

Question 138

Replevin is an action at law to recover specific goods in the possession of the defendant which are being unlawfully withheld from the plaintiff.

Answer 138

True

Question 139

An aggrieved seller who resells wrongfully rejected goods is accountable to the original buyer for any profit made on the resale.

a. True
b. False

Answer 139

False

Question 140

The right of the buyer to recover from an insolvent seller the goods in which he has a special property interest and for which he has paid, existed at common law before being included in the Code.

a. True
b. False

Answer 140

False

Question 141

Vandehal Company’s total liabilities are $520,000 and its total assets are $460,000, and the company is unable to pay debts as they become due. Vandehal’s situation falls within the bankruptcy meaning, but not the Code’s definition, of insolvency.

a. True
b. False

Answer 141

False

Question 142

Article 2A authorizes liquidated damages payable by either party for default or any other act or omission.

a. True
b. False

Answer 142

True

Question 143

If the seller has failed to comply with Code requirements in making a resale of goods that were wrongfully rejected, a good faith purchaser at the resale takes the goods subject to rights of the original buyer.

a. True
b. False

Answer 143

False

Question 144

On July 30 Christina, in Knoxville, agrees to sell machine-stitched quilts to Deanna, in Los Angeles for $2,500 C.O.D., with delivery by October 1. When Christina fails to deliver the quilts, Deanna suffers incidental damages of $400 and consequential damages of $300. Deanna may recover:

a. damages equal to the difference between the market price on July 30 in Knoxville and $2,500 in addition to the remedy of cover.
b. the difference between the market price on October 1 in Knoxville and $2,500, plus $400 and $300, less expenses saved because of Christina’s breach.
c. the difference between the market price on July 30 and October 1 in Los Angeles, plus $400 and $300, less expenses saved because of Christina’s breach.
d. only through the equitable remedy of specific performance.

Answer 144

b. the difference between the market price on October 1 in Knoxville and $2,500, plus $400 and $300, less expenses saved because of Christina’s breach.

Question 145

A seller’s remedies upon the buyer’s default:

a. may be goods oriented, money oriented, or obligation oriented.
b. are subject to the doctrine of election of remedies.
c. are, under the UCC, the same as a buyer’s remedies for the seller’s breach.
d. All of these.

Answer 145

a. may be goods oriented, money oriented, or obligation oriented.

Question 146

Which of the following is not a remedy of the buyer?

a. The buyer has the right of cover and to receive damages.
b. The buyer has the right to stop delivery of the goods.
c. The buyer may have the right to obtain specific performance.
d. The buyer may have the right to recover incidental and consequential damages.

Answer 146

b. The buyer has the right to stop delivery of the goods.

Question 147

The seller may resell the goods identified to a contract:

a. only at a public sale.
b. only if the goods are sold as a unit.
c. at a public or private sale.
d. only if the goods are perishable.

Answer 147

c. at a public or private sale.

Question 148

Which of the following would not be a remedy available to the seller on account of buyer’s breach?

a. Stop delivery of the goods by the carrier.
b. Require the financially sound buyer to return the goods.
c. Recover the price.
d. Cancel the contract.

Answer 148

b. Require the financially sound buyer to return the goods.

Question 149

In the Bigelow-Sanford, Inc. v. Gunny Corp. case, the court found:

a. the buyer did not purchase substitute goods in good faith and without unreasonable delay.
b. the Code permits a buyer to cover by buying substitute goods if the buyer acts in good faith and without unreasonable delay.
c. since the buyer did not specifically allocate the spot market replacements to the individual sellers’ accounts, the cost of cover could not be determined in this case.
d. the buyer was required to obtain cover and its failure to do so bars other Code remedies.

Answer 149

b. the Code permits a buyer to cover by buying substitute goods if the buyer acts in good faith and without unreasonable delay.

Question 150

. Which of the following is correct with respect to consequential damages under the Code?

a. Consequential damages include damages for destruction of a warehouse caused by the explosion of nonconforming goods.
b. Consequential damages include damages for lost profits from a contract to resell goods which the seller never delivers.
c. Particular needs of the buyer need to be made known to the seller before the seller can be held responsible for consequential damages relating to those needs.
d. All of these are correct.

Answer 150

d. All of these are correct

Question 151

. A seller’s incidental damages for a buyer’s breach would include all but which one of the following?

a. Cost to store the widgets in buyer

’

s city after breach.
b. Cost to ship widgets back to seller.
c. Cost to initially ship the widgets to buyer.
d. Cost to reload widgets onto seller

’

s truck at buyer

’

s city.

