biz law exam 3 review questions

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1. Lede entered into a signed contract with Sparus Corp. whereby Lede was to sell 20 computers to Sparus. Delivery was to be made on October 12, 2019, (time was of the essence), by Lede delivering to Sparus a warehouse receipt covering the computers which were stored in a public warehouse. The contract did not specify whether the warehouse receipt was to be negotiable or non-negotiable. Which of the following statements is true or false? A. If Sparus accepts a non-negotiable warehouse receipt, title to the computers passes to Sparus after Sparus is in possession of the warehouse receipt for a reasonable period of time. _________ B. Had Lede tendered a negotiable warehouse receipt to Sparus, title to the computer passes to Sparus upon delivery to it of the warehouse receipt. ________ C. Immediately after a non-negotiable warehouse receipt is delivered to Sparus (and assuming Sparus did not then object to it), risk of loss for the computers remains on Lede. _______

1. A. Fa; B. Tr; C. Tr

1. Peters, a mechanical engineer, was employed by BMI Motors for twenty-six years until he was discharged. At the time his employment was terminated, Peters was head of BMI's Mechanical Development Department. Peters sued BMI for wrongful discharge. He contends that he was discharged as a result of a conspiracy among his fellow executives to force him out of his employment because he had legitimately complained about certain deceptive practices of BMI and because he had refused to give the government false information although urged to do so by his superiors. Further he had, much to the dismay of his supervisors, undertaken to correct certain alleged misrepresentations made to the government. BMI claims that Peters' employment was terminable at the will of BMI for any reason and with or without cause. Decision?

1. Judgment for Peters. In this case, the public policy exception to the at-will doctrine will likely result in a ruling against BMI. Peters' actions were in furtherance of good public policy goals (i.e., truthful reporting to the government) and it appears that he was terminated for these actions. Therefore, even though Peters was an at-will employee, his discharge was wrongful because it was intended to retaliate against Peters for doing something that was praiseworthy and in support of good public policy.

1. Best BMW, Inc. is engaged in the business of selling and servicing new and used BMW automobiles. Its service department is located in a separate building adjacent to the new-car showroom and used-car lot. The service department consists of four repair stalls, a parts room and an office used for billing customers. As a courtesy to its customers who need repair work done and can't deliver their cars to Best during normal working hours, Best allows these "early bird customers" to park their cars in a small parking area adjacent to the service department the night before the work is scheduled to be done. Attached to the outside wall near one of the service department garage doors is a box which contains large envelopes with printed instructions to customers who want to take advantage of the "early bird" program. The instructions provide that the customer is to answer all the questions printed on the envelope (e.g., name, address, type of auto, work requested, etc.). The customer is required to sign the envelope in a designated space. Immediately above the signature line the following is printed: "Best BMW, Inc. is not responsible for damage to, theft of, or other loss to any automobile left for repair by customers using our early bird program." Also, the customer is instructed to put a set of his car keys in the envelope, seal it and deposit it in a small opening next to the box that contains the blank envelope. The deposited envelopes fall into an open box and are retrieved the following morning at 7:00 a.m. by the service manager who then schedules the work to be done on the customer's car. The box into which the envelopes fall is readily observable through the door which is constructed of about two-thirds glass. On November 9, late in the evening, Mary Mason took her car to Best to have some routine maintenance work done the next day. She took advantage of the "early bird" program and properly filled out the envelope and deposited it, with her car keys inside, in the opening in the wall next to the envelope box. That night, someone broke a pane of glass in the garage door and reached through into the envelope box and took the envelope with Mason's keys inside. Mason's car, along with $1,000 worth of stereo equipment she had in the trunk, was missing the next day when the service manager came to work. Mason claims that Best is liable for the loss of her car and the stereo equipment. Of course, Best thinks otherwise. Who is correct and why?

1. The issue in this question is whether or not a bailment exists. (a) A bailment exists as to the car because it is personal property and Best has control by virtue of having control over the keys to the car. No bailment exists as to the stereo equipment because of the "things within things" rule (that is, Best cannot become a bailee as to property it did not know about). (b) This is a mutual benefit bailment and, therefore, the bailee must exercise the reasonable level of care with regard to the bailed property. (c) The exculpatory language (the liability disclaimer) will not be effective to protect Best because it was not brought to the attention of Mason (and, thus, is not part of the contract) and because it probably violates good public policy. (d) Best is presumed liable as to the loss of the car, but not as to the loss of the stereo equipment. Given the facts, Best will not be able to overcome this presumption because it did not exercise ordinary care (given the location of the key box near the window).

10. Morris is a salesperson for Acme, Inc., a manufacturer of household appliances. Morris receives a commission on all sales made and no further compensation. He drives his own automobile, pays his own expenses, and calls on whom he pleases. While driving to make a call on a potential customer, Morris negligently collides with Hudson. Hudson sues Acme and Morris. Who should be held liable?

10. Employees are liable for any negligent conduct that occurs within the scope of their employment. The critical question in this case is whether Morris is an employee of Acme or is an independent contractor. Acme had no control over Morris since Morris made the decision as to which customers to see, as well as driving his own car. Therefore, Morris is most likely an independent contractor and therefore Acme would not be liable to Hudson. Hudson would, however, be successful in a suit against Morris since persons are responsible for their own negligent conduct.

10. The plaintiff brings this cause of action against a manufacturer for the loss of his leg below the hip. The leg was lost when caught in the gears of a screw auger machine sold and installed by the defendant. Shortly before the accident, the plaintiff's co-employees had removed a covering panel from the machine in order to do repair work. When finished with their repairs, they replaced the panel with a single piece of cardboard instead of restoring the equipment to its original condition. The plaintiff stepped on the cardboard in the course of his work and fell, catching his leg in the moving parts. Decision?

10. In this case the court held that the machine contained a design defect because it was extremely difficult to disassemble for common repairs and it should have been equipped with an automatic safety interlock device to prevent its operation when it was disassembled. What about possible defenses? (1) Subsequent alteration: this was held to be inapplicable in that the disassembly was foreseeable and the manufacturer should have acted to eliminate the problem. (2) Voluntary assumption of the risk: this is only applicable if the plaintiff knew of the risk. (3) Contributory negligence: this is not a valid defense under Section 402A. Comparative negligence may be raised.

11. Vlases, a coal miner who had always raised small flocks of chickens, spent two years building a new two-story chicken coop large enough to house 4,000 chickens. After is completion, he purchased 2,200 one-day-old chicks from Montgomery Ward for the purpose of producing eggs for sale. He had selected them from Ward's catalog, which stated that these chicks, hybrid Leghorns, were noted for their excellent egg production. Vlases had equipped the coop with brand-new machinery and had taken further hygiene precautions for the chicks' health. Almost one month later, Vlases noticed that their feathers were beginning to fall off. A veterinarian's examination revealed signs of drug intoxication and hemorrhagic disease in a few of the chicks. Eight months later, it was determined that the chicks were suffering from visceral and ocular leukosis, or bird cancer, - Section 15-25 - which reduced their egg-bearing capacity to zero. Avian leukosis may be transmitted either genetically or by unsanitary conditions. Subsequently, the disease infected the entire flock. Vlases then brought suit against Montgomery Ward for its breach of the implied warranties of merchantability and of fitness for a particular purpose. Ward claimed that there was no way to detect the disease in the one-day-old chicks, nor was there medication available to prevent this disease from occurring. Montgomery Ward brought this appeal from a judgment in favor of Vlases. Decision?

11. Judgment for Vlases affirmed. The implied warranty of merchantability and the implied warranty of fitness for a particular purpose are designed to protect the - Section 15-28 - buyer from bearing the loss when the goods do not conform to normal commercial standards or meet the buyer's particular purpose. The seller is therefore liable for the breach of these warranties even if he is unable to discover the defect in the goods or cure the damage if it could be ascertained. Under both warranties, however, the goods must be defective at the time of delivery to hold the seller liable. Here the avian leukosis definitely rendered the chicks commercially inferior and unmerchantable. They also were unfit for the purpose of laying eggs, for which Vlases had purchased them, relying on Ward's catalogue advertisement. Vlases had taken the necessary hygienic precautions in the handling, care, and housing of the chicks. There is a strong inference, then, that the chicks had contracted the disease genetically rather than because of unsanitary conditions. Therefore, they were of inferior quality at the time of the delivery, although the disease was not discovered until eight months later. Despite its inability to detect or prevent the leukosis in the one-day-old chicks, Ward is liable for the breach of both warranties

11. Helper, a delivery boy for Gunn, delivered two heavy packages of groceries to Reed's porch. As instructed by Gunn, Helper rang the bell to let Reed know the groceries had arrived. Mrs. Reed came to the door and asked Helper if he would deliver the groceries into the kitchen because the bags were heavy. Helper did so, and on leaving he observed Mrs. Reed having difficulty in moving a cabinet in the dining room. He undertook to assist her, but being more interested in watching Mrs. Reed than in noting the course of the cabinet, he failed to observe a small, - Section 17-18 - valuable antique table, which he smashed into with the cabinet and totally destroyed. Does Reed have a cause of action against Gunn for the value of the destroyed antique?

