Business Law II: Learn It Questions (Ch 20, 21, 22, 23, 29, 30, & 31)
If several terms of a mixed contract are left blank: a. the predominant factor test must be applied to determine which law applies and whether UCC gap fillers can be used. b. the contract will be interpreted in the favor of the buyer. c. the contract must be reformed into two separate contracts, one for the goods and one for the services. d. the contract automatically fails for lack of completeness.
a
The process by which a creditor may legally take a debtor's real property to satisfy a debt secured by that property is called: a. foreclosure. b. eminent domain. c. mortgage. d. search and seizure.
a
What document is filed to give public notice to third parties of a secured party's security interest in collateral? a. a financing statement b. a notice of garnishment c. an authenticated collateral description d. a security agreement
a
What is the term for the right of a seller, under the Uniform Commercial Code (UCC), to correct a delivery of goods that do not conform to contractual terms within the period specified by the contract in order to avoid a breach of contract action? a. cure b. specific performance c. replevin d. cover
a
What key factor determines what remedies are available for a seller in a sales contract when there is a breach by the buyer? a. The location of the goods involved in the breach b. The location of the buyer because this determines jurisdiction c. Whether the goods conform to the contract specifications d. Whether the goods have been completed and are ready to ship
a
When a surety pays a debt owed to a creditor, he gains the rights that the creditor had against the debtor. This is called the right of: a. subrogation. b. judgment. c. guarantee. d. contribution.
a
When does title to stolen goods transfer? a. never b. when they are stolen c. when the thief sells the goods to a purchaser in good faith who does not know of the theft d. when they are deemed unrecoverable
a
When the debtor has fully paid a debt that was secured by consumer goods and perfected by filing, the creditor must, in a timely manner, file a: a. termination statement. b. financing agreement. c. guaranty award. d. release of collateral notice.
a
Which of the following implied warranties means the warranty arose from practices used in the industry for the product? a. implied warranty from prior dealings or trade custom b. implied warranty of title c. implied warranty of fitness for a particular purpose d. implied warranty of merchantability
a
A sales or lease contract will not fail for indefiniteness even if one or more terms are left open as long as both of the following are true: (Choose 2 answers.) a. The parties intended to make a contract. b. The remedy for breach is clearly defined in the contract. c. There is a reasonably certain basis for the courts to determine a remedy in the case of a breach. d. The price is set clearly in the contract.
a & c
A surety who is being held liable on a contract after a principal debtor failed to pay could assert which of the following as a defense to release their obligation (if true)? Choose 2 answer choices. a. Incapacity of the surety at the time of signing b. Immaterial modification of the contract c. Material modification of the contract by the creditor without the surety's consent d. Bankruptcy of the principal debtor
a & c
What products are included in the UCC definition of goods? Choose 2 answer choices. a. Oil and gas, if the seller removes b. Investment securities c. Crops harvested by the seller d. Oil and gas, if the buyer removes
a & c
What rights does the perfect tender rule give buyers of goods? Choose 2 answer choices. a. The right to accept delivery of all of the goods b. The right to reject goods if they are not delivered as agreed c. The right to reject the seller's goods if the goods are not exactly as described in the contract d. The right to reject goods that conform to the contract specifications
a & c
Which of the following defenses may a surety or guarantor raise? Choose 2 answers. a. Bankruptcy of the surety b. Statute of limitations c. Fraud against the surety d. Incapacity of the principal debtor
a & c
Article 2 of the UCC applies to what types of contracts? Choose 2 answer choices. a. Contracts for the sale of goods and services when it is predominately goods b. Contracts for the sale of goods and services when it is predominately services c. Contracts for the sale of services d. Contracts for the sale of goods
a & d
How do parties determine which is the appropriate law for a mixed contract? Choose 2 answer choices. a. The predominant-factor test dictates the proper choice of law. b. Common law applies to all mixed contracts. c. The UCC applies to all mixed contracts. d. Common law is appropriate for some mixed contracts.
