Law 1 Final Exam

Cici signs a check "pay to the order of Doug" drawn on Cici's account in Eastside Bank. Cici shows the check to Frederica, who agrees that the signature is Cici's and that Doug is owed the amount that the check represents. Doug signs the back of the check. Liability on this check extends to

a. Cici and Doug only

Doctors Medical Clinic agent Emma is authorized to write checks on the clinic's account in Finance Bank. Greater Pharma Corporation is a clinic supplier. Emma writes a check on the clinc's account "pay to the order of Greater Pharma [signed] Emma," indorses it in Greater Pharma's name, and deposits it in her own account in Heartland Bank. If Heartland collects payment, the ultimate party most likely to suffer the loss is

a. Doctors Medical Clinic.

Eliza buys a new motorcycle from Fab Cycles, Inc. The most important factor in determining whether an express warranty is created is whether

a. Fab Cycles's promise becomes part of the basis of the bargain.

Nakamura, an accountant for Outdoor Outfitters, Inc., issues company checks payable to nonexistent persons drawn on Outdoor's account at Peerless Bank. Nakamura indorses the checks and deposits them in his account. Outdoor discovers the theft and demands that Peerless recredit its account. Peerless's best defense is that

a. Outdoor was in a better position than Peerless to prevent the theft.

Realty Acquisitions borrows $1,000,000 at 4 percent interest from Shady Credit Lenders and signs a promissory note for that amount. Without the borrower's authorization, Shady changes the amount of the note to $1,200,000 and increases the rate to 8 percent. Shady materially altered the note when

a. Shady changed the amount and the interest rate.

Safe4U Lenses, Inc., assures ThruVu Optical Company that Safe4U's lenses will not crack within a certain range of pressure. ThruVu buys the lenses to prescribe to its customers. When cracks develop within the stated range, ThruVu files a suit against Safe4U. The court is most likely to rule in favor of

a. ThruVu, because Safe4U's statement was an express warranty.

Keanu presents an instrument that states "pay to the order of Laura" to Mega Bank for payment. This instrument is the most common type of negotiable instrument, which is

a. a check.

Dedra signs a check payable to Ember, who indorses the back, gives it to Federal Commerce Bank, and receives cash. The transfer of the check from Ember to the bank is

a. a negotiation.

Emily writes and signs a check payable to "Festival Cinema." Georg, Festival's manager, indorses the check "For deposit only." This is

a. a restrictive indorsement.

Fact Pattern 25-2A LNG Corporation and Midstates Utility Company enter a contract for a sale of liquified natural gas. LNG draws a draft unconditionally ordering Midstates Utility to pay $50,000 to LNG's order in sixty days. Midstates Utility signs and dates the draft. Refer to Fact Pattern 25-2A. This instrument is

a. a trade acceptance.

Kramer goes to Lawn & Garden to tune up his mower. Martin, the service technician, learns that Kramer's lawn is overgrown and rocky and advises the use of a certain type of oil, plug, filter, and blade. Later, while Kramer is mowing his lawn, the mower breaks down due to the use of the items recommended by Martin. Kramer may recover from Lawn & Garden for breach of

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

Berton transfers a draft by signing it and delivering it to Cormac. Berton is

a. an indorser.

To obtain dental supplies for Orthodontics Dental Clinic, Piper executes a draft in favor of Quality Supply Corporation. A draft is

a. an unconditional written order to pay money.

Builders Exchange, Inc., issues an instrument in favor of Custom Construction Company. For the instrument to be negotiable, it must

a. be payable on demand or at a specific time.

Cameron buys a motorcycle from Blammo Motors. Cameron soon discovers that the cycle has a defect that significantly affects its value and use. To sue Blammo under the UCC, Cameron must commence an action for breach of contract within

a. four years.

HandiTools, Inc., sells power tools, power tool parts, and related supplies under "full" warranties. Under the Magnuson-Moss Warranty Act, this means that HandiTools must provide

a. free repair or replacement of any defective part.