11. No. Gunn is liable for the negligent acts of his employee committed within the scope of his employment, but is not liable for acts of an employee or agent that are unrelated to performance of the duties he was employed to perform. The duties of the delivery boy included only delivering groceries to the front porch and ringing the bell and not only did not entail carrying the goods inside and certainly did not entail his aiding the customer in a chore such as this. His act was voluntary and merely an act of courtesy, and having so volunteered, the act became a joint enterprise of Mrs. Reed and helper for the accomplishment of special business of Mrs. Reed which was not the business of Gunn.

12. Alice was Peter's traveling salesperson and was also authorized to collect customer accounts receivable. Before the agreed termination date of the agency, Peter wrongfully discharged Alice. Alice then called on Tom, an old customer, and collected an account receivable from Tom. She also called on Laura, a new prospect, as Peter's agent, secured a large order, collected the price of the order, sent the order to Peter, and disappeared with the collections. Peter delivered the goods to Laura per the order. (a) Peter sues Tom for his account receivable. Decision? (b) Peter sues Laura for the agreed price of the goods. Decision?

12. (a) Decision for Tom. Peter wrongfully terminated the agency. In such cases, the principal, in order to protect himself against possible future liability for the acts of his former agent, must give notice to third persons of the termination of the agency. Where, as here, a third person, Tom, has previously dealt on credit with Peter through his agent, Alice, Peter must give him actual notice. Since Tom did not receive notice from Peter, either oral or written, he had no reason to suspect that the agency relationship between Peter and Alice had been terminated and was justified in paying his account to Alice. (b) Decision for Laura. Although the authority of Alice to collect had been terminated before Alice dealt with Laura, and Laura had not been a customer of Peter prior to such termination, if Laura knew of the agency while it was in force, Alice had continuing apparent authority until Laura received constructive notice of the termination of the agency relationship. Since Peter did not publish such notice in a newspaper of general circulation in the place where the agency is conducted, Peter is bound by Alice's acts. If Laura had not known of the agency, then Alice was without apparent authority, but Peter's acceptance of the order and shipment of the goods was a ratification of Alice's unauthorized act.

12. Franks Co. contracted to sell to Acme Construction Corp. 1,000 cases of firstquality blue roofing shingles which were to be one-quarter inch thick. The contract required that delivery be made by March 1. Franks made delivery on February 15, and was notified by Acme on February 17 that 100 cases contained shingles which were less than one-quarter inch thick and 50 additional cases contained shingles which were off-color. These cases had inadvertently been included in the shipment as the result of a new employee's selecting some cases from an area which was used for storing "seconds" (that is, shingles which had manufacturing defects). Franks immediately notified Acme that 150 replacement would be promptly shipped to Acme. The cases were delivered on February 28, but Acme refused to accept them. Acme insisted that the contract had been breached and that Acme was no longer obligated to accept or pay for the shingles. Acme also indicated all cases of shingles would be returned to Franks. Is Acme titled to take this position? Discuss.

12. Acme is not entitled to take that position. Frank has the right to cure the nonconforming shipment of shingles provided it gives notice of its intention to do so (which it did), and it does so within the contract time (i.e., by March 1).

13. Box Corporation entered into a written contract with Sax Company whereby Box was to purchase from Sax four Zion Model 85A radios. The radios were to be - Section 14-10 - delivered by November 10, time being of the essence. Sax delivered the radios to Box just before the close of business on November 10. (a) On November 11, the purchasing agent of Box inspected the shipment from Sax and determined that Sax had shipped the wrong model of radio. The purchasing agent contacted Sax and advised Sax's salesman of this fact. The salesman indicated that he would refuse such a delivery and that he was going to buy the correct model of radios elsewhere. May Box refuse to accept shipment as proposed by Sax. Why or why not? (b) Assume the radios (the wrong models that were shipped) were stolen the night of November 10. Sax claims it is entitled to be paid for the radios despite the fact that they had been stolen. Is Sax correct? Why or why not?

13. (a) Box may refuse the shipment. Since time was of the essence, delivery of a conforming shipment on November 11 was too late. - Section 14-13 - (b) Sax is incorrect. Since the goods were nonconforming (that is, not as called for by the contract), risk of loss remained on Sax until cure by Sax or acceptance of the goods by Box.

14. Bates, an appliance retailer, ordered 100 Model X-A radios from Watson, a wholesaler, at a unit price of $50 cash, F.O.B. - Watson's loading dock. Watson shipped the radios to Bates. Which of the following statements are true or false? A. During shipment, risk of loss for the goods was on Bates. _______ B. Your answer to question A. would be different in all cases if Watson had not notified Bates that the goods had been shipped. _______ C. If Watson had shipped Model X-B radios to Bates, risk of loss during shipment would be on Bates until Bates rejects the non-conforming shipment. ________ D. Title to the radios would pass to Bates at the time they were turned over to the carrier by Watson regardless of whether Model X-A's or Model X-B's were shipped. _________ E. Bates must inspect all of the goods at the time of delivery or waive any defects. ________ F. Bates must pay the freight expense associated with the shipment of the radios by Watson. ________

14. A. True; B. False: C. False; D. True; E. False; F. True

16. On May 9, Jackson entered into a contract with Ace Appliances, Inc. whereby Ace had agreed to sell Jackson a stereo system for $1,100. The stereo system which was the subject of the contract was one of several hundred that Ace had in stock. The agreement provided that Jackson was to take delivery of the system on May 12. On May 11, prior to delivery to Jackson, Ace's store was destroyed by fire and Ace was unable to make delivery of the stereo system on May 12. Jackson sued Ace for breach of contract (because a similar system would cost Jackson $1,600 if he purchased it elsewhere). Ace defended claiming that it was excused from performance under the contract because of the fire. Is Ace correct? Why or why not?

16. Ace is incorrect. Because risk of loss had not yet passed to Jackson, and because the contract was not the type that required identification of the goods at the time the contract was made (identification would occur after the contract was made), UCC Section 2-613 does not excuse Ace from performing.

17. Franks Co. contracted to sell to Acme Construction Corp. 1,000 cases of firstquality blue roofing shingles which were to be one-quarter inch thick. The contract required that delivery be made by March 1. Franks made delivery on February 15, and was notified by Acme on February 17 that 100 cases contained shingles which were less than one-quarter inch thick and 50 additional cases contained shingles which were off-color. These cases had inadvertently been included in the shipment as the result of a new employee's selecting some cases from an area which was used for storing "seconds" (that is, shingles which had manufacturing defects). Franks immediately notified Acme that 150 replacement would be promptly shipped to Acme. The cases were delivered on February 28, but Acme refused to accept them. Acme insisted that the contract had been breached and that Acme - Section 14-15 - was no longer obligated to accept or pay for the shingles. Acme also indicated all cases of shingles would be returned to Franks. Is Acme titled to take this position? Discuss.

17. Acme is not entitled to take that position. Frank has the right to cure the nonconforming shipment of shingles provided it gives notice of its intention to do so (which it did), and it does so within the contract time (i.e., by March 1).

18. Angler Corp., a food distributor, entered into a contract with Mason Restaurants, Inc. whereby Angler agreed to sell 100 pounds of grade A tuna to Mason. The contract provided that the goods were to be shipped by Angler to Mason "F.O.B.-- Angler's loading dock". Angler shipped the wrong grade of tuna to Mason. During shipment, the tuna was destroyed in an accident involving the common carrier's truck. Mason has refused to pay for the tuna. Angler contends that since Mason had not rejected the tuna (because it was never tendered for delivery to Mason), risk of loss was on Mason because of the shipping terms included in the contract. Is Angler correct? Discuss.

18. Angler is not correct. Even though the contract is shipment contract and, therefore, risk of loss is normally on the buyer (Mason) during shipment, Angler shipped the wrong grade of tuna (i.e., a nonconforming shipment); and, as a result, Mason would have had the right to reject the goods at the time of the accident. Therefore, risk of loss remained with Angler (and was on Angler at the time of the accident and resulting loss to the goods).

19. Box Corporation entered into a written contract with Sax Company whereby Box was to purchase from Sax four Zion Model 85A radios. The radios were to be delivered by November 10, time being of the essence. Sax delivered the radios to Box just before the close of business on November 10. (a) On November 11, the purchasing agent of Box inspected the shipment from Sax and determined that Sax had shipped the wrong model of radio. The purchasing agent contacted Sax and advised Sax's salesman of this fact. The salesman indicated that he would refuse such a delivery and that he was going to buy the correct model of radios elsewhere. May Box refuse to accept shipment as proposed by Sax. Why or why not? (b) Assume the radios (the wrong models that were shipped) were stolen the night of November 10. Sax claims it is entitled to be paid for the radios despite the fact that they had been stolen. Is Sax correct? Why or why not?

19. (a) Box may refuse the shipment. Since time was of the essence, delivery of a conforming shipment on November 11 was too late. (b) Sax is incorrect. Since the goods were nonconforming (that is, not as called for by the contract), risk of loss remained on Sax until cure by Sax or acceptance of the goods by Box.