Answer 151

c. Cost to initially ship the widgets to buyer.

Question 152

Damages a buyer may recover for loss resulting from requirements, the needs of which the seller had reason to know at the time of contracting and which could not reasonably be prevented by cover, are:

a. incidental.
b. consequential.
c. punitive.
d. liquidated.

Answer 152

b. consequential

Question 153

The buyer’s incidental damages resulting from the seller’s breach include:

a. expenses reasonably incurred in inspection of rightfully rejected goods.
b. any commercially reasonable charges or commissions in connection with obtaining cover.
c. any reasonable expenses connected to the delay.
d. All of these.
e. None of these.

Answer 153

d. All of these.

Question 154

A buyer’s right to purchase, in good faith and without unreasonable delay, substituted goods from Seller B when Seller A breaches a sales contract is:

a. cover.
b. specific performance.
c. replevin.
d. reclamation.

Answer 154

a. cover

Question 155

The amount of liquidated damages included in a contract that would be upheld by a court:

a. must be reasonable in light of the inconveniences or lack of feasibility of obtaining an adequate remedy.
b. may be so high as to be punitive to the breaching party.
c. may be regarded as a penalty.
d. All of these.
e. None of these.

Answer 155

a. must be reasonable in light of inconveniences or lack of feasibility of obtaining an adequate remedy.

Question 156

Which type of contractual provision affects remedies?

a. Cover.
b. Liquidation or limitation of damages.
c. Modification or limitation of remedy.
d. Both limitation of damages and limitation of remedy are correct.

Answer 156

d. Both limitation of damages and limitation of remedy are correct.

Question 157

Which of the following is not a remedy available to an unpaid seller against the buyer?

a. Recovery of the price.
b. Cover and sue for damages.
c. Recovery of incidental damages.
d. Cancellation of the contract.

Answer 157

b. Cover and sue for damages.

Question 158

Under what circumstances may the buyer seek the remedy of replevin?

a. Where the buyer has been unable to obtain cover.
b. Where the goods have been shipped under reservation of a security interest in the seller and that interest has been satisfied.
c. Where the goods are specially manufactured but can be purchased from another source.
d. Both if the buyer has been unable to obtain cover and where the goods have been shipped under reservation of a security interest in the seller and that interest has been satisfied.

Answer 158

d. Both if the buyer has been unable to obtain cover and where the goods have been shipped under reservation of a security interest in the seller and that interest has been satisfied.

Question 159

A buyer’s commercially reasonable charges for the care and custody of goods that a buyer has rightfully rejected are known as:

a. incidental damages.
b. liquidated damages.
c. consequential damages.
d. cover charges.

Answer 159

a. incidental damages

Question 160

Under the CISG, if the contract is avoided and the seller has resold the goods in a reasonable manner and within a reasonable time after avoidance, the seller may recover:

a. the difference between the contract price and the resale price.
b. incidental damages only.
c. consequential damages.
d. Both the difference between the contract price and the resale price and consequential damages.

Answer 160

d. Both the difference between the contract price and the resale price and consequential damages.

Question 161

On February 21, Cara wrote to Pandora Mfg. asking for shipment of 100 swimsuits on 90-day credit. In the letter, she gave references that indicated that her store was financially sound. Actually she had bills that she could not pay and hoped to turn the business around with the summer swimsuit sales. Pandora shipped the suits on April 2; they were received April 15. Cara immediately put them on display and 27 were sold by April 30 when Pandora discovered that Cara had lied. Pandora could:

a. recover 73 suits plus incidental damages.
b. recover 10 suits provided that Pandora acted within 10 days of discovering the misrepresentation.
c. recover no suits since it had been more than 10 days since delivery.
d. recover 73 suits.

Answer 161

d. recover 73 suits.

Question 162

Perry is building his house and orders a hot water heater from Jones Co. to be installed by them. The hot water heater they sent has a 45-gallon capacity, but Perry had ordered a 60-gallon capacity. Jones cannot provide a 60-gallon heater for two months, so Perry cancels the contract and gets a heater from another company. Jones Co. says it must be allowed to install the replacement heater. What result?

a. Jones wins; Perry can only cancel the portion of the contract regarding the goods.
b. Jones wins; Perry can only cancel if installation is also delayed two months.
c. Perry wins since the contract breach concerns the whole contract.
d. Perry can cancel the whole contract, but he is then limited in his recovery of damages.