To finance the purchase of an electric guitar and amplifier from Leon's Guitars, Milo signs an instrument promising to pay to "National Lenders" $1,800 with interest in installments with the final payment due August 15, 2014. To be negotiable, this instrument must include on its face

a. no conditions.

Lara writes on a piece of paper, "I owe you $400," signs it, and gives it to Max. This instrument is

a. nonnegotiable, because it does not include an express promise to pay.

On Friday morning, Geoff deposits into his account at Heartland Bank a $500 check from Imelda, who also has an account at Heartland. On that same day, this check is considered

a. provisionally credited.

Fact Pattern 26-A1 Nena obtains a check payable to her order from Oran. Nena signs the back and gives the check to Patricia. Patricia writes "Pay to Patricia" above Nena's signature. Refer to Fact Pattern 26-A1. After Patricia writes "Pay to Patricia" above Nena's signature, further negotiation of the check

a. requires Patricia's indorsement and delivery

Fact Pattern 22-A1 Daily Bread Bakeries, Inc., contracts to buy all of its ingredient requirements for bread making, at a certain minimum per year, from Enriched Flour & Grain Corporation for six years. After three years, Daily Bread tells Enriched that it plans to sell its assets to Flat Bread Shops, Inc. Flat Bread refuses to assure Enriched that it will continue Daily Bread's contract.

a. terminate the contract and seek damages.

Precious Stones, Inc., and Sparkling Jewelry stores enter into a contract for a sale of gemstones. Precious Stones does not deliver. The buyer can normally recover as damages the difference between

a. the contract price and the market price.

When processing a check, Superior Bank encodes information, such as the amount of the check, on the item. Superior thereby warrants to any subsequent bank or payor

a. the encoded information is correct.

Darwin writes a check to Education Loan Management, Inc., that is drawn on Darwin's account at First Federal Bank. If the bank does not accept the check, liability for its amount is on

b. Darwin.

Commercial Rents Corporation agrees to lease a pressure washer to Delivery Trucks, Inc., which agrees to pick it up at E Street Warehouse. Before Delivery Trucks retrieves the washer, it is stolen. The loss is suffered by

b. Delivery Trucks.

Ervin signs a check "pay to the order of Felicia" drawn on Ervin's account in Garden Valley Bank. Ervin later orders Garden Valley not to pay the check, but the bank pays it over Ervin's order. Subsequent checks written on Ervin's account "bounce." Most likely liable for the costs to Ervin is

b. Garden Valley Bank.

Jenna receives a check from Kristy. Without Jenna's knowledge, Leland indorses it in his own name and deposits it in his account at Metro Bank. In Jenna's subsequent suit against the bank for the money, the court will most likely rule in favor of

b. Jenna, because Leland's signature is not authorized.

To finance the purchase of a house from Sander, Tobias signs an instrument promising to pay to "Uno Mortgage Company" $200,000 with interest in installments with the final payment due July 10, 2044. To be negotiable, this instrument must include the signature of

b. Tobias.

Canada and the United States form an agreement to govern their commercial exchanges with one another. This is

b. a bilateral agreement.

Leon pays Metro Bank $1,000 plus a service fee to draw a check on itself made payable to National Shipping Company. This is

b. a cashier's check.

Esteban receives a check from Fleet Trucking Corporation. Esteban indorses the check to Garden Valley Bank by writing "pay to Garden Valley Bank only" and signing his name. This is

b. a restrictive indorsement.

Varoom Motors, Inc., allows Weber to take a Xtrem-brand motorcycle for a "test run." Weber tries the cycle for a few hours, returns, and buys it. This is

b. a sale on approval.

Business Universal Corporation, a U.S. firm, establishes a wholly owned subsidiary firm in Brazil. In this situation, Business Universal retains complete control and authority over

b. all of the operation.