2. Lede entered into another signed contract with Sparus whereby Lede was to sell ten computers to Sparus. The computers were to be available on October 21, 2019, but the contract was silent with regard to Lede's obligations to deliver the computers to Sparus or with regard to Sparus' payment obligation. Which of the following statements is true or false? A. Because the contract is silent with regard to delivery, the presumption is that the computers must be delivered by Lede to Sparus' place of business pursuant to a shipment contract. ________ B. Under the circumstances risk of loss for the computers will pass to Sparus when it takes possession of the computers at Lede's place of business. ________ C. Sparus will be obligated to pay for the computers at the time they are tendered to it by Lede. _______ D. If the wrong computers are tendered to Sparus and, therefore, it refuses to accept delivery, risk of loss for the computers shifts to Lede to the extent Sparus has a deficiency in its effective insurance coverage. _________ E. If the correct computers are tendered to Sparus on October 21, 2019, and Sparus refuses to accept delivery, risk of loss for the computers shifts to Sparus for a commercially reasonable time to the extent of a deficiency in Lede's effective insurance coverage. _________ - Section 14-9 - If the contract between Lede and Sparus had required that Lede ship the computers to Sparus (but was otherwise silent as to the specific terms of shipment), which of the following statements is true or false F. Sparus would be obligated to pay the freight expense associated with the shipment of the computers. ________ G. Sparus must inspect all of the computers at the time they are delivered to it or waive the right to sue for any defects in the computers it later discovers. ________ H. Risk of loss during shipment would be on Sparus even if the computers shipped were the incorrect model. _______ I. Title to the computers would pass to Sparus at the time they were turned over to the carrier by Lede regardless of whether the correct model of computer was shipped by Lede. ________ J. Risk of loss during shipment would not be on Sparus if Lede failed to give notice to Sparus that the goods had been shipped (assuming the correct goods were received on time). ________

2. A. Fa; B. Tr; C. Tr; D. Fa; E. Tr; F. Tr; G. Fa; H. Fa; I. Tr; J. Fa

2. Sparus Corporation entered into a signed contract with Baker Corporation whereby Sparus was to sell 20 computers to Baker. Delivery was to be made on October 12, 2020, by Sparus delivering to Baker a warehouse receipt (a document of title) covering the computers which were stored in a public warehouse. The contract did not specify whether the warehouse receipt was to be negotiable or non-negotiable. Which of the following statements is true or false? A. Title will pass to Baker when Baker takes possession of the computers from the warehouse. _________ B. Title will pass to Baker when Sparus delivers the document of title to Baker. ________ C. If Sparus delivers a negotiable document of title to Baker risk of loss for the computers passes to baker upon receipt of the negotiable document of title. _______

2. A. False; B. True; C. True

2. Please re-read question 4: Products Liability: Warranties and Strict Liability. Best's first defense to Bart's lawsuit is that Monday had no authority to give any express warranties and, therefore, Best was not responsible for any statements made by Monday which might constitute express warranties. Is Best correct? Why or why not?

2. Best is not correct. Monday had apparent authority to give express warranties because car salespeople customarily have such authority. Burt is not bound by the limitation of Monday's authority because he was unaware of it.

2. At Whirlpool's manufacturing plant in Ohio, overhead conveyors transported household appliance components throughout the plant. A wire mesh screen was positioned below the conveyors in order to catch falling components and debris. Maintenance employees frequently had to stand on the screens to clean them. In 1973, Whirlpool began installing heavier wire because several employees had fallen partly through the old screens and one had fallen completely through to the plant floor. At this time, the company warned workers to walk only on the frames beneath the wire but not on the wire itself. Before the heavier wire had been completely installed, a worker fell to his death through the old screen. A short time after this incident, Deemer and Cornwell, two plant employees, met with the plant safety director to discuss the mesh, to voice their concerns, and to obtain the name, address, and telephone number of the local Occupational Safety and Health Administration (OSHA) representative. The next day, the two employees refused to clean a portion of the old screen. They were then ordered to punch out for the remainder of the shift without pay and also received written reprimands, which were placed in their employment files. Secretary of Labor Marshall brought suit, claiming that Whirlpool's actions against Deemer and Cornwell constituted discrimination in violation of the Occupational Safety and Health Act. Decision?

2. Decision for Secretary of Labor Marshall. When an employee is ordered by his employer to work under conditions that the employee reasonably believes pose an imminent risk of death or serious bodily injury, and the employee has reason to believe that there is insufficient time to seek effective redress from his employer or to apprise OSHA of the danger, he may refuse to expose himself to the dangerous condition, without being subjected to "subsequent discrimination" by his employer. Whirlpool Corp. v. Marshall, 445 U.S. 1, 100 S.Ct. 883 (1980).

2. At the start of the social season, Aunt Lavinia purchased a hula skirt in Sadie's dress shop. The saleswoman told her: "This superior garment will do things for a person." Aunt Lavinia's houseguest, her niece, Florabelle, asked and obtained her aunt's permission to wear the skirt to a masquerade ball. In the midst of the festivity, where there was much dancing, drinking, and smoking, the long skirt brushed against a glimmering cigarette butt. Unknown to Aunt Lavinia and Florabelle, its wearer, the garment was made of a fine unwoven fiber that is highly flammable. It burst into flames, and Florabelle suffered severe burns. Aunt Lavinia notified Sadie of the accident and of Florabelle's intention to recover from Sadie. Florabelle seeks to recover damages in an action against Sadie, the proprietor of the dress shop, and Exotic Clothes, Inc., the manufacturer from which Sadie purchased the skirt. Decision?

2. Florabelle can recover from Sadie and from Exotic Clothes. Lack of horizontal privity is no defense as to Sadie because Florabelle is a statutory third-party beneficiary under Section 2-318 of the UCC. Moreover, vertical privity is no defense for the manufacturer because by the great weight of authority this type of defense is no longer recognized. Moreover, lack of privity is not a defense to a cause of action based upon strict liability in tort. More specifically: Express warranties of seller: The statement of a salesperson that a product is wonderful or that it will enhance a person's appearance is seller's talk and mere "puffing" without legal significance. However, in this case it is questionable whether the salesperson's statement that the garment is "superior" is merely sales talk or constituted an express warranty. Most likely, a court would hold this statement to be an express warranty under Section 2-313 of the UCC. Implied warranty of merchantability: A merchant seller impliedly warrants that the goods he sells are reasonably fit for their ordinary purpose. UCC Section 2- 314. Here, a dress which bursts into flames upon contact with a lighted cigarette is not of merchantable quality. Strict liability in tort: An item of clothing which is highly flammable is a defective product which is unreasonably dangerous to the user or consumer. Accordingly, Florabelle will prevail under an implied warranty of merchantability theory and a strict liability in tort theory.

20. Bates, an appliance retailer, ordered 100 Model X-A radios from Watson, a wholesaler, at a unit price of $50 cash, F.O.B. - Watson's loading dock. Watson shipped the radios to Bates. Which of the following statements are true or false? A. During shipment, risk of loss for the goods was on Bates. _______ B. Your answer to question A. would be different in all cases if Watson had not notified Bates that the goods had been shipped. _______ C. If Watson had shipped Model X-B radios to Bates, risk of loss during shipment would be on Bates until Bates rejects the non-conforming shipment. ________ D. Title to the radios would pass to Bates at the time they were turned over to the carrier by Watson regardless of whether Model X-A's or Model X-B's were shipped. _________ E. Bates must inspect all of the goods at the time of delivery or waive any defects. ________ - Section 14-16 - F. Bates must pay the freight expense associated with the shipment of the radios by Watson. ________

20. A. Tr; B. Fa: C. Fa; D. Tr; E. Fa; F. Tr

22. On May 9, Jackson entered into a contract with Ace Appliances, Inc. whereby Ace had agreed to sell Jackson a stereo system for $1,100. The stereo system which was the subject of the contract was one of several hundred that Ace had in stock. The agreement provided that Jackson was to take delivery of the system on May 12. On May 11, prior to delivery to Jackson, Ace's store was destroyed by fire and Ace was unable to make delivery of the stereo system on May 12. Jackson sued Ace for breach of contract (because a similar system would cost Jackson $1,600 if he purchased it elsewhere). Ace defended claiming that it was excused from performance under the contract because of the fire. Is Ace correct? Why or why not?

22. Ace is incorrect. Because risk of loss had not yet passed to Jackson, and because the contract was not the type that required identification of the goods at the time the contract was made (identification would occur after the contract was made), UCC Section 2-613 does not excuse Ace from performing

3. Brown contracted to buy sixty cases of Lovely Brand canned corn from Smith, a seller located in Toledo, at a contract price of $600. Based on the contract, Smith selected and set aside sixty cases of Lovely Brand canned corn and tagged them "For Brown." The contract required Smith to ship the corn to Brown via Target Railroad, F.O.B. Toledo. Before Smith delivered the corn to the railroad, the sixty cases were stolen from Smith's warehouse. (a) Who is liable for the loss of the sixty cases of corn, Brown or Smith? Discuss. (b) Suppose Smith had delivered the corn to the railroad in Toledo. After the corn was loaded on a freight car but before the train left the yard, the car was broken open and its contents, including the corn, were stolen. Who is liable for the loss, Brown or Smith? Discuss. (c) Would your answer in question (b) be the same if this contract were F.O.B. Brown's warehouse, all other facts remaining the same? Discuss

3. (a) Smith, the seller, has the risk of loss. Although the goods have become identified to the contract as existing goods as to which the contract refers and Brown has a specific property in them under Section 2-501 of the UCC, this does not cause title or risk of loss to pass to the buyer. Where the contract requires the seller to ship the goods by carrier, and not to deliver them at a particular destination, risk of loss passes to the buyer - Section 14-17 - when the goods are duly delivered to the carrier. UCC Section 2- 509(1)(a). (b) Brown, the buyer, bears the risk of loss. The contract was F.O.B.-Toledo, where the goods were duly delivered to the carrier. UCC Section 2- 509(1)(a). (c) No, under the F.O.B.- Brown's Warehouse term, Smith would bear the risk of loss until the goods were duly delivered to their destination. UCC Section 2-509(1)(b).