a & d
In what ways does Article 2 of the Uniform Commercial Code (UCC) differ from contract rules under the common law? Choose 3 answers. a. Under the UCC, the only required definite term is quantity of product being sold. Other terms such as price and delivery time can be left open. b. Under the UCC, merchants have more flexibility in having open terms. c. Under the UCC, any manner of showing agreement to contract is accepted, but under the common law acceptance must mirror the offer. d. Under the UC
a, b, & c
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. a. The buyer may cancel the contract. b. The buyer may buy other goods and recover damages from the seller. c. The buyer may sue to obtain specific performance if the goods are unique or if damages are an inadequate remedy. d. The buyer may cancel all other contracts with this seller on the grounds of anticipatory breach.
a, b, & c
What remedies are available to a seller when the buyer breaches a contract before the goods are delivered to the buyer? Choose 3 answers. a. The seller may withhold delivery of the goods. b. The seller may cancel the contract. c. The seller may resell the goods and sue to recover damages. d. The seller may sue to obtain specific performance.
a, b, & c
Which of the following must a plaintiff prove when suing based on an express warranty for a defective product? Choose 3 answers. a. One of the buyer's reasons for the purchase is the product warranty. b. The seller breached the warranty. c. The seller made a statement of fact to the buyer about the quality or uses of the product. d. The seller knew the buyer would use the product in the manner in which it was used.
a, b, & c
Once a secured party has possession of collateral, what may they do? Choose 3 answer choices. a. Sell the goods in a public sale. b. Sell the goods in a private sale. c. Retain the goods if 60% of the debt is paid. d. Retain the goods if less than 60% of the debt is paid.
a, b, & d
A salesperson says to a customer, "The battery on this leaf blower will last for one hour of use." May the customer sue on an express warranty if the leaf blower dies after 30 minutes of use? a. No, because the warranty given must contain the words "guarantee" or "warranty." b. Yes, because an express warranty may be in writing or may be a statement verbally given to the buyer at the time of the sale. c. Yes, because the leaf blower was not fit for its particular purpose. d. No, because an expre
b
A secured party who has control will prevail over a secured party who has only filed for these types of collateral: a. purchase-money security interests, investment property, and mechanic's liens. b. deposit accounts, investment property, and letter-of-credit rights. c. deposit accounts, mechanic's liens, and insurance policies. d. insurance policies, purchase-money security interests, and letter-of-credit rights.
b
An express warranty is properly disclaimed if the disclaimer: a. is emailed to the buyer after payment. b. is given to the buyer at the time of sale. c. conspicuously states that there is no warranty of merchantability. d. uses the words "as is."
b
Between two secured parties who have both perfected their secured interest, which one takes priority? a. The one who has a higher value b. The one who perfected first c. They share equally d. The one who attached first
b
If a secured party has perfected its interest, it has a legal interest against: a. the debtor only b. the debtor and other creditors c. other creditors only d. no one
b
Linda wants to buy some equipment and needs computer software to use the equipment. Linda asks the salesperson if the software is Mac-compatible because she owns only one computer and it is a Macbook. The salesperson states that the computer software is Mac-compatible and many of his customers use the software on their Apple computers. The software box offers no information regarding operating system requirements. When Linda arrives home and opens the package, she discovers the software is not M
b
The Uniform Commercial Code applies to what types of contract? a. Contracts for real estate b. Contracts for goods over $500 c. Contracts for services over $500 d. Contracts for leasing
b
The default provision for the passage of title under the UCC is that title passes to a buyer at the time: a. the goods are put on a common carrier for delivery to buyer. b. the goods are physically delivered to the buyer. c. the goods are tendered at their destination. d. a document of title is handed to the buyer.
b
The process by which a creditor may take possession of (and usually sell) collateral to satisfy an unpaid debt is called: a. guaranty. b. foreclosure. c. suretyship. d. mechanic's lien.
b
Under the UCC, every six months, a debtor in a secured transaction has the right to request: a. change in collateral. b. confirmation of the amount of unpaid debt. c. termination of the agreement. d. reduction of interest rate.
b
Under the Uniform Commercial Code (UCC), what is the only required term for a valid sales contract? a. method of delivery b. quantity of goods being sold c. price of goods being sold d. place of delivery
b
Upon default, a secured party or mortgage holder is entitled to: a. cover. b. foreclose. c. redemption. d. cure.
