Exam 2

Which of the following must a plaintiff prove when suing based on an implied warranty of fitness for a particular purpose? Choose 2 answers. 1. the buyer told the seller of his or her particular needs from the product 2. the product was defective 3. the product was a "lemon" 4. the seller stated the product would meet the buyer's particular needs

1, 4

What are exceptions to the perfect tender rule?

1. agreement of parties 2. right to cure 3. substitution of carriers 4. installment contracts 5. commercial impracticability 6. destruction of identified goods 7. assurance and cooperation

What documents spell out the powers of a corporation? Choose 2 answers. 1. certificate of corporate power 2. the bylaws 3. the charter (also called the articles of incorporation) 4. de facto documentation

2, 3

Which of the following are advantages of operating as a sole proprietorship? Choose 2 answers. 1. The owner is not personally liable for business debts if the business is officially registered. 2. The business may conduct an initial stock offering once it has made a profit in four consecutive quarters. 3. Forming a sole proprietorship is simple and relatively inexpensive. 4. Sole proprietorships are not taxed.

3, 4

open delivery term

When no delivery terms are specified, the buyer normally takes delivery at the seller's place of business.

open payment term

When the parties do not specify payment terms, payment is due at the time and place at which the buyer is to receive the goods.

What are 3 ways in which a merchant status can arise?

1. *deals in goods of the kind* involved in the sales contract 2. by occupation, *holds himself out as having special knowledge and skill* related to the practices or goods involved in the transaction 3. by employing a merchant as a broker, agent, or other intermediary in a transaction

In which of these situations might a court pierce the corporate veil? Choose 2 answers. 1. More than half of the officers have resigned or been fired due to low profits. 2. Personal and corporate money is mixed together in one account. 3. The corporation does not have sufficient capital to operate and meet its debts. 4. The corporation has borrowed money from a shareholder.

2, 3

What actions are valid exceptions to the perfect tender rule? Choose 3 answers. 1. the seller may adjust the price if his or her costs have risen more than 1% 2. the contract is unenforceable if the goods which had been identified to the contract are destroyed 3. the seller may choose a different means of delivery if the agreed upon means becomes unavailable or impractical 4. the seller has the right to cure nonconforming goods within the contract time for performance

2, 3, 4

What are the 3 elements of a consumer lease?

1. a lessor who regularly engages in the business of leasing or selling 2. a lessee (except an organization) who leases the goods "primarily for a personal, family, or household purpose" 3. total lease payments that are less than a dollar amount set by state statute

Which of the following provisions are typically in a charter for a corporation? Choose 2 answers. 1. the name and address of the corporation's agent 2. the intended business purpose of the corporation 3. the advertising plan for the corporation 4. the trade secrets of the corporation

1, 2

What are the 3 ways acceptance can be demonstrated?

1. buyer or lessee indicates (by words or conduct) to the seller or lessor that the goods are conforming or that the buyer or lessee will retain them in spite of their nonconformity 2. buyer or lessee fails to reject the goods within a reasonable period of time 3. in sales contracts, the buyer performs any act inconsistent with the seller's ownership (ex: any use or resale of the goods - except for testing or inspecting - generally acts as acceptance)

What remedies are available for: seller -buyer breaches contract -goods haven't been delivered to buyer

1. cancel contract 2. withholding delivery of goods 3. resell or dispose of goods and sue to recover damages 4. sue to recover purchase price or lease payments due 5. sue to recover damages for the buyer's nonacceptance

If the contract doesn't indicate where the goods will be delivered, where are the 3 places they can be delivered?

1. seller's place of business 2. seller's residence 3. location of goods (if both parties know at time of contracting the location)

The UCC states that a sales or lease contract will not fail for indefiniteness even if one or more terms are left open as long as...

1. the parties intended to make a contract 2. there is a reasonably certain basis for the court to grant an appropriate remedy

How does the governance of a closely held corporation compare to the statutory model of corporate governance?

They are very different, with shareholders having more influence in a closely held corporation and more influence in the statutory model.

Which of the following is a requirement for the initial formation of a corporation?

a charter

destination contract

a contract in which the seller is required to ship the goods by carrier and deliver them at a particular destination. at that point, the seller's portion is complete

shipment contract

a contract that requires the seller to ship the goods to the buyer via a common carrier

A corporation that is formed in one state but does business in another state is referred to in the second state as:

a foreign corporation

Article 2A covers any transaction that creates...

a lease/sublease of goods

What statement is true about creating a sole proprietorship? a. No documentation is required to create a sole proprietorship. b. The members of a sole proprietorship must write and sign an operating agreement. c. The owner of a sole proprietorship must file an official record of the business name with the secretary of state's office. d. There is a waiting period of 30 days between opening the business and the time a sole proprietorship becomes official.

a. No documentation is required to create a sole proprietorship.