3. If the contract between Baker and Sparus had required that Sparus ship the computers to Baker (but was otherwise silent as to the specific terms of shipment), which of the following statements is true or false A. The contract would be presumed to be shipment contract. _______ B. Title would be transferred to Baker when the goods are delivered to Baker at its place of business. ______ C. Baker must inspect all of the computers at the time they are delivered to it or waive the right to sue for any defects in the computers it later discovers. ________ D. Risk of loss during shipment would be on Baker even if the computers shipped were the incorrect model. _______ - Section 14-7 - E. Title to the computers would pass to Baker at the time they were turned over to the carrier by Sparus regardless of whether the correct model of computer was shipped by Sparus. ________

3. A. True; B. False; C. False; D. False; E. True

3. Janet, a twenty-year-old woman, applied for a position driving a truck for Federal Trucking, Inc. Janet, who is 5'4" tall and weighs 135 lbs, was denied the job because the company requires that all employees be at least 5'6" tall and weigh at least 150 lbs. Federal justifies this requirement on the basis that its drivers are frequently forced to move heavy loads in making pickups and deliveries. Janet brings a cause of action. Decision?

3. Janet would prevail under the Civil Rights Act of 1964. Height and weight tests are questionable on their face in that they disproportionally act across gender and hence the courts have placed upon employers the burden of justifying such restrictions. As stated in Griggs v. Duke Power, the Civil Rights Act of 1964 prohibits "not only overt discrimination but also practices that are fair in form, but discriminatory in operation". In this situation, other less arbitrary tests could be used, for instance Federal Trucking could have employed a strength test or could equip its truck with equipment to allow for the easier movement of heavy loads. - Section 18-19 -

4. Brown contracted to buy six hundred cases of Lovely Brand canned corn from Smith, a seller located in Toledo, at a contract price of $60,000. Based on the contract, Smith selected and set aside six hundred cases of Lovely Brand canned corn and tagged them "For Brown." The contract required Smith to ship the corn to Brown via Target Railroad pursuant to a "shipment contract." Before Smith delivered the corn to the railroad, the six hundred cases were stolen from Smith's warehouse. (a) Who is liable for the loss of the six hundred cases of corn, Brown or Smith? Discuss. (b) Suppose Smith had delivered the corn to the railroad in Toledo. After the corn was loaded on a freight car but before the train left the yard, the car was broken open and its contents, including the corn, were stolen. Who is liable for the loss, Brown or Smith? Discuss. (c) Would your answer in question (b) be the same if this contract were a destination contract instead of a shipment contract? Discuss.

4. (a) Smith, the seller, has the risk of loss. Although the goods have become identified to the contract as existing goods as to which the contract refers and Brown has a specific property in them under Section 2-501 of the UCC, this does not cause title or risk of loss to pass to the buyer. Where the contract requires the seller to ship the goods by carrier pursuant to a shipment contract, and not to deliver them at a particular destination, risk of loss passes to the buyer when the goods are duly delivered to the carrier. That had not happened yet under these facts. UCC Section 2- 509(1)(a). (b) Brown, the buyer, bears the risk of loss. The contract was a shipment contract, and the goods were duly delivered to the carrier. UCC Section 2- 509(1)(a). (c) No, under a destination contract, Smith would bear the risk of loss until the goods were duly delivered to their destination. UCC Section 2- 509(1)(b).

4. Best BMW, Inc. Is engaged in the business of selling and servicing new and used BMW automobiles. Best employs 7 full-time new and used car salespersons. Generally, the sales people have had previous experience in selling cars. However, Best requires its sales people to follow certain procedures which are probably not common in the industry. For example, a sales person may not allow a customer to drive a car that he or she is interested in buying. Only the sales person may drive the car and only with the written consent of the sales manager (who must sign a short "Test Drive Request" form). Also, all used cars are to be sold without any express warranties made by the salesperson. Only the sales manager can commit Best to any express warranties. - Section 15-23 - On November 19, Peter Bart went to Best to negotiate the purchase of a used car on Best's used-car lot that he had been eyeing for some time. John Monday, one of Best's more aggressive sales people, pounced on Bart as soon as he walked through the door. During the course of negotiations, Monday told Bart that the car had only 21,000 miles on it and that it had been previously owned by a computer programmer who only drove it to work each day and on an occasional vacation. He also said that it had never been in an accident and that the price Best was asking, $3,800, made the car a "steal". Bart agreed to purchase the auto and he signed the standard purchase contract which contained the usual information and also provided in bold type of a different color than the rest of the contract that the car was sold "without warranty." About a week after Bart bought the car, he was involved in an accident caused by a defective steering component in the car (which existed at the time he purchased it). Bart was severely injured and the car was destroyed. He also learned at that time that the car had previously been in two accidents and that the previous owner was a hardware salesman who had put 84,000 miles on the car. These facts did not, however, contribute to the accident. Bart sued Best for breach of warranty, alleging that he didn't get what he bargained for and that Best is responsible for his injuries and the damage to the car resulting from the accident. Best fired Monday for the manner in which he conducted himself during the negotiations with Mason. Best argues that, in any event, no warranties were given by Monday or created by virtue of the sale and that the sales contract itself relieves it of any liability. (a) Without regard to the "without warranty" language in the Best/Bart contract, were any express warranties made by Monday? Discuss. (b) Without regard to the "without warranty" language in the Best/Bart contract, did any implied warranties result from the Best/Bart contract? Discuss. (c) Does the "without warranty" language relieve Best of any express warranty liability or implied warranty liability? Discuss.

4. (a) Yes, express warranties were created. The following would constitute express warranties (affirmations of fact or promise with regard to the car): 1. Car had 21,000 miles; 2. Previously owned by computer programmer; 3. Type of driving by previous owner; 4. No accident history. Monday's ascertainment that the price made the car a "steal" was puffing. - Section 15-26 - (b) Yes, the following implied warranties resulted from the contract: 1. Implied warranty of title (title is good, title not encumbered and sale rightful); 2. Implied warranty of merchantability (car was fit for the ordinary purpose). (c) The disclaimer is not effective as to the express warranties because, as a general rule, you cannot disclaim express warranties. However, the parol evidence rule may prevent Bart from introducing evidence as to the existence of the express warranties. The disclaimer is not effective as to the implied warranty of merchantability because the disclaimer doesn't include the word "merchantability". The disclaimer is not effective as to the implied warranty of title because it does not give the buyer reason to know that the title is encumbered or that the sale violates the rights of others.

4. Johnson, president of the First National Bank, believes that it is appropriate to employ only female tellers. Hence, First National refuses to employ Ken Baker as a teller but does offer him a maintenance position at the same salary. Baker brings a cause of action against First National Bank. Decision?

4. Decision for Baker. First National's hiring criteria based on gender is violative of the Civil Rights Act of 1964. Title VII of the Act prohibits discrimination on the basis of sex, race, color, religion or national origin in the hiring, firing, compensating or otherwise treating employees. First National's belief that it is only appropriate for females to work as bank tellers is not a valid defense. The three basic defenses are (1) a bona fide seniority system; (2) a professionally developed ability test; and (3) a bona fide occupational qualification. The third test does not encompass arbitrary and personal standards of opinion.

4. Murphy, while a guest at a motel operated by the Betsy-Len Motor Hotel Corporation, sustained injuries from a fall allegedly caused by negligence in maintaining the premises. At that time, Betsy-Len was under a license agreement with Holiday Inns, Inc. The license contained provisions permitting Holiday Inns to regulate the architectural style of the buildings as well as the type and style of the furnishings and equipment. The contract, however, did not grant Holiday Inns - Section 17-16 - the power to control the day-to-day operations of Betsy-Len's motel, to fix customer rates, or to demand a share of the profits. Betsy-Len could hire and fire its employees, determine wages and working conditions, supervise the employee work routine, and discipline its employees. In return, Betsy-Len used the trade name "Holiday Inns" and paid a fee for use of the license and Holiday Inns' national advertising. Murphy sued Holiday Inns, claiming Betsy-Len was its agent. Decision?

4. Decision for Holiday Inns. At issue is whether the terms of the license agreement satisfied the control best in establishing a principal-agent relationship. Held that the regulatory provisions, which included regulations on the architectural style of the buildings and the type and style of furnishings and equipment, did not give the defendant control over the day-to-day operations of Betsy-Len's motel and, therefore, did not constitute control within the definition of agency. Murphy v. Holiday Inns, Inc., 219 S.E.2d 874 (Virg. 1975).