Good Tire Company and Hiway Auto Service enter into a contract for a sale of tires. Good Tire is a merchant who deals in goods of the kind sold. Under the UCC, an implied warranty of merchantability arises

b. automatically in sales contracts.

Fact Pattern 26-A1 Nena obtains a check payable to her order from Oran. Nena signs the back and gives the check to Patricia. Patricia writes "Pay to Patricia" above Nena's signature. Refer to Fact Pattern 26-A1. By writing "Pay to Patricia" above Nena's signature, Patricia

b. avoids the risk of loss from theft of the instrument.

Nakeya and other foreign citizens allege environmental destruction committed overseas by the government of Cameroon on behalf of Deep Mining Company, a U.S. firm. To seek redress for their injuries in a U.S. court, these citizens can

b. bring civil suits under the Alien Tort Claims Act.

Commercial Leasing Corporation and Quarry Construction Company enter into a contract for a lease of three excavators. Under the perfect tender rule, Commercial Leasing must ship or tender goods to the lessee that

b. conform to the contract description in every way.

Gwen signs a check payable to Hart and gives it to him. Hart indorses the back, and transfers the check to Ingrid. To negotiate the check to Jaime, Ingrid must

b. deliver the check to Jaime.

Home Remodelers, Inc., and Imogen enter into a contract for a sale of cabinets and countertops. Home Remodelers, a merchant who deals in goods of the kind sold, notes that its goods come with an implied warranty of merchantability. Under the UCC, this means that the goods are reasonably

b. fit for the ordinary purpose for which such goods are used.

Jackson, or any U.S. citizen, can bring a civil suit in a U.S. court against a foreign entity

b. for a tort allegedly committed in the United States or overseas.

Argentina has a civil law system. In theory, in this system, the courts

b. may not develop their own laws.

Horace can write checks on his account at InterCity Bank. Jemma steals the checks, forges Horace's signature, and cashes the checks at InterCity. The bank is excused from any liability if, after receipt of the first forged check, Horace fails to report the forgeries within

b. one year.

Hydro Source Company contracts to sell pumps, tanks, and water storage systems to Inflo Irrigation, Inc. Before the goods are delivered, Inflo indicates that it will not be able to pay. Hydro Source can

b. resell the goods and recover any damages from Inflo.

Ecuador seizes the assets of Resourced Oil, Inc., a U.S. firm. Resourced's recovery from Ecuador in a U.S. court may be prevented by

b. the act of state doctrine.

Sofia, a citizen of Chile, and Trent, a citizen of the United States, enter into a contract. When Trent breaches the contract, Sofia obtains an award of damages in a Chilean court. She asks a U.S. court to enforce the award. The U.S. court defers to and enforces the Chilean court's decree. This is

b. the principle of comity.

TackMaker, Inc., and Silver Stallion Stables enter into a contract for a sale of bridles, saddlery, and other equine equipment. TackMaker delivers, but Silver Stallion does not pay. TackMaker can normally recover as damages

b. the purchase price plus incidental damages.

Rancho Amarillo and Bulls & Heifers Company enter into a contract for a sale of one hundred head of cattle. When Bulls & Heifers does not deliver within a reasonable time after the agreed delivery date, Rancho Amarillo files a suit for breach. Bulls & Heifers asserts the doctrine of commercial impracticability. This doctrine extends only to problems that are

b. unforeseen.

Mantas Moderno Company, which is based in New York, agrees to sell fifty woven carpets, imported from Mexico and currently stored in New Jersey, to NuDecor, Inc., which is based in Connecticut. If the contract does not indicate where the goods will be delivered, the place of delivery is

c. New Jersey.

Red's Roofing buys asphalt roofing tiles from Shingles, Inc. The parties agree that the tile will be shipped "F.O.B. Shingles's warehouse" to Red's Roofing location via Tristate Shipping Corporation. The tiles are lost in transit. The loss is suffered by

c. Red's Roofing.

Ridgetop Bank is an HDC of a note for $1,000 on which there is the forged signature of "Stan." If sued on the note by Ridgetop

c. Stan's best defense would be forgery.

