Dynamic Business Law 4th Edition Kubasek – Test Bank

$20.00

Pay And Download
Complete Test Bank With Answers
 
 
Sample Questions Posted Below

 

 

 

 

Dynamic Business Law: The Essentials, 4e (Kubasek)

Chapter 5   Constitutional Law

 

1) The U.S. Constitution establishes a system of government based on the principle of unfettered state autonomy.

 

Answer:  FALSE

Explanation:  The U.S. Constitution establishes a system of government based on the principle of federalism, according to which the authority to govern is divided between federal and state governments.

Difficulty: 2 Medium

Topic:  The U.S. Constitution

Learning Objective:  05-01 What is federalism?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

2) The U.S. Constitution allocates the power of the federal government among the three branches of government.

 

Answer:  TRUE

Explanation:  The U.S. Constitution allocates the power of the federal government among the three branches of government. The first three articles of the Constitution establish three independent branches of the federal government: the legislative, executive, and judicial branches. The Constitution ensures that each branch maintains a separate sphere of power to prevent any one branch from obtaining undue power and monopolizing control of government.

Difficulty: 2 Medium

Topic:  The U.S. Constitution

Learning Objective:  05-01 What is federalism?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

3) According to the Tenth Amendment to the U.S. Constitution, all powers that the Constitution neither gives exclusively to the states nor takes from the federal government are reserved for the federal government.

 

Answer:  FALSE

Explanation:  According to the Tenth Amendment to the U.S. Constitution, all powers that the Constitution neither gives exclusively to the federal government nor takes from the states are reserved for the states.

Difficulty: 2 Medium

Topic:  The U.S. Constitution

Learning Objective:  05-01 What is federalism?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

4) The United States Congress can overturn a presidential veto with a simple majority vote of the members of Congress.

 

Answer:  FALSE

Explanation:  The United States Congress can overturn a presidential veto with a two-thirds vote of the members of Congress.

Difficulty: 2 Medium

Topic:  The U.S. Constitution

Learning Objective:  05-01 What is federalism?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

5) The United States Congress has the power to enact legislation, but the president can veto a law that Congress passes.

 

Answer:  TRUE

Explanation:  The United States Congress, the legislative or lawmaking branch of government, has the power to enact legislation, but the president can veto a law that Congress passes.

Difficulty: 2 Medium

Topic:  The U.S. Constitution

Learning Objective:  05-01 What is federalism?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

6) The U.S. Constitution explicitly allows courts to review legislative and executive actions to determine whether they are constitutional.

 

Answer:  FALSE

Explanation:  Although the U.S. Constitution does not explicitly allow courts to review legislative and executive actions to determine whether they are constitutional, early common law established this process, known as judicial review.

Difficulty: 3 Hard

Topic:  The U.S. Constitution

Learning Objective:  05-02 What is the function of each branch of government, and how does each branch serve to check the others?

Bloom’s:  Analyze

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

7) The power of legislative fiat allows courts to review the constitutionality of lower courts’ decisions.

 

Answer:  FALSE

Explanation:  Judicial review allows courts to review the constitutionality of lower courts’ decisions.

Difficulty: 2 Medium

Topic:  The U.S. Constitution

Learning Objective:  05-02 What is the function of each branch of government, and how does each branch serve to check the others?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

8) The process of judicial review was established in the United States Supreme Court case Marbury v. Madison.

 

Answer:  TRUE

Explanation:  Although the U.S. Constitution does not explicitly allow courts to review legislative and executive actions to determine whether they are constitutional, early common law established this process, known as judicial review. The process of judicial review was established in the United States Supreme Court case Marbury v. Madison.

Difficulty: 3 Hard

Topic:  The U.S. Constitution

Learning Objective:  05-02 What is the function of each branch of government, and how does each branch serve to check the others?

Bloom’s:  Analyze

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

9) The Supremacy Clause is located in Article VI of the U.S. Constitution.

 

Answer:  TRUE

Explanation:  The Supremacy Clause is located in Article VI of the U.S. Constitution. It provides that the Constitution, laws, and treaties of the United States constitute the supreme law of the land, “any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.”

Difficulty: 2 Medium

Topic:  The Supremacy Clause and Federal Preemption

Learning Objective:  05-03 What is the relationship between the supremacy clause and preemption?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

10) Sometimes when the state and federal governments have concurrent authority, the federal government can decide to regulate that area exclusively. In such a situation, the state law is unconstitutional according to the doctrine of federal subrogation.