Answer 162

c. Perry wins since the contract breach concerns the whole contract.

Question 163

After a breach by the seller, buyer may replevy the goods after identification if:

a. he acts within 30 days.
b. he cannot, after a reasonable effort, buy replacement goods.
c. the seller is insolvent.
d. he cannot buy replacement goods or the seller is insolvent.

Answer 163

b. he cannot, after a reasonable effort, buy replacement goods.

Question 164

The fair market value of a 10-foot fishing boat is $1,000. In a special promotion, J’s Marina purchases a 10-foot fishing boat for $900. The boat is badly scratched when it arrives. J’s Marina, however, accepts the shipment and notifies the seller of the defect. The boat as delivered has a value of $800. If the damaged boat is a breach of warranty by the seller, the buyer may recover from the seller:

a. $100.
b. $100 plus incidental and consequential damages.
c. $200.
d. $200 plus incidental and consequential damages.

Answer 164

d. $200 plus incidental and consequential damages.

Question 165

Which of the following remedies are mutually exclusive and could not be obtained simultaneously?

a. Cover, incidental and consequential damages.
b. Identification of the goods and withholding delivery.
c. Withholding delivery and suit to recover incidental and consequential damages.
d. None of these. The Code

’

s remedies are cumulative unless under the facts of an individual case one remedy bars another.

Answer 165

d. None of these. The Code’s remedies are cumulative unless under the facts of an individual case one remedy bars another.

Question 166

Amy agrees to buy goods from Van for a contract price of $2,000 payable on delivery. Amy repudiates the contract and refuses to pay anything. Van resells the goods in compliance with the Code for $1,700, incurring $200 in sales commissions but saving $250 in shipping costs. Van would recover from Amy:

a. the contract price of $2,000.
b. $500.
c. $350.
d. $250.

Answer 166

d. $250

Question 167

An express warranty requires that the warranty be expressed in words.

a. True
b. False

Answer 167

False

Question 168

Fitness for a particular purpose and merchantability are implied warranties that apply only to sales by commercial vendors.

a. True
b. False

Answer 168

False

Question 169

Bradley buys a television set that turns out to be stolen. He can sue the seller for breach of warranty.

a. True
b. False

Answer 169

True

Question 170

The Code requires that the affirmations, promises, or descriptions the seller makes be relied on by the buyer to be an express warranty.

a. True
b. False

Answer 170

False

Question 171

Jennifer purchased a used refrigerator from her next-door neighbor. When she took it home and plugged it in, the refrigerator burst into flames. The seller in this case is in breach of the implied warranty of merchantability.

a. True
b. False

Answer 171

False

Question 172

The warranty of merchantability is found in Section 402A of the Restatement of the Law of Torts.

a. True
b. False

Answer 172

False

Question 173

Contributory negligence is a defense to a warranty of merchantability cause of action.

a. True
b. False

Answer 173

False

Question 174

Section 402A of the Restatement applies only if the defective product is unreasonably dangerous.

a. True
b. False

Answer 174

True

Question 175

Oral warranties made before the execution of a written agreement containing an express disclaimer are subject to the parol evidence rule.

a. True
b. False

Answer 175

True

Question 176

Ed buys a car from a friend “as is.” The friend tells him, “In my opinion, this car is in excellent mechanical condition.” The friend has made an express warranty.

a. True
b. False

Answer 176

False

Question 177

The Magnuson-Moss Warranty Act is administered by the Federal Trade Commission.

a. True
b. False

Answer 177

True

Question 178

Despite 402A’s bar of contributory negligence in strict liability cases, some courts apply comparative negligence to strict liability cases.

a. True
b. False

Answer 178

True

Question 179

Few obstacles to recovery in warranty cases present serious problems to plaintiffs in strict liability actions brought pursuant to Section 402A because this section was drafted largely to avoid such obstacles.

a. True
b. False

Answer 179

True

Question 180

Comment (m) to Section 402A provides that the basis of strict liability rests solely in tort and, therefore, is not subject to contractual defenses.

a. True
b. False

Answer 180

True

Question 181

Under comparative negligence, the court apportions damages between parties in proportion to the degree of fault or negligence it finds against them.

