Business Law Final: True/False

A check which is "payable to cash" requires an appropriate indorsement for further negotiation.

False

A draft involves only two parties, the drawer and the drawee.

False

A drawee bank's refusal to certify a check constitutes dishonor of the instrument.

False

A nonnegotiable instrument is not transferable.

False

A note must be signed by the drawer, while a draft must be signed by the maker.

False

A person can be a holder only if the instrument has been transferred to that person by negotiation.

False

A qualified indorsement destroys the instrument's negotiability.

False

An accommodation party will always be primarily liable on an instrument.

False

An aggrieved buyer may make a reasonable contract of cover and then seek to recover from the seller the difference between the cost of cover and the market price, plus any incidental and consequential damages.

False

An allonge may be used only if the instrument does not contain sufficient space for an indorsement.

False

An indorsement written on a piece of paper clipped to the instrument is not valid.

False

An indorser who has indorsed a negotiable instrument with a qualified indorsement stating that it is "without recourse" has no liability of any kind to subsequent holders.

False

An instrument is negotiable even though it is incomplete as to the amount payable.

False

An instrument is nonnegotiable if the holder may extend the maturity of the instrument for an indefinite period of time.

False

An instrument is nonnegotiable if the obligor may extend the maturity of the instrument for a definite period of time.

False

An obligation-oriented remedy is one that provides the aggrieved party with the opportunity to recover monetary damages.

False

An unauthorized signature cannot be ratified by the person whose name appears on the instrument.

False

Assignment is the transfer of a negotiable instrument in such a manner that the transferee becomes a holder.

False

Contributory negligence by the user of a defective product that is unreasonably dangerous will prevent the user from pursuing a claim based on Section 402A.

False

Elder, an authorized agent for Mullins, signs a negotiable instrument, "Mullins, principal, by Elder, agent." Mullins has primary liability and Elder has secondary liability on the instrument.

False

Greater rights are given to the transferee under assignment than under negotiation.

False

Heidi Homeowner buys a defective toaster at a neighborhood garage sale and is injured when it explodes. Heidi can sue her neighbor for breach of the implied warranty of merchantability.

False

In Davis v. Watson Brothers Plumbing, Inc., the court found that Davis was not a "holder" of the check.

False

In resolving ambiguities, printed words control typewritten and handwritten words, and typewritten words control handwritten words.

False

Most states have eliminated the requirements of horizontal privity but have retained vertical privity requirements in warranty actions.

False

Negotiation of a bearer instrument requires a valid indorsement.

False

Strict liability in tort may arise from a manufacturing defect but not from a defective design.

False

The Code has rejected the common law remedy of cover.

False

The Code requires that a seller make certain warranties, which cannot be disclaimed.

False

The concept of holder in due course was developed to make transferees subject to defenses.

False

The doctrine of strict liability in tort may be held to be applicable to merchant sellers for personal injuries but not property damage.

False

The expression "as is" will only disclaim the implied warranty of merchantability if it is in writing and conspicuous.

False

The strict liability in tort of manufacturers extends only to buyers and their families.

False

Under Revised Article 3, an order to pay only out of a particular fund makes the instrument conditional and thus destroys negotiability.

False

A blank indorsement can be converted into a special indorsement.

True

A cashier's check is a check drawn by a bank on itself to the order of a named payee.

True

A drawee bank is primarily liable after it accepts the check.

True

A note is a written promise by a maker to pay a payee and is thus a two-party instrument.

True

A restrictive indorsement attempts to limit the rights of the indorsee.

True

A seller who discovers that the buyer is insolvent may stop any delivery.

True

A signature may be made by an individual herself or by an authorized agent.

True

A thief or finder of order paper which has been indorsed in blank can transfer good title to a subsequent holder who may qualify as a holder in due course.

True

A warranty creates a duty on the part of the seller to ensure that the goods it sells will conform to certain qualities, characteristics, or conditions.

True

An instrument payable with a stated, variable rate of interest is an obligation for a fixed amount.

True

An instrument, otherwise negotiable, is negotiable bearer paper if by its terms it is payable to "cash."

True

Any seller can make an implied warranty of fitness for a particular purpose, but only a merchant can make an implied warranty of merchantability.

True

Application of the implied warranty of fitness for a particular purpose does not depend on whether the seller is a merchant.

True

Checks, when accepted, are said to be certified.

True

If a buyer breaches an installment contract in a manner that substantially impairs the whole contract, the seller may cancel the entire contract.

True

In the event of a breach of warranty, the measure of damages is the difference at the time and place of the acceptance between the value of the accepted goods and the value of the goods as warranted.

True

Negotiability is a legal concept that makes written instruments an accepted form of payment in substitution for money.

True

Presentment is excused where the acceptor is undergoing bankruptcy.q

True

Requirements for negotiation depend on whether the instrument is bearer paper or order paper.

True

Strict liability in tort generally is not subject to disclaimer, exclusion, or modifications by contractual agreement.

True

The Code allows parties to a contract to specify the extent of damages in the event of a breach.

True

The Code has rejected the doctrine of election of remedies, providing that remedies for breach are cumulative in nature.

True

The Code permits an aggrieved seller to bring an action to recover the price where the goods have been identified to the contract and there is no ready market available for their resale.

True

The Code's implied warranty of merchantability is a warranty by a merchant seller that the goods are reasonably fit for the ordinary purposes for which they are manufactured and sold.

True

The aggrieved seller's right to stop delivery of goods by a carrier or other bailee upon learning of the buyer's insolvency ceases when a negotiable document of title covering the goods is negotiated to the buyer.

True

The indorsement of an impostor or of any other person in the name of the named payee is effective if the impostor has induced the maker or drawer to issue the instrument to him.

True

The purpose of the Code's remedial provisions is to place the aggrieved party in as good a position as if the other party had fully performed.

True

The transfer of a nonnegotiable promise or order operates as an assignment

True

The treasurer of Image, Inc. uses a stamp to sign checks drawn on the corporate account. This meets the signature requirement of negotiability.

True

There is no implied warranty on defects that an examination ought to have revealed.

True

Under the Code the parties may, by agreement, limit, modify, or exclude remedies or damages available for breach.

True

Under the Magnuson-Moss Act, no seller providing a written warranty can effectively disclaim any implied warranty.

True

When a severe weather warning has been declared, a delay in notice of dishonor is excused to the reasonably diligent holder who was prevented from posting the notice.

True