Ursula buys a Verismooth boat from a Watercraft store, which agrees to keep the boat for Ursula until she picks it up. Before Ursula gets the boat, an unforeseen tornado destroys the store and the boat. The loss of the boat is suffered by

c. Watercraft.

Ralph, a representative for Statewide Truck & Transport Company, delivers a warehouse receipt to Thelma, the owner of United Storage Warehouse. A warehouse receipt is

c. a receipt issued by a warehouser for goods in a warehouse.

Corn that fills County Grain Co-op's silo is fungible if the corn is

c. alike naturally, by agreement, or by trade usage.

Ira signs a note payable to the order of Jay. Jay indorses the note and gives it to Kim as payment for a debt. Kim presents it to Ira, who pays it. Ira's payment discharges

c. all of the parties.

Global Enterprise Corporation, a U.S. firm, wishes to participate, but limit its involvement, in Middle Eastern markets. Global Ennterprise empowers Alem, Ltd., a United Arab Emirates firm, to enter into contracts in certain countries on Global Enterprise's behalf. This is

c. an agency relationship.

Sigrud buys spiked mountain-climbing shoes from Rockridge Gear store. Rockridge does not know that Sigrud plans to wear the shoes to climb Tower Mountain. When Sigrud is on the mountain, the spikes come out of the shoes, causing her to fall and be injured. Rockridge breached

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

Vehicle Wholesale Company and Walt's Retail Motors enter into a contract for a sale of used cars. Vehicle Wholesale assures Walt's that it has valid title to the vehicles. Under the UCC, warranties of title arise

c. automatically in most sales contracts.

Home Appliance Corporation contracts with Instate Trucking Company to take a selection of appliance repair parts to Journey Airlines, Inc., with Journey to transport the goods to a KeepSafe Company warehouse. Instate Trucking, Journey Airlines, and KeepSafe each acknowledge possession of the goods by a document of title. Instate Trucking, Journey Airlines, and KeepSafe are

c. bailees.

Fruits n' Veggies Company gives a $3,000 promissory note to Gro-Local Farms for a load of fresh produce. The produce arrives spoiled, rotten, and moldy. If Gro-Local presents the note for payment. Fruits n' Veggies's best defense would be

c. breach of warranty

Outpost Farm Supply and Pablo enter into a contract for a sale of chicken feed. Circumstances make it difficult for Outpost to perform, and the contract is breached. Pablo looks for remedies. Unlike the common law, under the UCC, remedies are

c. cumulative.

Northwest Resources, Inc., and Midwest Commodities Corporation are exporting firms that join together to export a line of products. Northwest Resources and Midwest Commodities apply to Commerce Bank for a loan to fund their effort. Under federal law, Commerce and other U.S. banks are

c. encouraged by credit guaranties to lend such funds.

Global Talk Corporation sells phones and other mobile devices. Under most circumstances, Global Talk will be presumed to have warranted that its title to the goods is

c. good and valid.

Beouf, Ltd., and Comida, S.A., transact an international sale of goods. For these parties, and other international buyers and sellers, the United Nations Convention on Contracts for the International Sale of Goods spells out the duties that apply

c. if the parties have not agreed otherwise in their contracts.

Munchies Bistro Corporation, a U.S. firm, signs a contract with Manger au Brasserie, S.A., a French firm, to give Manger the right to use Munchies's trademark in restaurants in France. This is

c. licensing.

Ryan owes $5,000 to State University. In the sand on the side of Treetop Hill, he executes an instrument for that amount that otherwise meets the requirements for negotiability. This instrument is likely

c. nonnegotiable, because sand is not sufficiently permanent.

Bence signs a promissory note for $1,500 in favor of Community College. The note is undated but specifies that it is "payable one month after date." This note is

c. nonnegotiable, because the maturity date cannot be determined from the face of the instrument.