4. King Department Store is in the business of selling men's and ladies' apparel. Ward & Co., CPAs, while performing its year-end audit of King, reviewed the following agreements which King entered into with Lutz, its largest supplier of merchandise, in December, 2019: ● On December 24, 2019, King entered into a sale or return contract with Lutz. King received delivery of the goods on December 28, 1986. ● On December 26, 12019 King signed an agreement to purchase 20 fur coats from Lutz for $20,000. The contract required King to promptly pick - Section 14-10- up the goods at Lutz's warehouse. On December 31, 2019, King arrived at Lutz's warehouse, paying Lutz the $20,000. Lutz tendered delivery of the furs but King refused to take possession since its truck was experiencing mechanical difficulties. The following day, King arrived to pick up the coats and was informed that a fire destroyed the furs on December 31. ● On December 30, 12019, King entered into two contracts to purchase merchandise from Lutz. The contracts required that Lutz ship the goodsby common carrier to King the following day, which it did. The shipping terms of the first contract were "F.O.B., King's Department Store." The second contract included the shipping term "C.I.F." (cost, insurance, and freight). Both shipments arrived at King's business on January 2, 2020. King has adopted a calendar year for accounting purposes. Flaxx, the partner in charge of the audit, wishes to resolve the following issues pertaining to each of the transactions with Lutz: ● Who bears the risk of loss in each of the above transactions as of December 31, 2019? ● Whether title to the goods received by King as a result of hte December 24 and December 30 contracts passed to King by December 31, and therefore should be included in King's ending inventory. ● Who is liable for the expense relating to the transportation of the goods on the December 30 contracts? The contracts between Lutz and King did not address the issues raised by Flaxx. Discuss the issues raised by Flaxx.

4. In the absence of an agreement to the contrary, King bears the risk of loss for the goods received on December 28, 2019 since the risk of loss on a sale or return contract passes to the buyer in accordance with the shipping terms of the contract. In this case, it appears that Section 2-509(3) would apply. The fact that King received the goods on December 28, 2019, clearly indicates that the risk of loss on December 31, 2019, was on King. Where the seller is a merchant, as is the case here, the risk of loss passes to the buyer upon the buyer's receipt of the goods. Therefore, in the second situation, since King had not yet received the coats, risk of loss had not passed to King. The December 30 contract containing the delivery term "F.O.B., purchaser's business" is a destination contract and the risk of loss in such a contract passes to the buyer when the goods are so tendered at the point of destination as to enable the buyer to take delivery. Thus, the risk of loss on December 31 remained with Lutz since the merchandise did not arrive at King's business until January 2, 2020. The second contract entered into on December 30 containing the delivery term "C.I.F." is a shipping point contract whereby the risk of loss passes to the buyer when the goods are duly delivered to the carrier. Of course, in either of the December 30 contracts, the party bearing the risk of loss may be entitled to recover damages from the carrier or if insurance is provided for, as in the "C.I.F." contract, from the insurance company. Unless otherwise agreed, title in a sale or return contract passes to the buyer at the time and place the seller completes his performance with reference to the physical delivery of the goods. Title remains with the buyer until the buyer returns the goods to the seller. Therefore, King should include the goods on sale or return in its ending inventory since title had passed, at the latest, when the goods were received on December 28 and the goods had not been returned by December 31. Title to the merchandise on the December 30 contract containing the delivery term "F.O.B., purchaser's business" remained with the seller until the goods were tendered at the point of destination, i.e., the purchaser's business. Thus, the goods should not be included in King's ending inventory since the goods were not delivered to King's business until January 2, 2020. Conversely, the December 30 contract containing the delivery term "C.I.F." resulted in title being transferred to King on December 31, 2019, the day the carrier received the goods. Such is the rule since the "C.I.F." term is a shipping point contract whereby title passes to the buyer at the time and place of shipment. Therefore, the goods should be included in King's ending inventory despite King's lack of physical possession. Since the December 30 agreements between King and Lutz did not stipulate who would pay the expenses relating to the transportation of the goods, Lutz is obligated to pay for transporting the goods to King's place of business pursuant to the "F.O.B., - Section 14-18 - purchaser's business" term. Under the "C.I.F." contract King is obligated to pay Lutz a lump sum covering the cost of the goods, insurance, and freight to the destination.

5. Salem Supply Co. sells new and used gardening equipment. Ben Buyer purchased a slightly used riding lawn mower for $1,500. The price was considerably less than that of comparable used mowers. The sale was clearly indicated to be "As Is." Two weeks after Ben purchased the mower, the police arrived at his house with Owen Owner, the true owner of the lawn mower, which was stolen from his yard, and reclaimed the mower. What recourse, if any, does Ben have?

5. Ben can sue Salem Supply Company for breach of warranty of title. Under the UCC warranty of title found in Section 2-312, the seller is obligated to convey the right of ownership without any lien. Because the goods were stolen, Salem Supply Company had a void title and could convey no interest to Ben even though Ben is a good faith buyer in the ordinary course of business from a merchant. This is not an entrusting to a merchant because the true owner did not authorize an entrustment of the mower to Salem. The fact that the sale is "as is" means that the warranty of merchantability may have been waived, but it does not negate the warranty of title because there is nothing in the circumstances of the sale to suggest to Ben that Salem's title is a colorable one. Ben is entitled to the return of the $1,500 he paid for the mower.

5. N.I.S promoted John, a forty-two-year-old employee, to a foreman's position while passing over James, a fifty-eight-year-old employee. N.I.S. told James he was too old for the job and that it preferred a younger man. James brings a cause of action. Decision?

5. Judgment for James. The Age Discrimination in Employment Act protects individuals who are 40 years or older against discrimination in hiring, firing, salaries or otherwise on the basis of age. In Moore v. Sears, F. Supp. 357 (1979), the United States District Court held that an employer violates the Age Discrimination Act if it favors a younger employee on the basis of age even if that younger employee does come within the protection of the Act; i.e., is 40 years or older. Thus, in this problem, when N.I.S. promoted 42-year-old John over 58- year-old James because it preferred the younger man, N.I.S. violated the law.

5. Steven offered to sell his used automobile to Benito for $2,600 cash. Benito agreed to buy the car, gave Steven a check for $2,600, and drove away in the car. The next day Benito sold the car for $3,000 to Jose, a good faith purchaser. The bank returned Benito's $2,600 check to Steven because of insufficient funds in Benito's account. Steven brings an action against Jose to recover the automobile. Who prevails?

5. Judgment for Jose. Benito acquired voidable title to the automobile which empowered him to transfer good title to Jose since Jose was a good faith purchaser for value. Section 2-403 (1)(b) and (c) of the UCC provides: "A person - Section 14-12 - with voidable title has power to transfer a good title to a good faith purchaser for value. When goods have been delivered under a transaction of purchase, the purchaser had such power even though ... (b) the delivery was in exchange for a check which is later dishonored, or (c) it was agreed that the transaction was to be a 'cash sale'..."

5. Judgment for Jose. Benito acquired voidable title to the automobile which empowered him to transfer good title to Jose since Jose was a good faith purchaser for value. Section 2-403 (1)(b) and (c) of the UCC provides: "A person with voidable title has power to transfer a good title to a good faith purchaser for value. When goods have been delivered under a transaction of purchase, the purchaser had such power even though ... (b) the delivery was in exchange for a check which is later dishonored, or (c) it was agreed that the transaction was to be a 'cash sale'..."

6. While Butler and his wife, Wanda, were browsing through Sloan's used car lot, Butler told Sloan that he was looking for a safe but cheap family car. Sloan said, "That old Cadillac hearse ain't hurt at all, and I'll sell it to you for $2,950." Butler said, "I'll have to take your word for it because I don't know a thing about cars." - Section 15-24 - Butler asked Sloan whether he would guarantee the car, and Sloan replied, "I don't guarantee used cars." Then Sloan added, "But I have checked that Caddy over, and it will run another 10,000 miles without needing any repairs." Butler replied, "It has to because I won't have an extra dime for any repairs." Butler made a down payment of $400 and signed a printed form contract furnished by Sloan that contained a provision, "Seller does not warrant the condition or performance of any used automobile." As Butler drove the car out of Sloan's lot, the left rear wheel fell off; and Butler lost control of the vehicle. It veered over an embankment, causing serious injuries to Wanda. What is Sloan's liability to Butler and Wanda?

6. Butler may recover under a breach of the implied warranty of merchantability and under a strict liability in tort cause of action and possibly for a breach of an express warranty. (a) Warranties. An express warranty need not be in writing. An affirmation or promise is sufficient. In this particular case, it is debatable whether Sloan's statement concerning the condition of the car--"it will run another 10,000 miles without needing any repairs"--constitutes an express warranty. An implied warranty of merchantability arises where the seller is a merchant, unless it is disclaimed or modified. There is an implied warranty that the goods are fit for ordinary purposes, here the driving of an automobile. The fact that the car is a used vehicle does not eliminate the implied warranty of merchantability, but merely mandates that consideration be taken of the price, age and condition of the car. Warranties may generally be excluded or modified. A disclaimer of merchantability must mention the word "merchantability" and must be conspicuous if in writing (unless a catch-phrase is used). A disclaimer of an express warranty is generally ineffective. - Section 15-27 - Wanda will also be able to collect from Sloan under a breach of the implied warranty of merchantability since privity of contract will not be a valid defense. (b) Strict Liability in Tort. Strict liability in tort applies to this transaction since a merchant seller sold a defective product unreasonably dangerous to user or consumer. Strict liability in tort applies to new and used goods and is generally not subject to disclaimer, exclusion or modification. Moreover, privity is not a limitation upon this cause of action.