b
What is the term for when a merchant gives a written, signed assurance that he or she will not revoke an offer for a stated period of time? a. an irrevocable offer b. a firm offer c. an accommodation offer d. a promised offer
b
What is the time limit for commencing an action for breach of contract under the Uniform Commercial Code (UCC)? a. there is no time limit b. four years c. one year d. 90 days
b
When a document of title is required to obtain the goods, title passes to the buyer: a. at the moment the sale is made. b. when the document of title is delivered. c. when the seller tenders the goods. d. when the buyer picks up the goods.
b
When goods are to be picked up by a non-merchant at the place of sale of a merchant, risk of loss passes: a. when the seller tenders the goods. b. when the buyer takes physical possession of the goods. c. when the goods reach the buyer's destination. d. when the goods are delivered to a common carrier.
b
When used as collateral, a laptop computer used by a family for email, games, and schoolwork would be classified as: a. inventory. b. consumer goods. c. electronic chattel paper. d. equipment.
b
Which of the following implied warranties means the product is reasonably fit for the ordinary purposes for which the product is used? a. an implied warranty of fitness for a particular purpose b. an implied warranty of merchantability c. an "as is" warranty d. an implied warranty from prior dealings or trade custom
b
Under which of the following circumstances does risk of loss pass to a buyer when goods are held by a bailee? (Select two) a. when the bailee delivers the goods to the buyer. b. when the buyer obtains a negotiable document of title c. when the bailee acknowledges the buyer's right to possess the goods d. when the seller delivers the goods to the bailee.
b & c
What does the Magnuson-Moss Warranty Act require? Choose 2 answer choices. a. Manufacturers must offer at least limited warranties. b. The name of the person to contact for warranty services. c. The address of the person to contact for warranty services. d. Manufacturers must offer warranties for products selling for over $25.
b & c
Which of these situations are governed by the Magnuson-Moss Warranty Act? Choose 2 answer choices. a. A fan costs $22. b. A fan is selling for $34, but the manufacturer does not want to offer a full warranty. c. A fan is selling for $100, and the manufacturer offers a full warranty. d. A fan is selling for $47, but the manufacturer does not want to offer a warranty.
b & c
Consumer goods include which of the following? Choose 2 answer choices. a. a supply of picnic tables purchased for retail store inventory b. a stove for a residential kitchen c. a stove for a commercial kitchen d. a sofa
b & d
In which of these situations does an express warranty exist? Choose 2 answer choices. a. An employee at Crane Outdoor Shop promises Korinne that their outdoor furniture does not fade in the sun. Korrine states she wants to buy the furniture for indoor use, and it will not be in the sun. b. Crane Outdoor Shop sells only online. The product postings include detailed descriptions of the features, but no pictures. c. Crane Outdoor Shop advertises they have the best outdoor furniture in the state. d.
b & d
Marathon Shoe Store Inc. gives notice to HighFlyer Shoe Co. that Marathon cannot pay for its current shoe order and would like to cancel. HighFlyer has not yet finished making the shoes. What options does HighFlyer have to address the breach of contract by Marathon? Choose 2 answer choices. a. HighFlyer can force Marathon to accept delivery and pay for the shoes. b. HighFlyer can cease manufacturing any unfinished goods and sell the goods for salvage value. c. HighFlyer can withhold payment. d.
b & d
Which of the following is a way a debtor can avoid foreclosure after default on a mortgage? (select two) a. suretyship b. workout agreement c. garnishment d. forbearance
b & d
How does the 1980 United Nations Convention on Contracts for the International Sale of Goods (CISG) differ from the Uniform Commercial Code (UCC)? Choose 3 answers. a. Under the CISG, all sales contracts of $500 or more must be in writing. b. The CISG does not apply to consumer sales. c. The CISG is stricter on requiring mirror image acceptances. d. Under the UCC, an irrevocable offer must be in writing, but under the CISG it can be oral.
b, c, & d
What actions are valid exceptions to the perfect tender rule? Choose 3 answers. a. The seller may adjust the price if his or her costs have risen more than 1%. b. The seller has the right to cure nonconforming goods within the contract time for performance. c. The seller may choose a different means of delivery if the agreed upon means becomes unavailable or impractical. d. The contract is unenforceable if the goods which had been identified to the contract are destroyed.