To borrow the money to buy a car, Megan signs a note "payable to the order of Neighborly Financing." Olav cosigns the note to guarantee the repayment of the loan. Olav's liability on this note is

c. primary.

River Gear Company and Tours & Trips, Inc., enter into a contract on August 1 for the sale of fifty inflatable river rafts. Tours & Trips cancels the contract ten days later. River Gear is unable to sell the rafts to another buyer. River Gear can

c. recover the contract price from Tours & Trips but must hold the rafts for it.

NutriRich, Inc., sells fifty cases of Omega 3 capsules to Good Health stores, but before Good Health takes physical possession, the cases are lost. Under the UCC, the parties' rights and obligations with respect to the loss depend on the concept of

c. risk of loss.

Fact Pattern 27-1A Lisa writes a check on her account at Metro Bank to Niklas to pay a debt. Niklas negotiates the check by indorsement to O'Leary, who presents it for payment to Prime Bank. Refer to Fact Pattern 27-1A. Niklas is

c. secondarily liable.

Banquet Furnishings, Inc., and Christina enter into a contract for a lease of tables, chairs, and items for a wedding reception. Banquet Furnishings, a merchant who deals in goods of the kind sold, generally describes the goods, details technical specifications, and shows a sample. Under the UCC, if these are inconsistent

c. the sample takes precedence over the general description.

To pay for investment advice from financial consultants Buffet and Carraldo, Doris signs a check payable to "Buffet or Carraldo." A proper indorsement of the check is

d. "Buffet" only, or "Carraldo" only, or "Buffet" and "Carraldo."

Hyacinth signs a check payable to Ishmael Accountants, P.C., and gives it to Ishmael, leaving the amount blank but authorizing Ishmael to fill in the check for $10,000. Ishmael fills in $15,000 and negotiates the check to Green Valley Bank, to whom Ishmael owes $15,000. Green Valley Bank, an HDC, can enforce the check for

d. $15,000.

Banquets & Parties (B&P) stores contracts to buy 1,000 uninflated balloons from Gas Bags, Inc., for $1 per item. When the market price decreases to 50 cents per balloon, B&P refuses to go through with the deal. Gas Bags can recover

d. $500.

Fact Pattern 28-1A Marlene loses her Neighborly Bank access card. She realizes her loss the next day but waits a week to call the bank. Meanwhile, Odell finds and uses Marlene's card to withdraw $3,000 from Marlene's account. Refer to Fact Pattern 28-1A. Marlene is responsible for

d. $500.

On Monday, Elin deposits in her account at Fiscal Bank a local check for $500. After 5:00 P.M. on Friday, from these funds, Elin can withdraw no more than

d. $500.

Brad leaves an iPod at Computer Sales & Repair (CSR) to have the battery replaced. CSR sells the iPod to Doris, who does not know that it belongs to Brad. Brad can recover from

d. CSR.

Chaka signs a check "pay to the order of Darryl" drawn on Chaka's account in Evergreen Bank. Darryl signs the back of the check. Secondary liability on this check extends to

d. Chaka and Darryl only.

Resource Industries Inc.'s agent Svetlana is authorized to draw checks on the company's account in Town Bank. The checks are preprinted with the company name. Svetlana writes a check "pay to the order of Vivian [signed] Svetlana." Vivian presents the check for payment. If Town Bank dishonors it, liability extends to

d. Resource Industries.

Tomas writes a check for $1,000 drawn on Unified Bank and presents it to Viola. Viola presents the check for payment to Unified Bank, which dishonors it. The party most likely liable to Viola is

d. Tomas in a civil suit.

Mountainside Coffee Company and Nature's Cuisine, Inc., enter into a contract for a sale of coffee beans. The contract includes the term "F.O.B. Ocean City," which is the location of Nature's Cuisine. This means that the contract is

d. a bill of lading.

Avril receives a payroll check from Business Solutions, Inc., and indorses it by signing her name on the back of the check. This is

d. a blank indorsement.