 

Answer:  FALSE

Explanation:  Sometimes when the state and federal governments have concurrent authority, the federal government can decide to regulate that area exclusively. In such a situation, according to the doctrine of federal preemption, the state law is unconstitutional. To determine whether the United States Congress intended to provide exclusive regulation, courts look to the language of the statute and transcripts of congressional hearings.

Difficulty: 2 Medium

Topic:  The Supremacy Clause and Federal Preemption

Learning Objective:  05-03 What is the relationship between the supremacy clause and preemption?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

11) The Ninth Amendment to the United States Constitution is the primary source of authority for the federal regulation of business.

 

Answer:  FALSE

Explanation:  The primary source of authority for the federal regulation of business is the commerce clause, located in Article I, Section 8 of the Constitution. This clause states that the United States Congress has the power to “regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.”

Difficulty: 2 Medium

Topic:  The Commerce Clause

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

12) The NLRB v. Jones & Laughlin Steel Corp. case was the turning point for the United States Supreme Court’s application of the Commerce Clause to the regulation of business activities.

 

Answer:  FALSE

Explanation:  The NLRB v. Jones & Laughlin Steel Corp. case was the turning point for the United States Supreme Court’s interpretation of the Commerce Clause. In that case, the Court ruled that the U.S. Congress could regulate labor relations at a manufacturing plant because a work stoppage at the plant would seriously affect interstate commerce. Since the NLRB v. Jones & Laughlin Steel Corp. case, Congress has regulated a broad range of business activities according to the Commerce Clause.

Difficulty: 2 Medium

Topic:  The Commerce Clause

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

13) Police power consists of the residual powers retained by each state to safeguard the health and welfare of its citizenry.

 

Answer:  TRUE

Explanation:  Police power consists of the residual powers retained by each state to safeguard the health and welfare of its citizenry. Typical exercises of a state’s police power include state criminal laws, building codes, zoning laws, sanitation standards for restaurants, and regulations for the practice of medicine.

Difficulty: 2 Medium

Topic:  The Commerce Clause

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

14) The Privileges and Immunities Clause of the United States Constitution gives the federal government the authority to collect taxes.

 

Answer:  FALSE

Explanation:  Article I, Section 8 of the U.S. Constitution gives the federal government the “Power to lay and collect Taxes, Duties, Imports, and Excises.”

Difficulty: 2 Medium

Topic:  Taxing and Spending Powers of the Federal Government

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

15) The United States Congress can use its spending power to achieve social welfare objectives.

 

Answer:  TRUE

Explanation:  As with its power to tax, Congress can use its spending power to achieve social welfare objectives. For example, in South Dakota v. Dole, the United States Supreme Court upheld a federal statute that grants federal funds for state highways to only those states in which 21 is the legal drinking age.

Difficulty: 3 Hard

Topic:  Taxing and Spending Powers of the Federal Government

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Apply

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

16) The Fourth Amendment to the United States Constitution extends most of the provisions of the Bill of Rights to the states.

 

Answer:  FALSE

Explanation:  The Fourteenth Amendment to the United States Constitution extends most of the provisions of the Bill of Rights to the states, prohibiting state interference in citizens’ exercise of their rights.

Difficulty: 2 Medium

Topic:  The Amendments to the Constitution

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

17) The first ten amendments to the United States Constitution do not substantially affect government regulation of business.

 

Answer:  FALSE

Explanation:  The first ten amendments to the U.S. Constitution, known as the Bill of Rights, substantially affect government regulation of business. These amendments prohibit the federal government from infringing on individual freedoms.

Difficulty: 2 Medium

Topic:  The Amendments to the Constitution

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

18) The rights established by the First Amendment to the United States Constitution are absolute.

 

Answer:  FALSE

Explanation:  Like other rights, First Amendment rights are not absolute. For example, in terms of the First Amendment right to freedom of speech, a person does not have the right to yell “Fire!” in a crowded theater when there is no fire, nor does the First Amendment protect false statements about another that are injurious to that person’s reputation.

Difficulty: 2 Medium

Topic:  The Amendments to the Constitution

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

19) The United States Supreme Court has ruled that the First Amendment to the U.S. Constitution protects corporate political speech less compared to the political speech of ordinary citizens.

 

Answer:  FALSE

Explanation:  In First National Bank of Boston v. Bellotti, the United States Supreme Court ruled that the First Amendment protects corporate political speech to the same extent as ordinary citizens’ political speech.

Difficulty: 2 Medium

Topic:  The Amendments to the Constitution

Learning Objective:  05-05 What is the difference between commercial and political speech, and why is that difference important?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

20) Courts analyze government restrictions on commercial speech according to a four-part test established in Central Hudson Gas & Electric Corp. v. Public Service Commission of New York.