6. Porter, the owner of a collection of artworks, entered into a number of art transactions with Harold Von Maker who used, among other names, that of Peter Wertz. Porter permitted Von Maker to temporarily have a painting by Maurice Utrillo, Chateau de Lion-sur-Mer, to hang it in his house until he decided whether to purchase it. A few months later, Porter sought the return of the Utrillo painting but was unable to reach Von Maker. Porter subsequently discovered that he was not dealing with the "real" Peter Wertz but with Harold Von Maker, a man with an extensive criminal record, including a conviction for defrauding the Chase Manhattan Bank. When Porter finally reached him, Von Maker claimed the Utrillo was on consignment with a client. Von Maker then agreed in writing either - Section 14-11 - to return the painting to Porter within ninety days or to pay for it. At the time he entered this agreement, Von Maker had already sold the painting. He had used the real Peter Wertz, a delicatessen employee and acquaintance, to affect the sale of the Utrillo to Feigen for $20,000. Feigen, an art dealer, then sold the painting to Brenner, and it is now somewhere in Venezuela. Porter brought suit against Feigen and the others involved to recover possession of either the Utrillo or its value. Decision?

6. Judgment for Porter. The entrustment provision of the UCC empowers a merchant entrusted with possession of goods in which he deals to transfer the rights of the entruster to a "buyer in the ordinary course of business." To apply in this case, Feigen must fit the definition of a buyer in the ordinary course of business. The Code defines such a buyer as a "person who in good faith and without knowledge that the sale to him is in violation of the ownership rights ... of a third party in the goods buys in ordinary course from a person in the business of selling goods of that kind." Feigen bought the painting from the real Wertz, who was a delicatessen employee, not an art dealer "in the business of selling goods of that kind." In addition, Feigen made no investigation to verify Wertz as the true owner or an art dealer. Accordingly, Feigen did not act in good faith. Therefore, the Code's entrustment provision does not apply, and Porter is entitled to possess of the Utrillo painting or its value. Porter v. Wertz, 68 A.D.2d 141, 416 N.Y.S.2d 254 (1979).

6. Porter, the owner of a collection of artworks, entered into a number of art transactions with Harold Von Maker who used, among other names, that of Peter Wertz. Porter permitted Von Maker to temporarily have a painting by Maurice Utrillo, Chateau de Lion-sur-Mer, to hang it in his house until he decided whether to purchase it. A few months later, Porter sought the return of the Utrillo painting but was unable to reach Von Maker. Porter subsequently discovered that he was not dealing with the "real" Peter Wertz but with Harold Von Maker, a man with an extensive criminal record, including a conviction for defrauding the Chase Manhattan Bank. When Porter finally reached him, Von Maker claimed the Utrillo was on consignment with a client. Von Maker then agreed in writing either to return the painting to Porter within ninety days or to pay for it. At the time he entered this agreement, Von Maker had already sold the painting. He had used the real Peter Wertz, a delicatessen employee and acquaintance, to affect the sale of the Utrillo to Feigen for $20,000. Feigen, an art dealer, then sold the painting to Brenner, and it is now somewhere in Venezuela. Porter brought suit against Feigen and the others involved to recover possession of either the Utrillo or its value. Decision?

6. Sierra Pacific Industries purchased various areas of timber and six other pieces of real property, including a ten-acre parcel on which five duplexes and two singlefamily units were located. Sierra Pacific requested the assistance of Joseph Carter, a licensed real estate broker, in selling the non-timberland properties. It commissioned him to sell the property for an asking price of $85,000, of which Sierra Pacific would receive $80,000 and Carter would receive $5,000 as a commission. Unable to find a prospective buyer, Carter finally sold the property to his daughter and son-in-law for $85,000 and retained the $5,000 commission without informing Sierra Pacific of his relationship to the buyers. After learning of these facts, Sierra Pacific brought this action for breach of fiduciary duty against Carter. Decision?

6. Judgment for Sierra Pacific. An agent owes a fiduciary duty to his principal which requires the disclosure of all information in the agent's possession that is relevant to the subject matter of the agency. An agent may not compete with the principal, nor may he act as agent for another whose interests conflict with those of the principal. A real estate agent must refrain from dual representation in an action unless he obtains the consent of both principals after full disclosure. Under most circumstances, then, if the agent is related to the buyer in a way that suggests a reasonable possibility that the agent himself could be acquiring an interest in the property, the relationship is a material fact that must be disclosed. Therefore, Sierra Pacific may recover the $5,000 commission paid to Carter plus any actual and proximately caused loss on the price it received for the property. Sierra Pacific Industries v. Carter, 104 Ca.App.3d 579, 163 Cal.Rptr. 764.

6. Ms. Wise was fired from her job at the Mead Corporation after she was involved a in a fight with a co-worker. On four other unrelated occasions, fights occurred between male co-workers. Only one of the males was fired, but this was after his second fight, in which he seriously injured another employee. There is no dispute that Ms. Wise was qualified and performed her duties adequately. Ms. Wise successfully establishes a prima facie case of discrimination. However, defendant Mead Corporation meets its burden to "articulate legitimate and nondiscriminatory reasons" for firing Ms. Wise. Can she prevail?

6. Ms. Wise may still win this case. Plaintiff must first establish a prima facie case of discrimination by showing (1) she is a member of a protected class; (2) she was qualified for the job from which she was fired; (3) the misconduct for which she was fired was similar to that engaged in by employees outside the protected class whom the employer retained. The burden then shifts to the defendant to "articulate some legitimate, non-discriminatory reason for the employee's discharge". Note, however, that this is only an intermediate burden of production, for the burden of persuasion never shifts to the defendant. The defendant need not persuade the court that it was motivated by the proffered reasons. Of course, failure to meet this burden of production would cause the plaintiff to win with no further showing. If the defendant meets this burden, the plaintiff may still prevail if she proves that the articulated reasons for discharge were in fact a pretext for discrimination. Plaintiff can prove pretext by convincing the trier of fact that discrimination was a more likely motivation, or that the employer's stated reasons are not credible. Wise v. Mead Corp., 614 F.Supp. 1131 (D.C.Ga. 1985).

7. Charlotte, the owner of a new Cadillac automobile, agreed to loan the car to Ellen for the month of February while she (Charlotte) went to Florida for a winter vacation. It was understood that Ellen, who was a small-town Cadillac dealer, would merely place Charlotte's car in her showroom for exhibition and sales promotion purposes. While Charlotte was away, Ellen sold the car to Bob. When Charlotte returned from Florida, she sued to recover the car from Bob. Decision?

7. Decision in favor of Robert. Charlotte, the owner of the Cadillac, voluntarily placed the automobile in a dangerous bailment situation when she entrusted it to Ellen, a Cadillac dealer, for display in Ellen's showroom. The buyer in the ordinary course of business (Bob) is therefore protected. Section 2-403(2) of the UCC provides: "Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in ordinary course of business.

7. Catania wished to paint the exterior of his house. He went to Brown, a local paint store owner, and asked him to recommend paint for the job. Catania told Brown that the exterior walls were stucco and in a chalky, powdery condition. Brown suggested Pierce's shingle and shake paint. Brown then instructed Catania how to mix the paint and how to use a wire brush to prepare the surface. Five months later, the paint began to peel, flake, and blister. Catania brings an action against Brown. Decision?

7. Judgment for Catania. There is an implied warranty of fitness covering the sale of the paint. Here, 1) the seller had reason to know the buyer's particular needs and purpose, and 2) knew that the buyer was relying on the seller's superior skill and judgment to select suitable goods. Catania v. Brown, 4 Conn.Cir. 344, 231 A.2d 668 (1967).

8. Best BMW, Inc. Is engaged in the business of selling and servicing new and used BMW automobiles. On occasion Best would have its sales people purchase used cars from third parties without disclosing that the salesperson was, in fact, buying - Section 17-17 - for Best's used-car lot. Best's management assumed that better prices could be negotiated using this procedure. John Peterson, one of Best's salesmen, entered into such a contract (in accordance with instructions from the sales manager) with Matt Hallow on December 8. The contract provided for delivery and payment on December 12. Best refused to go through with the deal and, therefore, Peterson did not take delivery or pay for the car on December 12 as agreed to. Which of the following statements is true or false? A. Peterson had apparent authority to enter into the contract with Hallow. _______ B. Peterson is personally liable on the contract with Hallow unless Best's identity becomes known (in which case he would not be liable because he was acting as an agent). _______ C. Peterson had actual authority to enter into the contract with Hallow. _______ D. Both Peterson and Best are liable to Hallow (although Hallow must make an election after Best's identity becomes known). ________ E. If Peterson is found liable to Hallow and has to pay Hallow damages, Best would be liable to Peterson. ________

8. A. Fa; B. Fa; C. Tr; D. Tr; E. Tr

8. Home Indemnity, an insurance company, paid one of its insureds after the theft of his car. The car reappeared in another state and was sold to Michael Schrier for $4,300 by a used car dealer. The dealer promised to give Mr. Schrier a certificate of title. One month later the car was seized by the police on behalf of Home Indemnity. Mr. Schrier sued for the return of the car and won. Home Indemnity seeks reversal of that decision and possession of the car. Decision?

8. Judgment for Home Indemnity. The possessor of stolen goods, regardless of her knowledge of their origins, cannot convey good title. The subsequent sale of the goods, even to a bona fide purchaser for value, does not divest the original owner of title. Even a good faith purchaser cannot receive better title than the seller has. Schrier v. Home Indemnity Co., 273 A.2d 248 (D.C. App. 1971).

8. Plaintiff, while dining at defendant's restaurant, ordered a chicken pot pie. While she was eating, she swallowed a sliver of chicken bone, which became lodged in her throat, causing her serious injury. Plaintiff brings a cause of action. Should she prevail? Why?