a. True
b. False

Answer 181

True

Question 182

Implied warranties may be excluded by course of performance, course of dealing, or usage of trade.

a. True
b. False

Answer 182

True

Question 183

Horizontal privity pertains to remote sellers within the chain of distribution.

a. True
b. False

Answer 183

False

Question 184

Statutes of repose were enacted to give consumers more rights against large manufacturers.

a. True
b. False

Answer 184

False

Question 185

Misuse or abuse of the product is a defense to an action brought under 402A of the Restatement (Second) of Torts.

a. True
b. False

Answer 185

True

Question 186

The liability of manufacturers and sellers of goods for a defective product or for its failure to perform adequately may be based on one or more of the following: negligence, misrepresentation, violation of a statutory duty, warranty, and strict liability in tort.

a. True
b. False

Answer 186

True

Question 187

Under the CISG, if at the time of entering into the sales contract, the buyer knew or could not have been unaware of the lack of conformity, the seller is not liable for the warranty of particular purpose, ordinary purpose, or sale by sample or model.

a. True
b. False

Answer 187

True

Question 188

. The use of a sample or model is another means of creating an implied warranty.

a. True
b. False

Answer 188

False

Question 189

An implied warranty is found in the language of a sales contract.

a. True
b. False

Answer 189

False

Question 190

A warranty of title may be included only by specific language or by certain circumstances.

a. True
b. False

Answer 190

False

Question 191

As of the writing of the textbook, the Restatement (Third) of Torts: Products Liability had replaced the Second Restatement in all but four of the states.

a. True
b. False

Answer 191

False

Question 192

The main provision of the Restatement (Third) of Torts, Section 2, recognizes three types of product defects: manufacturing defects, design defects, and failure to warn, but it imposes strict liability only for manufacturing defects.

a. True
b. False

Answer 192

True

Question 193

Terrell asks a salesperson what size of water heater he should buy for a twenty-unit motel. If Terrell purchases a tank based on the salesperson’s suggestion, the salesperson’s recommendation is:

a. an express warranty of merchantability regarding the water heater.
b. an implied warranty of merchantability regarding the water heater.
c. an implied warranty of fitness for a particular purpose.
d. no warranty, but only a statement of opinion.

Answer 193

c. an implied warranty of fitness for a particular purpose.

Question 194

Which of the following would constitute a defect within the meaning of 402A of the Restatement?

a. A chair with legs designed to be attached with screws and glue but lacking the screws.
b. A small car designed to have the fuel tank next to the rear axle.
c. A flammable liquid bottled in a container without a warning label to warn users of the flammability.
d. All of these are defects within the meaning of 402A.

Answer 194

d. All of these are defects within the meaning of 402A.

Question 195

An express warranty within the meaning of the Code is created by which of the following?

a. A sample.
b. A description.
c. A promise.
d. All of these.

Answer 195

d. All of these.

Question 196

Which of the following is generally NOT a defense to a claim against a manufacturer under 402A?

a. Contributory negligence on the part of the plaintiff.
b. Express voluntary assumption of the risk.
c. Misuse or abuse of the product.
d. Subsequent alteration of the product by the plaintiff.

Answer 196

a. Contributory negligence on the part of the plaintiff.

Question 197

Implied warranties under the Code:

a. depend on the type of contract or sale entered into.
b. are a result of specific language in the sales contract.
c. continue the common law rule of caveat emptor.
d. are intended to protect the seller rather than the buyer.

Answer 197

a. depend on the type of contract or sale entered into.

Question 198

In the In Re L. B. Trucking, Inc. case:

a. warranty provisions of the UCC did not apply because the sale of goods was merely incidental to the service aspect of the contract.
b. Thomas’s statements were found by the court to be mere puffing or sales talk.
c. Southern States was found to have breached both express and implied warranties.
d. Durham did not rely on Thomas’s statements, so they could not be considered warranties.

Answer 198

c. Southern States was found to have breached both express and implied warranties.

Question 199

Whether an implied warranty arises out of the circumstances under which the parties enter into a contract may depend on:

a. the type of contract entered into.
b. the seller

’

s merchant or non-merchant status.
c. applicability of other statutes.
d. All of these.
e. None of these.