b, c, & d
What factors influence the remedies available to a seller when the buyer breaches a contract? Choose 3 answers. a. what remedies the seller has already claimed for this breach b. which party has possession of the goods c. whether the buyer has rejected or accepted the goods d. whether or not the goods are in transit
b, c, & d
Which of the following are implied warranties? Choose 3 answers. a. state-of-the-art b. fitness for a particular purpose c. merchantability d. prior dealing or trade usage
b, c, & d
Which of the following elements are required to be a buyer in the ordinary course of business: (Select all that apply) a. buying from a merchant of any type, including pawnbrokers. b. buying from a merchant in the business of selling goods of that kind. c. buying without knowledge it violates the rights of another. d. paying fair market value for the goods. e. buying goods in good faith. f. paying for the goods with cash.
b, c, & e
What factors are important for a buyer to determine when deciding which remedies apply when a seller breaches a sales contract? Choose 2 answer choices. a. Whether the goods have been completed and are ready to ship b. The location of the buyer because this determines jurisdiction. c. Whether the seller delivered nonconforming goods d. Whether the seller failed to deliver the goods
c & d
Which of the following must a plaintiff prove when suing based on an implied warranty of fitness for a particular purpose? Choose 2 answers. a. the product was a "lemon" b. the product was defective c. the seller stated the product would meet the buyer's particular needs d. the buyer told the seller of his or her particular needs from the product
c & d
A pledge has occurred in which of the following situations? a. Sarah verbally agreed to a security agreement with her bank in exchange for the bank loaning her money but never signed the agreement. b. Sarah used her credit card to make a purchase of a new television. c. Sarah signed a security agreement in exchange for her bank loaning her money to buy a sofa. d. Sarah allowed her bank to hold a valuable painting that she owns, in exchange for the bank loaning her money.
d
A purchase money security interest (PMSI) is created when a seller or lender agrees to extend credit to a buyer for all or part of the purchase price of: a. a business enterprise. b. real property. c. financial documents. d. consumer goods.
d
A receipt for goods being transported that is signed by the carrier and serves as a contract for the transportation of the goods is called a: a. shipment contract. b. dock warrant. c. warehouse receipt. d. bill of lading.
d
An attached security interest will legally protect a creditor against: a. third parties. b. banks. c. all other creditors. d. the debtor.
d
An implied warranty of fitness for a particular purpose may be properly disclaimed by which of the following? a. an email accompanying the receipt for an online order b. an "all sales are final" statement c. a verbal "as is" statement d. a written "as is" statement
d
Before title to goods can pass under the UCC, the goods must be: a. identified only. b. in existence only. c. contemplated. d. identified and in existence.
d
Breeze Manufacturing agrees to purchase goods from Hawkins Inc. In what situation could Breeze reject a shipment of goods from Hawkins under the perfect tender rule? a. The industry practice is to allow for minor flaws, but Breeze and Hawkins did not specifically agree to that. b. If Breeze accepted flawed goods from Hawkins in the past. c. If Hawkins Inc. hires a carrier to deliver the goods that was different from the carrier the parties included in the contract. d. The goods do not meet the s
d
Can the parties to a contract agree to change the time limit for commencing an action for breach of contract under the Uniform Commercial Code (UCC)? a. Yes, they may set the time limit to any time they agree upon. b. Yes, but the maximum time allowed is ten years. c. No, they must abide by the Statute of Limitations time limit of four years. d. Yes, they may set the time limit to any time between one year and four years.
d
How does the Uniform Commercial Code define "default"? a. the failure to make payments when due b. the failure to redeem a property upon default c. the failure to provide consideration on a contract d. It does not define default.
d
If a company installs windows in a home, but the homeowner fails to pay, the company can place which of the following on the property? a. artisan's lien b. possession lien c. homeowner's lien d. mechanic's lien
d
If a jeweler repairs a necklace for a customer, who fails to pay, the jeweler may place which of the following on the necklace? a. jeweler's lien b. judicial lien c. foreclosure lien d. artisan's lien
d
In a contract where the payment is broken down such that 80 percent of the cost is for materials and 20 percent is for installation of those materials, the contract will be governed by: a. both the common law and the UCC. b. the common law. c. neither the common law nor the UCC. d. the UCC.