Which of the following is a disadvantage of operating as a sole proprietorship? a. The owner of a sole proprietorship is personally liable for all business debts. b. Sole proprietorships are taxed at a higher rate than corporations. c. A sole proprietorship may only be run as a non-profit organization. d. Forming a sole proprietorship requires extensive paperwork to be completed by a lawyer and filed with the appropriate state office.

a. The owner of a sole proprietorship is personally liable for all business debts.

anticipatory repudiation

an assertion or action by a party indicating that he or she will not perform an obligation that the party is contractually obligated to perform at a future time

When does the title pass to the buyer under a shipment contract?

at the time and place of shipment

An implied warranty of fitness for a particular purpose may be properly disclaimed by which of the following? a. a verbal "as is" statement b. a written "as is" statement c. an "all sales are final" statement d. an email accompanying the receipt for an online order

b. a written "as is" statement

Which of the following implied warranties means the product will be suitable for the particular use that the buyer intends? a. implied warranty from prior dealings or trade custom b. implied warranty of fitness for a particular purpose c. implied warranty of title d. implied warranty of merchantability

b. implied warranty of fitness for a particular purpose

When a contract contemplates shipment of the goods but does not specify terms relating to the assortment of goods, the _____ has the right to make these arrangements.

buyer

What is the term for the doctrine under which a seller must deliver goods that conform exactly to the terms of the contract? a. mirror image rule b. commercially acceptable cure c. exact acceptance d. perfect tender rule

d. perfect tender rule

When does identification take place for future goods?

depending on goods: unborn animals (within 12 mos): time of conception crops to be harvested (within 12 mos): when crops are planted any others: when goods are shipped, marked, or otherwise designated by the seller as the goods to which the contract refers

What is the combination of factors that sets sole proprietorships apart from all other business entities?

ease of formation, along with receiving all of the profit

What is the time limit for commencing an action for breach of contract under the Uniform Commercial Code (UCC)?

four years

A sole proprietorship differs from a corporation in:

how stock is sold

open quantity terms

if the parties do not specify a quantity, no contract is formed and there is no basis for determining a remedy. HOWEVER, the two exceptions are: 1. requirements contracts 2. output contracts

open price term

if the parties have not agreed on a price, the court will determine a "reasonable price at the time for delivery"

What type of corporation is formed for the purpose of doing a public service instead of making money?

nonprofit

tender of delivery

occurs when seller makes conforming goods available to buyer and provides whatever notification is reasonably necessary to enable the buyer or lessee to take delivery

When contracts involve a combination of goods and services, courts generally use what test to determine whether the contract is primarily for the sale of goods or services?

predominant factor test

The _____ involved must be expressly stated in the contract. If this is left open, the courts will have no basis for determining a remedy.

quantity of goods

What does Article 2 not deal with the sale of?

real property (real estate), services, or intangible property (stocks or bonds)

Which type of corporation is taxed like a partnership, with shareholders paying personal income tax on business income?

s corporation

When a contract contemplates shipment of the goods but does not specify the shipping arrangements, the _____ has the right to make these arrangements.

seller

What factors influence the remedies available to a seller when the buyer breaches a contract? Choose 3 answers. 1. whether or not the goods are in transit 2. which party has possession of the goods 3. what remedies the seller has already claimed for this breach 4. whether the buyer has rejected or accepted the goods

1, 2, 3

What remedies are available to a buyer when a seller refuses to deliver the goods that are the subject of a contract? Choose 3 answers. 1. the buyer may buy other goods and recover damages from the seller 2. the buyer may cancel the contract 3. the buyer may sue to obtain specific performance if the goods are unique or if damages are an inadequate remedy 4. the buyer may cancel all other contracts with this seller on the grounds of anticipatory breach

1, 2, 3

What remedies are available to a seller when the buyer breaches a contract before the goods are delivered to the buyer? Choose 3 answers. 1. the seller may resell the goods and sue to recover damages 2. the seller may sue to obtain specific performance 3. the seller may cancel the contract 4. the seller may withholding delivery of the goods

1, 3, 4

Which of the following are implied warranties? Choose 3 answers. 1. merchantability 2. state-of-the-art 3. prior dealing or trade usage 4. fitness for a particular purpose

1, 3, 4

A sole proprietorship has flexibility in decisions regarding: (Choose 2 answers.) 1. pricing of services or goods sold. 2. how much stock is sold. 3. how the business is taxed. 4. when to schedule vacation.

1, 4

A sole proprietorship is similar to a partnership in (choose 2): 1. how taxes are paid directly by the owner, not the company 2. the minimum number of owners. 3. the ability to have an owner/member who does not participate in the business. 4. liability for debt.

1, 4

duration of an ongoing contract

A single contract might specify successive performances but not indicate how long the parties are required to deal with each other. In this situation, either party may terminate the ongoing contractual relationship.

What is true of the tax liability of C corporations?

C corporations pay taxes on profits at the corporate level

The simplest form of business to establish is a

sole proprietorship

merchant

someone who is in the business of buying or selling particular goods and who possesses or uses an expertise specifically related to those goods

perfect tender rule

states that if goods or tender of delivery fail in any respect to conform to contract, buyer/lessee has right to: 1) accept the goods; 2) reject entire shipment; or 3) accept part and reject part

identification

takes place when specific goods are designated as the subject matter of a sales or lease contract (allows title to pass form seller to buyer)

What are the characterizations of "goods" subject to Articles 2 and 2A of the UCC?

tangible and movable

requirements contracts

the buyer agrees to purchase and the seller agrees to sell all or up to a stated amount of what the buyer requires

A sole proprietorship differs from an LLC in

the documentation required for formation

A sole proprietorship differs from a partnership in:

the number of owners

Who is liable for contracts entered into on behalf of the corporation before the corporation is formed?

the promoter

output contracts

the seller agrees to sell and the buyer agrees to buy all or up to a stated amount of what the seller produces

When does identification take place for existing goods?

the time the contract is made

When does the title pass to the buyer under a destination contract?

when the goods are tendered at that destination