EST FOUR Multiple Choice Questions (Enter your answers on the enclosed answer sheet) 1) What is the defi nition of "goods" under Article 2 of the UCC?...

Business Law TEST FOUR

Multiple Choice Questions (Enter your answers on the enclosed answer sheet)

1) What is the defi nition of “goods” under Article 2 of the UCC?

a. ”Goods” are defi ned as tangible things that are immovable at the time of their identifi

cation to the contract.

b. ”Goods” are defi ned as fi xtures.

c. ”Goods” are defi ned as intangible things that are immovable at the time of their identifi

cation to the contract.

d. ”Goods” are defi ned as intangible things that are movable at the time of their identifi -

cation to the contract.

e. ”Goods” are defi ned as tangible things that are movable at the time of their identifi cation

to the contract.

2) Regarding differences under Article 2 of the UCC in the treatment of merchants and

nonmerchants, which is true?

a. Article 2 holds merchants to a lower duty than nonmerchants.

b. Article 2 applies to merchants, but never to nonmerchants.

c. Article 2 contains several provisions that either apply only to merchants or impose a

greater duty on merchants.

d. Article 2 does not differentiate at all between merchants and nonmerchants, and they

are treated the same under all circumstances.

e. None of the above is true.

3) Where a contract for the sale of goods does not mention the place of delivery for the

goods, which of the following is true?

a. The seller is obligated to deliver the goods to the buyer’s place of business.

b. The contract fails for failure to state a material term.

c. The seller is obligated to deliver the goods at the seller’s place of business.

d. Sellers without a place of business are obligated to deliver the goods at the seller’s

home.

e. Both C and D are true.

4) Under the UCC, if an offer is received by mail, the acceptance:

a. can be made by another means, but only if the offer so states.

b. must also be made by mail.

c. can be made in any commercially reasonable manner.

d. is effective only once it is received by the offeror.

e. can be canceled by the offeree at any time during the period of a fi rm offer.

Unit 4 Examination

271

Business Law

5) The parol evidence rule would not allow which of the following items into evidence

when interpreting a written contract?

a. Evidence of the meaning of a term in the parties’ line of business that differs from the

meaning of that term in everyday language.

b. Evidence based on prior conduct in similar contracts between the parties to explain

the meaning of an ambiguous term in the contract.

c. Evidence of a price change agreed upon after the contract was signed.

d. Evidence of an oral statement regarding the contract price made when the written

contract was signed that was different from the price in the written contract.

e. All the above would be allowed into evidence under the parol evidence rule.

6) What is required to meet the writing requirement of the statute of frauds under the

UCC?

a. In cases where both parties are merchants, a writing signed by the party to be charged

or a written confi rmation of an oral agreement that is sent by one party to the other

and not objected to by the other party; in all other transactions, a writing signed by

the party to be charged.

b. In cases where at least one party is a merchant, either a writing signed by the party

to be charged or a written confi rmation of an oral agreement that is sent to the merchant

and not objected to by the merchant; in transactions not involving a merchant,

a writing signed by the person to be charged.

c. In cases where both parties are merchants, a writing signed by the party other than

the party to be charged at the end of the document.

d. In all cases, a writing signed by the party to be charged.

e. In all cases, a writing signed by all parties to the contract.

7) Which of the following is true relating to a “fi rm offer” under the UCC?

a. It must be in writing and signed by the merchant.

b. It can be made only by a merchant.

c. It may provide that the offer remain open for any period of time up to six months.

d. A, B and C.

e. A and B only.

8) Susan decides to buy new carpet for her home. She goes to Carpet City and chooses

the carpet she likes. As part of the deal, Carpet City agrees to install the carpet. The

carpet is installed while Susan is at work. When she returns home and sees it, Susan

immediately notices problems. The carpet is not the same quality of carpet she ordered,

and the color is off. Does the UCC apply, and why or why not?

Unit 4 Examination

272

Business Law

a. The UCC does not apply because the deal with Carpet City included service that is not

covered by the UCC.

b. The UCC does not apply because it does not apply to mixed contracts of goods and

services.

c. The UCC applies because it applies to service contracts as well as to contracts for the

sale of goods.

d. The UCC applies because the predominant part of the transaction between Susan and

Carpet City was the sale of goods.

e. The UCC does not apply because Susan and Carpet City did not agree in writing before

the carpet was installed that the UCC would apply.

