The Money Law 22

Which of the following is generally NOT a defense to a claim against a manufacturer under 402A? a. Contributory negligence on the part of the plaintiff. b. Voluntary assumption of the risk. c. Misuse or abuse of the product. d. Subsequent alteration of the product by the plaintiff.

a. Contributory negligence on the part of the plaintiff. Correct. Contributory negligence occurs when conduct of the plaintiff falls below a conforming standard and causes injury, and is generally NOT a defense to a claim against a manufacturer under 402A. See "Obstacles to Recovery 22-4."

Which of the following is true with regard to implied warranties under the Code? a. They depend on the type of contract or sale entered into. b. They are a result of specific language in the sales contract. c. They continue the common law rule of caveat emptor. d. They are intended to protect the seller rather than the buyer.

a. They depend on the type of contract or sale entered into. Correct. They depend on the type of contract or sale entered into, the seller's status as a merchant, and the conduct of the parties. See "Implied Warranties 22-1c."

An obligation of the merchant-seller that the goods are reasonably fit for the ordinary purposes for which they are manufactured and sold, and the goods are of fair average quality is known as: a. a warranty of merchantability. b. strict liability. c. an express warranty. d. a warranty of fitness for a particular purpose.

a. a warranty of merchantability. Correct. An obligation of the merchant-seller that the goods are reasonably fit for the ordinary purposes for which they are manufactured and sold, and the goods are of fair average quality is known as a warranty of merchantability. See "Implied Warranties 22-1c."

Alice is browsing in a commercial art gallery when she sees a painting that she likes. Arthur, who is the manager of the gallery, tells her that in his opinion the painting is a genuine Leroy Neiman work. Based upon that representation, Alice buys the work for $5,000. At the sale, Arthur has Alice sign a receipt that includes the following language: This sale caries no warranties, including no EXPRESS or IMPLIED WARRANTIES. Alice later discovers that the painting is only a cheap copy of the original that is worth no more than $50. Arthur has: a. breached an express warranty. b. not breached a warranty because he was merely expressing his opinion. c. breached and the warranty of fitness for a particular purpose. d. breached the warranty of title.

a. breached an express warranty. Correct. Arthur's statement was an express warranty, and even though the sales receipt included a disclaimer, a seller cannot provide an express warranty and then disclaim it.

Rainbow Toy Corporation places a rocket ship toy into the market. The rocket is manufactured according to specifications, but the rocket suddenly explodes after its first use. Such a defect is a: a. Manufacturing Defect. b. Design Defect. c. None of the answers are correct. d. Failure to Warn Defect.

b. Design Defect. Correct. A design defect occurs when a product is produced as specified, but the product is dangerous and hazardous because its design is inadequate. Here, the rocket is manufactured according to specifications but explodes after first use creating a hazardous condition.

Karen decided to sell her stair step exerciser, because she wasn't using it as much as she thought she would. Her friend Lydia bought it from Karen for $100. The first day that Lydia used the exerciser, it fell apart, injuring Lydia's ankle. In this situation: a. Lydia can sue Karen for breach of the warranty of merchantability, because the exerciser is not fit for the ordinary purpose intended. b. Lydia cannot sue Karen for the warranty of merchantability because Karen is not a merchant. c. Lydia cannot sue Karen, because they are not in privity of contract. d. Karen can sue the manufacturer for breach of the warranty of merchantability, because she was the original buyer.

b. Lydia cannot sue Karen for the warranty of merchantability because Karen is not a merchant. Correct. Lydia may be able to sue under another cause of action, but Karen is not a merchant and only a merchant makes an implied warranty of merchantability.

Mark tells Leslie that his stereo has quadraphonic speakers because he was told that when he bought it. Leslie buys the stereo, but it does not have quadraphonic speakers. Is Mark liable for breach of warranty? a. No, because he did not promise her that the speakers were quadraphonic. b. Yes, because the statement was false. c. No, because he did not know his statement was false. d. Yes, because Mark was not acting in good faith.

b. Yes, because the statement was false. Correct. Mark's statement constituted an express warranty.

Strict liability in tort imposes liability on: a. a manufacturer of a component used within a larger product, the manufacturer of which modifies the component for use in its finished product. b. a manufacturer of a defective component used in a larger product if the manufacturer of the finished product made no essential change in the component. c. a non-merchant seller of a defective product which is unreasonably dangerous to the user or consumer. d. a manufacturer, even if the defect occurs after it left the factory.

b. a manufacturer of a defective component used in a larger product if the manufacturer of the finished product made no essential change in the component. Correct. Strict liability in tort imposes liability on a manufacturer of a defective component used in a larger product if the manufacturer of the finished product made no essential change in the component. See "Requirements of Strict Liability in Tort 22-3."

Matt tells Ron that the snow boots he is selling are capable of protection at temperatures of 20° below zero. Ron orders a pair for his trip to Greenland. The first night's temperature goes down to 27 below. Ron suffers frostbite on all of his toes. Ron then sues for breach of warranty. The result is: a. no breach, because Matt's statement was merely opinion. b. no breach, because Matt's statement was correct. c. a breach, because Matt's statement is a breach of the implied warranty of a fitness for a particular purpose. d. a breach, because Matt's statement is a breach of the implied warranty of merchantability.

b. no breach, because Matt's statement was correct. Correct. Matt's representation was accurate; that the boots would provide protection for 20° below zero.