 

Answer:  TRUE

Explanation:  Not all corporate speech is political speech. Commercial speech is speech that conveys information related to the sale of goods and services. Courts analyze government restrictions on commercial speech according to a four-part test established in Central Hudson Gas & Electric Corp. v. Public Service Commission of New York.

Difficulty: 2 Medium

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Remember

AACSB:  Diversity

Accessibility:  Keyboard Navigation

 

 

21) What system does the United States Constitution establish to keep the legislative branch from dominating the other branches of government?

  1. A) The Bill of Rights
  2. B) The Commerce Clause
  3. C) Federalism
  4. D) Checks and balances
  5. E) The Tenth Amendment

 

Answer:  D

Explanation:  The United States Constitution establishes a system of checks and balances to keep each branch’s powers from dominating the other branches.

Difficulty: 2 Medium

Topic:  The U.S. Constitution

Learning Objective:  05-01 What is federalism?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

22) The United States Constitution establishes a system of government based on the principle of ________, according to which the authority to govern is divided between federal and state governments.

  1. A) plurality
  2. B) deism
  3. C) plutocracy
  4. D) oligarchy
  5. E) federalism

 

Answer:  E

Explanation:  The United States Constitution establishes a system of government based on the principle of federalism, according to which the authority to govern is divided between federal and state governments.

Difficulty: 2 Medium

Topic:  The U.S. Constitution

Learning Objective:  05-01 What is federalism?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

23) What constitutional power does the United States president use to overrule laws passed by the legislative branch of government (i.e., the U.S. Congress)?

  1. A) Federal presumption
  2. B) The Supremacy Clause
  3. C) Veto power
  4. D) Judicial review
  5. E) The Ninth Amendment

 

Answer:  C

Explanation:  The United States president can use veto power to overrule laws passed by the legislative branch (i.e., the U.S. Congress).

Difficulty: 1 Easy

Topic:  The U.S. Constitution

Learning Objective:  05-01 What is federalism?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

24) Who wrote the opinion for the landmark 1803 United States Supreme Court case Marbury v. Madison?

  1. A) John Marshall
  2. B) Oliver Wendell Holmes
  3. C) William Rehnquist
  4. D) Louis Brandeis
  5. E) Learned Hand

 

Answer:  A

Explanation:  Chief Justice John Marshall wrote the opinion for the landmark 1803 United States Supreme Court case Marbury v. Madison.

Difficulty: 2 Medium

Topic:  The U.S. Constitution

Learning Objective:  05-02 What is the function of each branch of government, and how does each branch serve to check the others?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

25) Which amendment to the United States Constitution provides that all powers that the Constitution neither gives exclusively to the federal government nor takes from the states are reserved for the states?

  1. A) The First Amendment
  2. B) The Second Amendment
  3. C) The Fifth Amendment
  4. D) The Sixth Amendment
  5. E) The Tenth Amendment

 

Answer:  E

Explanation:  According to the Tenth Amendment to the United States Constitution, all powers that the Constitution neither gives exclusively to the federal government nor takes from the states are reserved for the states.

Difficulty: 1 Easy

Topic:  The U.S. Constitution

Learning Objective:  05-01 What is federalism?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

26) Why must federal legislation that affects business be based on an expressed constitutional grant of authority?

  1. A) Because the United States Congress passed a law to that effect.
  2. B) Because the federal government has only those powers granted to it by the U.S. Constitution.
  3. C) Because President Abraham Lincoln issued an executive order to that effect.
  4. D) Because President George Washington issued an executive order to that effect.
  5. E) Because the Privileges and Immunities Clause of the Constitution grants that expressed power.

 

Answer:  B

Explanation:  Because the federal government has only those powers granted to it by the United States Constitution, federal legislation that affects business must be based on an expressed constitutional grant of authority.

Difficulty: 2 Medium

Topic:  The U.S. Constitution

Learning Objective:  05-01 What is federalism?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

27) The United States Constitution establishes ________ branches of government.

  1. A) two
  2. B) three
  3. C) four
  4. D) five
  5. E) None; the United States Supreme Court established the branches of government in the Marbury v. Madison

 

Answer:  B

Explanation:  In addition to allocating authority between state and federal governments, the United States Constitution allocates the power of the federal government among the three branches of government.

Difficulty: 1 Easy

Topic:  The U.S. Constitution

Learning Objective:  05-01 What is federalism?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

28) What are the three independent branches of the federal government?