9) Which of the following situations creates a sale that falls under UCC sales law rules?

a. Dr. Mackey agrees to teach at Pollak university for 1 year.

b. Abc rentals rents a cement mixer to Isabel.

c. Katherine makes a contract to purchase a shed that requires assembly. The contract

price is for $8,000.00 which includes $400.00 for labor.

d. Allison contracts to pay Mike $880.00 to have her bedroom painted. $800.00 is

for labor and $80.00 is for the paint.

e. All of the above are UCC sales contracts.

10) Seller who is located in Atlanta, Georgia contracted to sell a shipment of peaches to

the 1910 fruit gum company located in Buffalo, New York. The peaches were sold

f.o.b. Buffalo. Seller delivered the peaches to the proper carrier in Atlanta and the

peaches were destroyed during shipping. Under these facts:

a. Seller bears the risk of loss and is responsible.

b. Seller and buyer share the risk of loss.

c. This is a trick question; goods can’t be shipped f.o.b. Buffalo.

d. Buyer bears the risk of loss and is responsible.

e. Neither the seller nor the buyer bear risk of loss, the carrier bears the risk of loss.

11) Which of the following is true regarding a shipment contract?

a. Such contracts require the seller to bear the risk of loss to the goods during their

transportation.

b. The risk of loss does not pass until the goods are tendered to the buyer at the specifi

ed destination.

c. It requires the seller to deliver conforming goods to the buyer by use of the seller’s

own trucks.

d. It requires the seller to ship goods conforming to the contract to a buyer via a carrier.

e. It requires the seller to deliver conforming goods to a specifi c destination.

Unit 4 Examination

273

Business Law

12) When a seller breaches a contract for the sale of goods by delivering nonconforming

goods that are so nonconforming that the buyer has the right to reject them, the risk

of loss:

a. is unaffected by the seller’s breach.

b. is transferred to the buyer as a matter of law within 24 hours.

c. remains on the seller until the nonconformity is cured or the buyer accepts the nonconforming

goods.

d. remains on the seller indefi nitely.

e. is transferred to the buyer upon delivery of the nonconforming goods, but is transferred

back to the seller if the buyer returns the goods.

13) Under Article 2A of the UCC, for which types of lease(s) is the risk of loss on the lessor

during the term of the lease?

a. Ordinary leases.

b. Both ordinary and fi nance leases.

c. Finance leases.

d. Neither ordinary nor fi nance leases.

e. Loss-shifting leases.

14) In Lindholm v. Brandt, when Malmberg sold Lindholm’s “Red Elvis” to Brandt, the

court found that:

a. Malmberg had been entrusted with the artwork but had a void title because he

breached the terms of the entrustment so he couldn’t pass good title to Brandt.

b. Malmberg had been entrusted with the artwork and could pass the voidable title to

Brandt because Brandt qualifi ed as a good faith purchaser.

c. Malmberg had stolen the artwork and could pass the void title to Brandt because

Brandt qualifi ed as a good faith purchaser.

d. Malmberg had been entrusted with the artwork and could pass the void title to Brandt

because Brandt qualifi ed as a good faith purchaser.

e. Malmberg had stolen the artwork, so he couldn’t pass his void title to Brandt.

15) Josh had a computer that needed repair. He took the computer to a used computer

dealer that repaired computers as well. While talking with the owner, Josh learned

that the owner also knew how to repair bicycles. Josh happened to need some repairs

done on his bike, so he left it at the computer shop as well. A week later, Josh

went to pick up his bike and computer. When he got to the store, the owner said he

had bad news. He had hired a new employee who was totally incompetent and had

sold a number of items that were in for repair. He sold both Josh’s computer and his

bike. The store owner knows who purchased them from the credit card records. In

this situation, assuming he can locate the purchasers, Josh can recover:

a. his computer, but not his bike.

b. both his bike and his computer.

c. his bike, but not his computer.

d. neither his bike nor his computer.

e. the computer only if Josh can establish that the purchases had not resold it.