8. There are two different tests which jurisdictions apply to this type of fact situation, i.e., whether the product is unreasonably dangerous. The majority rule is the reasonable expectations test, which asks whether the ordinary consumer would expect to find chicken bones in a pot pie. The minority and old rule is the natural versus foreign test: if an element is natural to an ingredient in the final product, it is natural to the final product. Hence, since chicken bones are nature to chicken which is natural to chicken pot pie, chicken bones are natural to chicken pot pie. Under the latter test, the defendant would prevail. Under the former test, the plaintiff may prevail.

9. John Doe purchased a bottle of "Bleach-All," a well-known brand, from Roe's combination service station and grocery store. When John used the "Bleach-All," his clothes severely deteriorated due to an error in mixing the chemicals during the detergent's manufacture. John brings an action against Roe to recover damages. Decision?

9. Judgment to John Doe. Roe is a "merchant" within the meaning of the UCC since he is a "person who deals in goods of the kind." Section 2-104. Unless excluded or modified, which it is not in this case, a merchant seller impliedly warrants that the goods which he sells are merchantable. Section 2-314. John Doe would also prevail under a strict liability in tort cause of action since Roe is a merchant who sold a defective product that was unreasonably dangerous. It might further be noted that Roe would have a cause of action based upon both warranty and strict liability theory against the manufacturer of the bleach as well as any seller in his chain of title.

9. Best BMW, Inc. Is engaged in the business of selling and servicing new and used BMW automobiles. On December 3, Fred Jacobs went to Best to look at used cars. Jim Peters, a Best salesman, showed him several cars that were in his price range. He finally decided on one in particular and wanted to take a test drive. Peters advised him that he would have to drive because of Best's policy and that was fine with him. Peters did not request permission from the sales manager for the test drive. During the test drive, Peters negligently drove through a red light and collided with another vehicle. Jacobs was injured. He has sued Best and Peters to recover for his injuries. Best defends claiming, in part, that Peters had not requested and received permission to conduct the test drive. Will Jacobs recover against Peters? Discuss. Will Jacobs recover against Best? Discuss (remember to address the issue concerning Peters' lack of permission).

9. Yes, Jacobs will recover against Best. The accident occurred within the scope of Peters' employment with Best (because he was on the job and acting in his employer's interests). Best's liability to Jacobs is not limited by the fact that - Section 17-20 - Peters had violated a rule of employment. This fact, however, will strengthen Best's cause of action against Peters.

1. Dill is an agent for Mint, Inc. As such, Dill made a contract for and on behalf of Mint with Sky Co. that was not authorized and upon which Mint has disclaimed liability. Sky has sued Mint on the contract asserting that Dill had the apparent authority to make it. Which of the following would not be important in determining the scope of Dill's apparent authority? A. The express limitations placed upon Dill's authority that were not known by Sky. B. The custom and usages of the business. C. The status of Dill's position in Mint. D. Previous acquiescence by the principal in similar contracts made by Dill.

11. Small Periodicals, Inc. entered into a transaction with Bazos News Service Corp. involving the sale of 5,000 auto repair manuals which Small distributes on behalf of the publisher. The 5,000 manuals were stored by Small in a public warehouse, along with other different inventory items that Small distributes. The contract provided that Small was to make delivery of the manuals to Bazos by delivering to Bazos by November 15 a warehouse receipt covering the goods (the contract did not specify whether the warehouse receipt was to be negotiable or nonnegotiable). The warehouse receipt issued by the warehouser provided that the goods (i.e., the manuals) were "to be delivered to Bazos News Service Corp". 'This warehouse receipt was delivered to Bazos on November 15. On November 16, before Bazos had taken possession of the manuals from the warehouser the warehouse was destroyed by fire of unknown origin and the 5,000 manuals purchased by Bazos were destroyed. Under these circumstances, which of the following statements is incorrect? A. On November 16, Bazos had title to, and risk of loss for, the manuals. B. At the time of the fire Bazos had an insurable interest in the manuals. C. Risk of loss for the manuals rested with Small on November 16, at the time of the fire. D. Title to the manuals passed to Bazos upon delivery of the warehouse receipt to it. E. Both A. and B. are incorrect.

3. In connection with a contract for the sale of goods, in which of the following ways can the implied warranty of merchantability be excluded by the seller? A. By an oral statement which mentions merchantability. B. By a written statement without mentioning merchantability. C. By an oral statement which does not mention merchantability. D. By an inconspicuous written statement which mentions merchantability.

1. Title is an important concept in a sale of goods contract for the following reasons except: A. When title passes to the buyer, the buyer's insurance would likely cover the goods. B. When title passes to the buyer, risk of loss also automatically passes. C. When title passes to the buyer, the buyer's bank may possess a lien on the goods sold. D. When title passes to the buyer, the buyer can then further sell or transfer the goods.

1. Which of the following factors will be most important in determining if an express warranty has been created? A. Whether the seller intended to create a warranty. B. Whether the promises made by the seller became part of the basis of the bargain. C. Whether the sale was made by a merchant in the regular course of business. D. Whether the statements made by the seller were in writing.

15. Bates ordered 1,000 units of merchandise from Watson, a wholesaler, at a unit price of $50 each, with delivery to be made at Bates' warehouse after April 11 but in no event later than April 15 with payment to be made 30 days after delivery. Watson accepted Bates' offer. If Watson ships the goods to Bates and the shipment arrives on April 12 A. Bates must inspect all items at the time delivery is tendered or waive any defects. B. Bates may inspect the goods prior to accepting delivery but may not accept conforming goods while rejecting the nonconforming goods if he wishes to preserve his remedies for any breach of contract as to the latter. - Section 14-11 - C. If Watson delivers 1,000 units of a newer model of the merchandise ordered reasonably believing it to be acceptable and Bates rejects the merchandise as nonconforming, Watson may hold Bates to the contract terms by reasonably notifying Bates of his intent to cure and delivering conforming units by April 15. D. None of the above is correct.

5. What fiduciary duty, if any, exists in an agency relationship? A. The agent owes a fiduciary duty to third parties he deals for and on behalf of his principal. B. The principal owes a fiduciary duty to his agent. C. The agent owes a fiduciary duty to his principal. D. There is no fiduciary duty in an agency relationship.

9. Alicia owns an antique rosewood cabinet. Bruno stole the cabinet from Alicia's home and subsequently sold it through his antique store for cash to Clarissa, who did not know that Bruno lacked good title. Between Alicia and Clarissa, who should prevail in a suit to recover the cabinet? A. Clarissa should win because Bruno had a voidable title. B. Clarissa should win because she was a good faith purchaser for value. C. Alicia should win because Bruno had a void title. D. Alicia should win because Clarissa was not a good faith purchaser for value.

2. On October 1, Mason took his television into Acme T.V. Service for repair. Acme is engaged in the business of appliance repair and the sale of used household appliances, including televisions. During the night of October 1, Acme's store burned down as a result of a lighting strike during a thunderstorm. Mason's television, along with those owned by many other customers, was destroyed. Under these circumstances, which of the following statements is correct? A. Because a bailment relationship was created between Mason and Acme, Acme is liable to Mason. B. Acme is liable to Mason because Acme was unable to return the television to Mason. - Section 12-5 - C. Acme is not liable to Mason because the destruction of Mason's t.v. was not caused by Acme's failure to meet the required level of care. D. Acme is not liable to Mason because no bailment relationship was created between Mason and Acme.

C. Acme is not liable to Mason because the destruction of Mason's t.v. was not caused by Acme's failure to meet the required level of care.

13. Kent works as a welder for Mighty Manufacturing, Inc. He was specially trained by Mighty in the procedures and safety precautions applicable to installing replacement mufflers on automobiles. One rule of which he was aware involved a prohibition against installing a muffler on any auto which had heavily congealed oil or grease or which had any leaks. Kent disregarded this rule, and as a result a customer's auto caught fire causing extensive property damage and injury to Kent. Which of the following is correct? A. Mighty is not liable to Kent under the worker's compensation laws. B. Mighty is not liable to the customer because Mighty's rule prohibited Kent from installing the muffler in question. C. Kent does not have any personal liability to the customer for the loss because Kent was acting for and on behalf of his employer. D. Mighty is liable to the customer irrespective of its efforts to prevent such an occurrence and the fact that it exercised reasonable care.

14. Park Manufacturing hired Stone as a traveling salesman to sell goods manufactured by Park. Stone also sold a line of products manufactured by a friend. He did not disclose this to Park. The relationship was unsatisfactory and Park finally fired Stone after learning of Stone's sales of the other manufacturer's goods. Stone, enraged at Park for firing him, continued to make contracts on Park's behalf with both new and old customers that were almost uniformly disadvantageous to Park. Park, upon learning of this, gave written notice of Stone's discharge to all parties with whom Stone has dealt. Which of the following statements is incorrect? A. Park can bring an action against Stone to have him account for any secret profits. B. Prior to notification, Stone retained some continued authority to bind Park despite termination of the agency relationship. - Section 17-19 - C. New customers who contracted with Stone for the first time could enforce the contracts against Park if they knew that Stone had been Park's salesman but were unaware that Stone was fired. D. If Park had promptly published a notification of termination of Stone's employment in the local newspaper and in the trade publications, he would not be liable for any of Stone's contracts.