Answer 199

d. All of these

Question 200

Karen decided to sell her stair step exerciser, because she wasn’t using it as much as she thought she would. Her friend Lydia bought it from Karen for $100. The first day that Lydia used the exerciser, it fell apart, injuring Lydia’s ankle. Lydia:

a. can sue Karen for breach of the warranty of merchantability, because the exerciser is not fit for the ordinary purpose intended.
b. cannot sue Karen for breach of the warranty of merchantability, because Karen did not expressly warrant the quality of the exerciser.
c. cannot sue Karen for the warranty of merchantability because this warranty was not implied in this situation.
d. cannot sue Karen, because they are not in privity of contract.

Answer 200

c. cannot sue Karen for the warranty of merchantability because the warranty was not implied in this situation.

Question 201

Geoff’s fiancée, Susan, comes to meet his parents for the weekend. On Saturday morning, while using Geoff’s mother’s hair dryer, the blower short-circuits sending sparks across the guest room. Susan’s angora sweater and her hands are covered with tiny burns. Susan’s mother is a lawyer and wants her to sue the seller of the dryer for breach of warranty. Can she?

a. No, because horizontal privity would extend only to members of the family.
b. No, because privity would require that Geoff

’

s mother sue.
c. Yes, since she is a guest in the home of the buyer, the warranties would extend to her in most states.
d. Yes, since under the Code all reasonable users are protected from injury.

Answer 201

c. Yes since she is a guest in the home of the buyer, the warranties would extend to her in most states.

Question 202

. Greg has been in the business of selling collectible figurines for twenty years. Margaret agreed to buy a set if Greg would also bring her a display case for them. Greg bought one and sold it to Margaret along with the figurines. While placing the figurines in the display case, she ran her hand over the back edge of one of its shelves and cut herself severely. The wood was not finished on that side and nails were protruding through the shelf. Can Margaret sue Greg under strict liability?

a. Yes, because the display case was in an unreasonably dangerous condition.
b. Yes, because the display case was defective.
c. No, because she was not a true consumer under Sec. 402A.
d. No, because Greg is not a seller under Sec. 402A.

Answer 202

d. No because Greg is not a seller under Sec. 402A

Question 203

In the Womco, Inc. v. Navistar International Corporation case, the court stated the disclaimer of the warranty of:

a. merchantability must be written and mention the word “merchantability.”
b. merchantability may be oral.
c. fitness for a particular purpose may be oral or written.
d. merchantability or fitness for a particular purpose must be conspicuous, which requires that the disclaimer be in a larger type and a different color.

Answer 203

b. merchantability may be oral.

Question 204

The UCC permits a seller to limit or modify the buyer’s remedies for breach of warranty:

a. in all cases.
b. except for unconscionable limitations or exclusions of consequential damages.
c. in no cases, as this would be contrary to public policy.
d. except when the seller seeks to limit the time within which the warranty is effective.

Answer 204

b. except for unconscionable limitations or exclusions of consequential damages.

Question 205

Article 2A carries over the warranty provisions of Article 2 with relatively minor revisions that reflect differences in:

a. style.
b. leasing terminology.
c. leasing practices.
d. All of these.
e. leasing terminology but not leasing practices

Answer 205

d. All of these

Question 206

The distinction between a void and voidable title is not important in determining the rights of good faith purchasers of goods.

a. True
b. False

Answer 206

False

Question 207

The UCC “risk of loss” rules assign the loss according to who has ownership of the goods.

a. True
b. False

Answer 207

False

Question 208

Jerry bought a stereo from SX Company “on approval.” The risk of loss passed to Jerry when he took possession of the stereo.

a. True
b. False

Answer 208

False

Question 209

If the owner of goods entrusts them to a merchant, the merchant can transfer good title to the goods to a buyer in the ordinary course of business even if the original owner does not want to sell the goods.

a. True
b. False

Answer 209

True

Question 210

If the owner of goods entrusts them to a merchant, the merchant can transfer good title to the goods to a buyer in the ordinary course of business even if the original owner does not want to sell the goods.

a. True
b. False

Answer 210

False

Question 211

Fungible goods are goods for which one unit is the equivalent of any other unit.

a. True
b. False

Answer 211

True

Question 212

Duncan Supply has consigned goods to Huffman Hardware. Huffman’s creditors may not take possession of the consigned goods to satisfy their claims against Huffman.

a. True
b. False

Answer 212

False

Question 213

Future goods can be the subject of a present sale.

a. True
b. False

Answer 213

False

Question 214

. In a contract where the buyer is to pick up the goods at the seller’s place of business and the seller is a merchant, the risk of loss passes to the buyer when the goods are tendered to the buyer.