16) Assuming that goods are nonconforming and that the nonconformity substantially

impairs their value to this buyer, which of the following additional factors must be

present for a valid revocation of the acceptance of goods?

Unit 4 Examination

274

Business Law

a. Nothing else is necessary to revoke the acceptance of the goods.

b. The goods were accepted on the reasonable assumption that the seller could and

would cure the nonconformity.

c. The goods were accepted before the nonconformity was discovered, and the nonconformity

was diffi cult to discover.

d. Both B and C must be present in order to revoke the acceptance of the goods.

e. If either B or C is present, the acceptance of the goods can be revoked.

17) Which of the following must be met in every instance in order to revoke an acceptance

of goods?

a. The seller’s promise to cure the nonconformity has not been met.

b. The seller must have fully paid for the goods prior to revocation.

c. The nonconformity is one that substantially impairs the value of the goods.

d. The goods were accepted before discovery of the nonconformity and the seller had

assured the buyer that the goods were conforming.

e. The goods were accepted before discovery of the nonconformity and the nonconformity

was one that was diffi cult to discover.

18) Which of the following is true regarding the rights of the buyer or lessee if the goods

fail to conform to the sales or lease contract in any way?

a. The buyer or lessee may accept the whole.

b. The buyer or lessee may reject the whole.

c. The buyer or lessee may accept any commercial unit and reject the rest.

d. Both A and B are true.

e. Both A, B, and C are true.

19) What is the right of the buyer or lessee to purchase or rent substitute goods if the

seller or lessor fails to make delivery of the goods called?

a. The right to recovery.

b. The right to purchase.

c. The right to cover.

d. The right to recoup.

e. The right to capture.

20) What are the rights of the aggrieved party if an anticipatory repudiation occurs?

a. The aggrieved party may await performance by the repudiating party for a commercially

reasonable time.

b. The aggrieved party must await performance for 7 days.

c. The aggrieved party may await performance for 48 hours.

d. The aggrieved party may treat the contract as breached at the time of the anticipatory

repudiation, which gives the aggrieved party an immediate cause of action.

e. Both A and D.

21) Which of the following is presumed to become part of the “basis of the bargain”?

Unit 4 Examination

275

Business Law

a. Statements of “puffi ng”.

b. All statements of opinion by the seller.

c. All statements of fact by the seller at the time the contract is made.

d. A and C only.

e. A and B only.

22) Which of the following best describes a defect in packaging under products liability?

a. The packaging of a product fails to contain necessary warnings about the dangers

associated with a product.

b. The packaging of a product is such that it allows the product to spoil.

c. The packaging of a product contains misleading or deceptive information about the

product contained inside.

d. The packaging of a product, such as a bottle or can, causes an injury to the user.

e. The packaging of a product allows children to access a product, such as drugs or

poisons, that is generally safe when used as directed, but can be harmful if not used

properly.

23) In Elsroth v. Johnson & Johnson, involving cyanide placed in Tylenol capsules causing

Diane Elsroth’s death, the court found:

a. the construction of tamperproof packaging is impossible.

b. Johnson & Johnson had not followed Food and Drug Administration guidelines appropriately

by using only three tamper resistance techniques when a minimum of four

were required.

c. liability for defective design involves the product itself but not the product packaging.

d. A and B only.

e. A and C only.

24) In Philip MorrisUSA v. Williams, the Supreme Court looked at the issue of punitive

damages in product liability suits and decided:

a. the Due Process Clause of the Constitution forbids the use of punitive damages to

punish a defendant for injuries to nonparties.

b. treble punitive damages are warranted in product liability cases.

c. punitive damages are not permitted in product liability suits.

d. punitive damages may not exceed 9X the compensatory damages.

e. the Equal Protection Clause of the Constitution forbids the use of punitive damages to

punish a defendant for injuries to nonparties.

25) Which of the following best describes the defense of correction of a defect?

a. The defense applies even in a situation where a user received a recall notice to correct

the defect but did not comply with the notice.

b. It applies only if the manufacturer replaces the defective product at no additional

charge to the owner.

c. The defense applies only if the particular sample of the item was repaired, thus fi xing

the defect.

d. The defense applies if the user realizes there is a defect and assumes the risk.

e. The defense applies if a product is redesigned such that future production does not

contain the defect.