3. Futterman operated a cotton factory and employed Marra as a general purchasing agent to travel through the southern states to purchase cotton. Futterman e-mailed Marra instructions from day to day as to the price to be paid for cotton. Marra entered a cotton district in which she had not previously done business and represented that she was purchasing cotton for Futterman. Although directed by Futterman to pay no more than 25 cents a pound, Marra bought cotton from Anderson at 30 cents a pound, which was the prevailing offering price at that time. Futterman refused to take the cotton. Under these circumstances, which of the following is correct? A. Because Marra had no actual authority to make the purchase, Futterman will not be liable to Anderson. B. Marra will be liable to Anderson but Futterman will not. C. Marra has no potential liability to Futterman because he was acting within is implied grant of authority. D. Futterman is liable on the contract because of Marra's apparent authority.

7. Cox engaged Datz as her agent. It was mutually agreed that Datz would not disclose that he was acting as Cox's agent. Instead he was to deal with prospective customers as if he were a principal acting on his own behalf. This he did and made several contracts for Cox. Assuming Cox, Datz or the customer seeks to avoid liability on one of the contracts involved, which of the following statements is correct? A. Cox must ratify the Datz contracts in order to be held liable. B. Datz has no liability once he discloses that Cox was the real principal. C. The third party can avoid liability because he believed he was dealing with Datz as a principal. D. The third party may choose to hold either Datz or Cox liable.

7. Regarding the Americans with Disabilities Act of 1990, which of the following is correct? A. Employers must make reasonable accommodations to accommodate people with disabilities. B. Pre-employment medical examinations are forbidden before a job offer. C. Title I of the ADA is administered by the EEOC. D. All of the above are correct.

10. Ney cleaned his basement and found a painting of tomato soup cans. He really did not like the painting and, therefore, he offered to sell it to Lee for $100 who had shown an interest in it. Lee, Ney's neighbor and an accounting professor, accepted the offer, and paid Ney the $100. Lee did not take possession of the painting at the time he paid for it despite the fact that Ney offered it to him. He wanted Ney to hold the painting for him because he intended it to be a surprise gift for his wife. Before Lee took possession of the painting from Ney, it was stolen from Ney's house by a burglar who forcibly broke into Ney's home. Under these circumstances, A. Lee will be able to recover the $100 purchase price from Ney because Ney had the risk of loss for the painting at the time of the burglary. B. At the time of the theft, Lee had both title to the painting and the risk of loss. C. At the time of the theft, Ney still had title to the painting but Lee had risk of loss for it. D. Lee had an insurable interest in the painting at the time of the burglary. - Section 14-9 - E. Both B. and D. are correct.

16. Small Periodicals, Inc. entered into another transaction with Bazos News Service Corp. involving the sale of 5,000 auto repair manuals which Small distributes on behalf of the publisher. The 5,000 manuals were stored by Small in a public warehouse, along with other different inventory items that Small distributes. The contract provided that Small was to make delivery of the manuals to Bazos by delivering to Bazos by November 15 a warehouse receipt covering the goods (the contract did not specify whether the warehouse receipt was to be negotiable or nonnegotiable). The warehouse receipt issued by the warehouser provided that the goods (i.e., the manuals) were "to be delivered to Bazos News Service Corp". 'This warehouse receipt was delivered to Bazos on November 15. On November 16, before Bazos had taken possession of the manuals from the warehouser the warehouse was destroyed by fire of unknown origin and the 5,000 manuals purchased by Bazos were destroyed. Under these circumstances, which of the following statements is incorrect? A. On November 16, Bazos had title to, and risk of loss for, the manuals. B. At the time of the fire Bazos had an insurable interest in the manuals. C. Risk of loss for the manuals rested with Small on November 16, at the time of the fire. D. Title to the manuals passed to Bazos upon delivery of the warehouse receipt to it. E. Both A. and B. are incorrect.

10. On November 2, Lace Corp. offered to sell certain appliances at a price of $3,000 to Parco, Inc., a household appliances retailer. Lace is an appliance wholesaler. The offer, which was accepted by Parco, included the following shipping terms: "F.O.B.--Parco's warehouse". Lace inadvertently shipped the wrong appliances to Parco and Parco rejected them upon delivery by the common carrier. Parco immediately advised Lace that the wrong appliances had been shipped and that Parco was rejecting the shipment. Under these circumstances, A. Title passed to Parco when the goods were identified to the contract. B. Title reverted (i.e., shifted back) to Lace when the appliances were rejected by Parco. - Section 14-12 - C. Risk of loss for the appliances during shipment was on Parco, but shifted back to Lace when the goods were rejected. D. During shipment risk of loss for the appliances was on Lace, but title to the goods had passed to Parco when they were shipped. E. Both B. and C. are correct.

13. On November 1, Small Periodicals, Inc. entered into a written contract to sell Bazos News Service Corp. 500 copies of a particular trade journal. Small regularly inventoried up to 10,000 copies of this journal in its warehouse for sale to its customers on a monthly basis. The contract provided that the journals were to be shipped by Small to Bazos for November 15 delivery by United Parcel Service, F.O.B.--Small's loading dock. On November 11, before Small had boxed up the journals to be shipped to Bazos or had otherwise segregated them from the rest of its inventory, Small's warehouse was destroyed by a fire of unknown origin. Obviously, Small failed to make delivery to Bazos under the November 1 contract. Bazos has sued Small for breach of contract. Under the circumstances, Small will A. Be excused from performance under the contract with Bazos under the doctrine of commercial impracticability. B. Not be excused from performance under the contract despite the fact that the journals were not identified to the contract at the time of the fire. C. Be excused from performance under the contract because the goods were identified to the contract at the time of the loss. D. Not be excused from performance under the contract because of the F.O.B. terminology that was included in the contract.

14. Assume in question 13 that the warehouse fire did not occur and that Small shipped the journals as required by the contract between Small and Bazos. Under these circumstances, which of the following statements is correct? A. Small is obligated to tender delivery of the journals to Bazos at its (Bazos') business location. B. Bazos would bear the risk of loss for the journals during shipment to Bazos. C. Title to the journals would pass from Small to Bazos when the journals are delivered to Bazos at its place of business. D. Small would be liable for the shipping expenses incurred by Bazos in returning unsold journals to Small.

15. On November 2, Bace Corp., engaged in the business of selling new and used televisions, contracted to purchase from Sales, Inc. (an electronic manufacturer) 20 Model 1020 CRA television sets. The written contract simply provided that Sales was to "ship the televisions to Bace for delivery by November 15", and did not include any other shipping terminology. Sales assigned its rights and delegated its duties under the contract to Pep Electronics, Ltd. Sales did not advise Bace that it had conveyed the contract to Pep. The contract is silent with regard to a party's right to assign rights or delegate duties. Under these circumstances, - Section 14-14 - A. Risk of loss for the televisions during shipment to Bace would be on Sales. B. Bace has title to the televisions during shipment regardless of whether or not the correct model of television was shipped. C. Bace must accept the televisions even if they are delivered to Bace on November 17. D. None of the above is correct.

21. Bates ordered 1,000 units of merchandise from Watson, a wholesaler, at a unit price of $50 each, with delivery to be made at Bates' warehouse after April 11 but in no event later than April 15 with payment to be made 30 days after delivery. Watson accepted Bates' offer. If Watson ships the goods to Bates and the shipment arrives on April 12 A. Bates must inspect all items at the time delivery is tendered or waive any defects. B. Bates may inspect the goods prior to accepting delivery but may not accept conforming goods while rejecting the nonconforming goods if he wishes to preserve his remedies for any breach of contract as to the latter. C. If Watson delivers 1,000 units of a newer model of the merchandise ordered reasonably believing it to be acceptable and Bates rejects the merchandise as nonconforming, Watson may hold Bates to the contract terms by reasonably notifying Bates of his intent to cure and delivering conforming units by April 15. D. None of the above is correct.

11. Under Article 2 of the UCC, which of the following statements is true with regard to the buyer's rights and duties under a sale of goods contract? A. If the contract is a C.O.D. contract, the buyer has the right to reject the goods after inspecting them. B. The buyer must furnish the facilities reasonably necessary to permit the buyer to accept the goods. C. The buyer may reject the goods if they fail in any respect to conform to the contract. D. The buyer may accept the goods despite the fact that the seller's manner of delivery was not conforming to the contract and thereafter sue the seller for breach of contract. E. All of the above are correct.

12. Ney cleaned his basement and found a painting of tomato soup cans. He really did not like the painting and, therefore, he offered to sell it to Lee for $100 who had shown an interest in it. Lee, Ney's neighbor and an accounting professor, accepted the offer, and paid Ney the $100. Lee did not take possession of the painting at the time he paid for it despite the fact that Ney offered it to him. He wanted Ney to hold the painting for him because he intended it to be a surprise gift for his wife. Before Lee took possession of the painting from Ney, it was stolen from Ney's house by a burglar who forcibly broke into Ney's home. Under these circumstances, A. Lee will be able to recover the $100 purchase price from Ney because Ney had the risk of loss for the painting at the time of the burglary. B. At the time of the theft, Lee had both title to the painting and the risk of loss. C. At the time of the theft, Ney still had title to the painting but Lee had risk of loss for it. D. Lee had an insurable interest in the painting at the time of the burglary. E. Both B. and D. are correct.

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