d
In a shipment contract: a. the buyer must present a document of title to obtain the goods. b. the seller is required to ship goods and make sure they are delivered to a particular destination before risk of loss transfers to the buyer. c. the goods must unloaded from the carrier before risk of loss transfers to the buyer. d. the seller is required to ship goods but is not required to deliver them to a particular destination before risk of loss transfers to the buyer.
d
In a suretyship, primary liability means the surety will be liable: a. only after the debtor defaults. b. only after the judgment by the court. c. only if the debtor is in default for 90 days. d. at any time.
d
In what situations does the UCC overrule common law? a. The UCC applies to contracts that sell services. b. The UCC governs situations in which common law is silent. c. The UCC applies to mixed contracts if the predominant purpose of the deal is to sell services. d. The UCC applies to contracts that sell goods.
d
Primarily liable means: a. the secondary obligor is jointly liable with the principal debtor, but the creditor may not hold them liable until the creditor has exhausted all remedies against the principal debtor. b. only the principal debtor may ever be held liable on a contract. c. the principal debtor is the only party liable, until after the principal debtor defaults. d. the secondary obligor is jointly liable with the principal debtor and the creditor may hold them liable as soon as the debt
d
Redemption is: a. permitted before default. b. a legal right. c. a right under federal law. d. an equitable right.
d
The default provision of the Uniform Commercial Code (UCC) is that, unless otherwise specified, title to goods being sold passes when: a. the goods are given to a carrier for shipment. b. the goods are made available at a designated destination. c. a document of title is delivered to the buyer. d. the goods are physically delivered to the buyer.
d
The person who must repay the loan in a secured transaction is called the: a. creditor. b. collateral holder. c. secured party. d. obligor.
d
Under the Uniform Commercial Code (UCC), risk of loss passes to the buyer: a. at the same time that title passes to the buyer. b. in a shipment contract, at the time that the shipment is delivered to the buyer. c. never, if the goods are entrusted to a bailee. d. whenever the contract designates it to pass.
d
Void title means: a. the goods may only be subsequently transferred with valid title to good faith purchasers. b. for the title to become legal, the buyer must wait seven days. c. the goods were purchased using fraud or deception. d. there is no legal title.
d
What is the term for the action of a buyer who, upon learning that the seller will not perform the seller's duty under a contract, makes arrangements to purchase the same goods from a different source? a. cure b. replacement c. replevin d. cover
d
What is the term for the doctrine under which a seller must deliver goods that conform exactly to the terms of the contract? a. the mirror image rule b. commercially acceptable cure c. exact acceptance d. the perfect tender rule
d
What must a plaintiff prove in an express warranty case? a. The seller's opinion about the product b. The buyer's opinion about the product c. A disclaimer d. Buyer reliance on the seller's promises
d
When a lender postpones part or all of the payments on a loan for a limited time to give a defaulting borrower time to make mortgage payments, it is called: a. foreclosure. b. a workout agreement. c. a short sale. d. forbearance.
d
When a non-merchant sells a good to a buyer at the seller's location, the risk of loss passes to the buyer: a. when the buyer takes actual possession of the goods. b. when the buyer takes constructive possession of the goods. c. when the buyer tenders payment for the goods. d. on tender of delivery.
d
When does a buyer obtain an insurable interest in goods? a. when the goods have been tendered b. when the goods have been accepted for delivery c. when the goods have been delivered d. when the goods have been identified
d
Which of the following actions causes a security agreement to terminate? a. delivery of a termination notice b. release of collateral back to the debtor c. filing for bankruptcy d. full repayment of the debt
d
Which of the following is a PMSI? a. A bank provides John a loan to purchase office furniture for his new business and retains an interest in an original Picasso painting owned by John. b. A bank provides John a loan to purchase a refrigerator and retains a security interest in his checking account at the bank. c. A bank provides John a loan to purchase office furniture for his new business and retains an interest in the inventory of his business. d. A bank provides John a loan to purchase a ref
d
Which of the following qualifies as a "good" under Article 2 of the Uniform Commercial Code? a. stocks, if evidenced by a stock certificate b. commercial office building c. undeveloped land d. a commercial freezer unit Assessment question
d
If a consumer falls when a step on a new ladder breaks, what warranty could apply? a. implied warranty of merchantability b. express warranty c. implied warranties implied from prior dealings or trade custom d. implied warranty of fitness for a particular purpose
a
Assuming there are not enough assets to pay the debts of an entire class of creditors, creditors must: a. be paid at a pro rata share. b. forfeit their claim. c. be paid in equal amounts. d. be paid based on whoever was first to file their claim.