a. True
b. False

Answer 214

False

Question 215

The Code has expanded the rights of good faith purchasers with respect to sales by minors.

a. True
b. False

Answer 215

True

Question 216

When goods have been damaged without the fault of either the seller or buyer, if the risk of loss is placed on the seller, the seller has no right to recover the purchase price from the buyer and has no right to the return of the damaged goods.

a. True
b. False

Answer 216

False

Question 217

A void title may allow good title to pass in special circumstances.

a. True
b. False

Answer 217

False

Question 218

Security interests, defined by the Code as interests in personal property or fixtures that ensure payment or performance of obligations, are governed by Article 6 of the UCC.

a. True
b. False

Answer 218

False

Question 219

Kevin delivers to Zach nonconforming goods. Zach accepts, but later discovers the defect and rightfully revokes acceptance. If the goods are destroyed through no fault of Kevin or Zach:

a. if Zach’s insurance is adequate, it will cover the loss and Kevin would not bear any of the loss.
b. Kevin would bear the loss of these nonconforming goods, whether or not Zach has insurance.
c. Zach will bear the loss, whether he has insurance or not.
d. Kevin and Zach will equally share the loss.

Answer 219

a. if Zach’s insurance is adequate, it will cover the loss and Kevin would not bear any of the loss.

Question 220

Which of the following is true regarding identification of the goods under Article 2?

a. Only the buyer can identify the goods.
b. Identification of existing goods gives the buyer a special property right.
c. Identification of fungible goods occurs when the seller separates the contracted units from the whole.
d. All of these are correct.

Answer 220

b. Identification of existing goods gives the buyer a special property right.

Question 221

A sale exists after the buyer takes:

a. the title to the goods.
b. the risk of loss on the goods.
c. an insurable interest in the goods.
d. a special property interest in the goods.

Answer 221

a. the title to the goods.

Question 222

Article 6 of the Code does not:

a. apply to sales of goods in the ordinary course of business.
b. define

“

bulk transfer

”

as any transfer in bulk and not in the ordinary course of business.
c. apply to merchants whose principal business is the sale of merchandise from stock.
d. include the transfer of a substantial part of equipment as a bulk transfer under any circumstances.
e. All of the answers are correct.

Answer 222

a. apply to sales of goods in the ordinary course of business.

Question 223

Under the CISG:

a. loss of, but not damage to, the goods after the risk of loss has passed to the buyer discharges the buyer from the obligation to pay the purchase price.
b. if the sales contract involves the carriage of the goods and the seller is not obligated to hand them over at a particular destination, risk of loss passes to the buyer when the goods are handed over to the first carrier.
c. if the sales contract does not involve carriage of the goods, the risk of loss passes to the buyer when the goods are tendered to him.
d. All of the answers are correct.

Answer 223

b. if the sales contract involves the carriage of the goods and the seller is not obligated to hand them over at a particular destination, risk of loss passes to the buyer when the goods are handed over to the first carrier.

Question 224

Alex sees Mona’s ring, and he thinks it is very valuable. He uses physical duress to cause her to give him the ring, and he quickly sells it to unsuspecting Hanna’s Antique Jewelry Shop for $5,000. A month later, Mona discovers her ring on sale at Hanna’s. Can Mona get the ring back?

a. Yes, since a true owner can always recover her own property.
b. Yes, since Alex had voidable title to the ring.
c. Yes, since Alex had void title to the ring.
d. No, since Hanna was a good faith purchaser for value.

Answer 224

c. Yes, since Alex had void title to the ring.

Question 225

With regard to Article 6 of the Uniform Commercial Code, which of the following is accurate?

a. The National Conference of Commissioners on Uniform State Laws and the American Law Institute jointly issued a recommendation stating

“

that changes in the business and legal contexts in which sales are conducted have made regulation of bulk sales necessary.

”

b. Nearly all of the states have repealed Article 6 of the UCC.
c. Article 60 is a revision of Article 6.
d. All of these are accurate.
e. None of these are accurate.

Answer 225

b. nearly all of the states have repealed Article 6 of the UCC.