The United States taxes each barrel of imported oil at a flat rate. This is

d. a tariff.

Connie transfers a note by signing it and delivering it to Diana. Diana is

d. an indorsee.

Fact Pattern 26-A1 Nena obtains a check payable to her order from Oran. Nena signs the back and gives the check to Patricia. Patricia writes "Pay to Patricia" above Nena's signature. Refer to Fact Pattern 26-A1. When Patricia writes "Pay to Patricia" above Nena's signature, the check becomes

d. an order instrument.

Music, Inc., sells fifty MP3 players to Noise Stores, Inc. To avoid liability for most implied warranties, in some states Music could simply state in writing that the players are sold

d. as is.

Precision Parts, Inc., and Quality Auto stores enter into a contract for a sale of specific auto parts. Precision Parts ships parts that do not meet the specifications. Quality Auto

d. can reject the entire shipment.

Hong Ltd., a Chinese firm, imports its goods into the United States and offers those goods for sale at "less than fair value." This is

d. dumping.

Construction Products Company and Dante enter into a contract for a sale of bricks and stones. Construction Products knows the purpose for which Dante will use the goods. Under the UCC, an implied warranty of fitness of a particular purpose arises

d. if the buyer is relying on the seller to select suitable goods

Lighter Than Air, Inc., and Mario enter into a contract for a sale of a hang glider. Lighter Than Air, a merchant who deals in goods of the kind sold, makes implied and express warranties in connection with the sale. The Magnuson-Moss Warranty Act was designed to prevent deception in warranties by

d. making warranties easier to understand.

Fact Pattern 28-1A Marlene loses her Neighborly Bank access card. She realizes her loss the next day but waits a week to call the bank. Meanwhile, Odell finds and uses Marlene's card to withdraw $3,000 from Marlene's account. Refer to Fact Pattern 28-1A. When Marlene receives her Neighborly Bank statement, she demands that the bank investigate the matter and recredit his account. The bank

d. must investigate and, if the dispute is not resolved within ten days, recredit Marlene's account (at least until the dispute is resolved).

In the global environment of business, the law of a particular nation, such as Germany, Japan, or the United States, is classified as

d. national law.

Oliver signs an instrument that states it is being executed "as per a contract for the sale of a case of apples dated May 1." This instrument is

d. negotiable.

The government of the United States and the governments of other nations have the power to enforce their respective national laws within their borders. The power to enforce international law within the borders of all nations rests with

d. no court or international organization.

Farley gets a $300 check as a gift from Gena. Farley crudely increases the amount of the check to $3,000—the alteration is obvious—and transfers it to Home Entertainment store in exchange for a new HD TV. The store deposits the check in its bank account at Intrastate Bank. HDCs of this check include

d. none of these parties.

Jacob signs a promissory note payable to Kendyl "with interest" on which he conspicuously notes that it is "nonnegotiable." This instrument is

d. nonnegotiable, because it includes the notation "nonnegotiable."

Talia, who is not a Urban Bank customer, attempts to cash a check drawn on the bank. The check is considered dishonored if Urban Bank

d. refuses to pay it

Farmland Creamery and Gourmet Delis, Inc., enter into a contract for a sale of dairy products. When Farmland learns that Gourmet is insolvent, Farmland can stop delivery of the goods in transit

d. regardless of the quantity.

Ocean Vessels, Inc., and Pacific Harbor Company enter into a contract for a sale of a boat. Ocean is a merchant who deals in goods of the kind sold. The goods are defective. Under the UCC, the implied warranty of merchantability is breached

d. regardless of what Ocean knew or could have discovered.

Fact Pattern 25-2A LNG Corporation and Midstates Utility Company enter a contract for a sale of liquified natural gas. LNG draws a draft unconditionally ordering Midstates Utility to pay $50,000 to LNG's order in sixty days. Midstates Utility signs and dates the draft. Refer to Fact Pattern 25-2A. On this instrument, LNG is

d. the drawer.