Eric bought a new snowmobile from the North Pole Manufacturing Company. After buying the machine, Eric then modified the spark plugs and a few other things in order to soup it up. In February, just after a snowfall, Eric was driving the snowmobile, when it tipped over, trapping him beneath it. His leg was severely burned. Eric now wants to sue North Pole for strict liability in tort. Eric: a. cannot sue the manufacturer, because horizontal privity is lacking. b. will likely lose the suit, because the machine has been altered since its manufacture. c. will likely win the suit, because of the faulty design of the snowmobile. d. will likely win because the snowmobile is an unreasonably dangerous product.

b. will likely lose the suit, because the machine has been altered since its manufacture. Correct. Strict liability only exists if the product reaches the consumer without significant changes.

Which of the following is NOT included within the Code definition of merchantability? a. Reasonably fit for the ordinary purposes for which the goods are used. b. Pass without objection in the trade under the contract description. c. In the case of fungible goods that they be of a quality that exceeds the description and be above average. d. Be of fair, average quality.

c. In the case of fungible goods that they be of a quality that exceeds the description and be above average. Correct. In the case of fungible goods, that they be of a quality that exceeds the description and be above average is NOT included in the Code definition of merchantability. See "Implied Warranties 22-1c."

Rainbow Toy Corporation places a rocket ship toy into the market, but the rocket is missing certain plastic screws that are part of the specifications of the project. Such a defect is a: a. Design Defect. b. Failure to Warn Defect. c. Manufacturing Defect. d. None of the answers are correct.

c. Manufacturing Defect. Correct. A manufacturing defect occurs when the product fails to meet its own manufacturing specification, as here, because certain plastic screws are missing from the toy.

__________ exists by a product failing to meet manufacturing specifications thus not made properly. a. Design defect b. Failure to warn c. Manufacturing defect d. Strict liability

c. Manufacturing defect Correct. A manufacturing defect exists by a product failing to meet manufacturing specifications thus not made properly. See "Defective Condition 22-3b."

Leslie purchased 100 flower pots from a local merchant. Warranties which are not included in her sales contract, but exist by "operation of law," are the: a. exclusive warranties. b. quasi warranties. c. implied warranties. d. express warranties.

c. implied warranties.

Whether an implied warranty arises out of the circumstances under which the parties enter into a contract may depend on: a. the type of contract entered into. b. the seller's merchant or non-merchant status. c. applicability of other statutes. d. All of these are correct.

d. All of these are correct. Correct. The type of contract, the seller's merchant or non-merchant status, and the applicability of other statutes are all factors that determine whether an implied warranty arises out of the circumstances under which the parties enter into a contract. See "Implied Warranties 22-1c."

An express warranty within the meaning of the Code is created by which of the following? a. A sample. b. A description. c. A promise. d. All of these are correct.

d. All of these are correct. Correct. An express warranty with the meaning of the Code is created by a sample, a description, and/or a promise. See "Express Warranties 22-1b."

Rainbow Toy Corporation places a rocket ship toy into the market. The rocket is manufactured according to specifications and is a safe product, but the rocket has a tendency to char whatever surface it launches from due to intense heat coming from the rocket during launch causing property damage. If Rainbow Toy Corporation does not tell buyers about the potential to char the launching pad surface, such a defect is: a. Design Defect. b. Manufacturing Defect. c. None of the answers are correct. d. Failure to Warn Defect

d. Failure to Warn Defect Correct. Rainbow failed to warn buyers about its potential to char the launching pad surfaces and cause property damage. This was a defect in the manufacturing process.

Terrell asks a salesperson what size of water heater he should buy for their twenty-unit motel. If Terrell purchases a tank based on the salesperson's suggestion, the salesperson's recommendation is: a. an implied warranty of merchantability regarding the water heater. b. no warranty, but only a statement of opinion. c. an express warranty of merchantability regarding the water heater. d. an implied warranty of fitness for a particular purpose.

d. an implied warranty of fitness for a particular purpose. Correct. The salesperson's statement is an implied warranty of fitness for a particular purpose, in which the seller knows the buyer's particular purpose and the buyer is relying on the seller's skill and judgment.

A warranty may rise out of all of the following except: a. a promise made by the seller the buyer. b. the mere existence of a sale. c. out of the circumstances under which the sale is made. d. from a disclaimer.

d. from a disclaimer. Correct. A disclaimer negates a warranty. See "Types of Warranties 22-1."

Leslie purchased 100 flower pots from a local merchant. Warranties which are not included in her sales contract, but exist by "operation of law," are the: a. express warranties. b. exclusive warranties. c. quasi warranties. d. implied warranties.

d. implied warranties. Correct. Warranties which are not included in her sales contract, but exist by "operation of law," are the implied warranties. See "Implied Warranties 22-1c."