Question 226

Jack is a guest at Harry’s home. While there, he goes into the library and picks up a music box that is part of Harry’s collection. Jack overwinds the stem and it breaks. Hoping Harry won’t notice, Jack takes the music box for repair to a jeweler who sells similar ones. The jeweler fixes it, but forgets to tag it and an unsuspecting clerk sells it to Robert. Jack is frantic. Can Harry get the music box from Robert?

a. No, the jeweler gives good title to a bona fide purchaser for value.
b. No, the jeweler was not a merchant with regard to music boxes.
c. Yes, Robert was not a buyer in the ordinary course of business.
d. Yes, Robert has assumed only Jack

’

s title, which is no title at all.

Answer 226

d. Yes, Robert has assumed only Jack’s title, which is no title at all.

Question 227

Tom makes pottery in his spare time. Jackie asks if he’d sell her a covered bowl. Later that day, he telephones her and says she can have it for $50. She agrees, so he tells her he’ll wrap it up for her and it will be ready in half an hour. Six days later, Jackie had not yet come for the bowl when a dog knocks the box off the shelf and breaks the bowl. Who is liable?

a. Tom, because Jackie had not yet received the bowl.
b. Tom, because the bowl was in his possession when the dog broke it.
c. Jackie, because she had identified the bowl.
d. Jackie, because Tom had tendered the bowl to her nearly a week earlier.

Answer 227

a. Tom, because Jackie had not yet received the bowl.

Question 228

In Robinson v. Durham, the court found:

a. the Robinsons were good faith purchasers for value when they bought the car for their business, and they had good title which they passed to Durham.
b. the Robinsons had a voidable title, and they passed good title to Durham, who was a good faith purchaser for value.
c. there was a breach of warranty of title between the Robinsons and Durham.
d. the Robinsons obtained no title from the thief, but they passed good title to Durham since he was a good faith purchaser for value.

Answer 228

c. there was a breach of warranty of title between the Robinsons and Durham.

Question 229

When delivery is to be made without moving the goods, unless otherwise agreed, title passes:

a. at the time and place of contracting under all circumstances.
b. when a document of title is created if a negotiable document of title is involved.
c. when the goods are identified if they were not identified at the time of contracting.
d. at the time the seller completes performance.

Answer 229

c. when the goods are identified if they were not identified at the time of contracting.

Question 230

Mary orders a dress for $1,000. The designer sends the wrong size. Mary doesn’t inspect the dress on arrival and therefore doesn’t discover the nonconformity until the day before she is to wear it to her first board meeting as president of Tri-State Engineering. She calls the designer and sends the dress back, but it is lost in the mail. Mary’s insurance would cover $400 of the loss. The designer’s insurance would cover $900. Who is liable?

a. Mary will bear the whole loss because she accepted the goods.
b. The designer will bear the whole loss because Mary returned the nonconforming goods.
c. Mary will owe $100, the designer $900.
d. The risk is Mary

’

s to the extent of $400.

Answer 230

d. The risk is Mary’s to the extent of $400.

Question 231

Amanda ordered fifty personalized sweatshirts from King Manufacturing Company. After the shirts were specially imprinted, but before they were mailed, Amanda called King Manufacturing to disavow the contract. The next day the sweatshirts were stolen. In this case:

a. Amanda must pay the entire purchase price, because she breached the contract.
b. King Manufacturing will have to bear the entire loss, because it had not yet mailed the shirts.
c. Amanda must bear the entire loss, because the shirts were identified to the contract.
d. King must first seek payment from its insurance carrier, and then collect from Amanda for any amount not covered by insurance.

Answer 231

d. King must first seek payment from its insurance carrier, and then collect from Amanda for any amount not covered by insurance.

Question 232

In a sale on approval:

a. possession, but not title, is transferred to the buyer for a stated period of time.
b. possession and title are transferred to the buyer for a stated period of time.
c. title, but not possession, is transferred to the buyer for a stated period of time.
d. neither title nor possession is transferred to the buyer for a stated period of time.

Answer 232

a. possession, but not title, is transferred to the buyer for a stated period of time.

Question 233

The Heinrich v. Titus-Will Sales, Inc. case stands for the principle that:

a. the UCC requires proper state licensing for a company claiming to be a merchant to actually have merchant status.
b. a buyer in the ordinary course of business acquires good title when buying from a merchant seller who was entrusted with possession of the goods.
c. risk of loss depends on who has title to the goods at the time the goods are damaged or destroyed.
d. a void title is no title.

Answer 233

b. a buyer in the ordinary course of business acquires good title when buying from a merchant seller who was entrusted with possession of the goods.