a
During self-help, a secured party may take the secured collateral from a debtor: a. as long as they do not breach the peace. b. only if the collateral at issue is a consumer good. c. in any way they are able. d. with the order of a judge.
a
Failure to pay a debt for having a car bumper replaced and painted to match the car would lead to: a. an artisan's lien. b. mortgage foreclosure. c. a mechanic's lien. d. a creditor's composition agreement.
a
A written or authenticated security agreement is a requirement when creating a secured transaction unless: a. both parties agree to waive the written requirement. b. the collateral is intangible, such as a savings account. c. the secured party has possession or control of the collateral. d. the value of the collateral is less than $500.
c
Between a secured party who has attached and a secured party who has perfected, which one takes priority? a. They share equally b. The secured party who has a higher value c. The secured party who perfected d. The secured party who has attached first
c
In a shipment contract, risk of loss passes from seller to buyer when: a. the buyer takes physical possession of the goods. the seller tenders the goods. b. the goods are delivered to the carrier. c. the goods are delivered to d. the destination.
c
In many states, a person must be in what position to have standing to sue for the breach of a product's implied warranty? a. The buyer must have inspected the product at the time of sale. b. The buyer must still have the receipt for the product. c. The buyer must be in privity of contract with the defendant. d. The buyer must have received a written warranty.
c
The Palace Restaurant purchases goods from Pluto Restaurant Supply House on a regular basis. Pluto breaches the contract with Palace when Pluto runs out of the cooking equipment Palace agreed to purchase. What remedy is NOT available to Palace? a. Right to cancel the contract b. Purchase substitute goods from another party c. Reclaim the goods from Pluto's other customers d. Recover incidental damages
c
The right of redemption allows a defaulting borrower to: a. avoid foreclosure by paying the amount they are behind on their loan. b. return their home to the mortgage holder and not have it impact their credit report. c. pay the full amount of the debt and regain their home. d. avoid losing their home by reaffirming their debt.
c
What must an aggrieved buyer prove to obtain the remedy of specific performance in the event of a breach by the seller? a. that the buyer has attempted to cover b. that the seller is insolvent c. that the goods are unique and a substitute will not be equal d. that the price offered for the goods is fair
c
When a buyer in the ordinary course of business purchases goods, they have title to those goods above: a. only the person who entrusted the goods to the merchant, but not the merchant. b. neither the merchant nor the person who entrusted the goods to the merchant. c. both the merchant and the person who entrusted the goods to the merchant. d. only the merchant but not the person who entrusted the goods to the merchant.
c
When does a PMSI perfect? a. upon the filing of the security agreement b. 30 days from the date of sale c. automatically at the time of sale d. A PMSI cannot be perfected.
c
Which of the following implied warranties means the product will be suitable for the particular use that the buyer intends? a. implied warranty of title b. implied warranty of merchantability c. implied warranty of fitness for a particular purpose d. implied warranty from prior dealings or trade custom
c
Which of the following is the proper order for the payment of bankruptcy claims by class from highest priority to lowest priority? a. Secured claims, unsecured claims, priority claims b. Unsecured claims, secured claims, priority claim c. Secured claims, priority claims, unsecured claims d. Priority claims, secured claims, unsecured claims
c
Which section of the Uniform Commercial Code (UCC) applies to contracts for sales of goods? a. Article 2A b. Article 3 c. Article 2 d. Article 4
c
What characteristics must an item possess to be classified as a "good"? Choose 2 answers. a. It must have a definable cash value. b. It must be taxable. c. It must be tangible. d. It must be moveable.
c & d