  1. A) Legislative, executive, and judicial
  2. B) Legislative, commerce, and safety
  3. C) Commerce, safety, and law enforcement
  4. D) Executive, safety, and law enforcement
  5. E) Law enforcement, judicial, and statutory

 

Answer:  A

Explanation:  The first three articles of the United States Constitution establish three independent branches of the federal government: the legislative, executive, and judicial branches. The U.S. Constitution ensures that each branch maintains a separate sphere of power to prevent any one branch from obtaining undue power and monopolizing control of government.

Difficulty: 1 Easy

Topic:  The U.S. Constitution

Learning Objective:  05-01 What is federalism?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

29) The common law process of ________ allows courts to review legislative and executive actions to determine whether they are constitutional.

  1. A) executive fiat
  2. B) judicial deference
  3. C) legislative deference
  4. D) judicial review
  5. E) res ipsa loquitur

 

Answer:  D

Explanation:  Although the United States Constitution does not explicitly allow courts to review legislative and executive actions to determine whether they are constitutional, early common law (particularly the landmark 1803 U.S. Supreme Court case Marbury v. Madison) established this process, known as judicial review.

Difficulty: 2 Medium

Topic:  The U.S. Constitution

Learning Objective:  05-02 What is the function of each branch of government, and how does each branch serve to check the others?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

30) Which clause of the United States Constitution provides that the Constitution, laws, and treaties of the U.S. constitute the supreme law of the land?

  1. A) The Privileges and Immunities Clause
  2. B) The Supremacy Clause
  3. C) The Commerce Clause
  4. D) The Fifth Amendment Due Process Clause
  5. E) The Fourteenth Amendment Due Process Clause

 

Answer:  B

Explanation:  The Supremacy Clause of the United States Constitution provides that the Constitution, laws, and treaties of the U.S. constitute the supreme law of the land, “any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.”

Difficulty: 1 Easy

Topic:  The Supremacy Clause and Federal Preemption

Learning Objective:  05-03 What is the relationship between the supremacy clause and preemption?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

31) The Supremacy Clause is located in Article ________ of the United States Constitution.

  1. A) I
  2. B) II
  3. C) III
  4. D) VI
  5. E) VII

 

Answer:  D

Explanation:  The Supremacy Clause of the United States Constitution, located in Article VI, provides that the Constitution, laws, and treaties of the United States constitute the supreme law of the land, “any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.”

Difficulty: 2 Medium

Topic:  The Supremacy Clause and Federal Preemption

Learning Objective:  05-03 What is the relationship between the supremacy clause and preemption?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

32) Sometimes when the state and federal governments have concurrent authority, the federal government can decide to regulate that area exclusively. In such a situation, according to the doctrine of ________, the state law is unconstitutional.

  1. A) federal subrogation
  2. B) federal preemption
  3. C) federal privileges and immunities
  4. D) res ipsa loquitur
  5. E) stare decisis

 

Answer:  B

Explanation:  Sometimes when the state and federal governments have concurrent authority, the federal government can decide to regulate that area exclusively. In such a situation, according to the doctrine of federal preemption, the state law is unconstitutional.

 

To determine whether the United States Congress intended to provide exclusive regulation, courts look to the language of the statute and transcripts of congressional hearings.

Difficulty: 2 Medium

Topic:  The Supremacy Clause and Federal Preemption

Learning Objective:  05-03 What is the relationship between the supremacy clause and preemption?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

33) What was the result in the Christy Brzonkala v. Antonio J. Morrison et al. case referenced in the textbook, in which the defendants alleged the unconstitutionality of civil remedies available under the federal Violence against Women Act?

  1. A) The United States Congress lacked the authority to regulate noneconomic, violent criminal conduct solely on the basis of that conduct’s aggregate effect on interstate commerce.
  2. B) The United States Congress validly passed the law pursuant to the First Amendment to the U.S. Constitution.
  3. C) The United States Congress validly passed the law pursuant to the Second Amendment to the U.S. Constitution.
  4. D) The United States Congress validly passed the law pursuant to the Fourth Amendment to the U.S. Constitution.
  5. E) The United States Congress validly passed the law pursuant to the Fourteenth Amendment to the U.S. Constitution.

 

Answer:  A

Explanation:  The United States Supreme Court affirmed the lower courts’ decisions, holding that the U.S. Congress may not regulate noneconomic, violent criminal conduct solely based on that conduct’s aggregate effect on interstate commerce.

Difficulty: 2 Medium

Topic:  The Commerce Clause

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

34) Which of the following is an example of the state’s exercise of its police power?

  1. A) The enactment of state criminal codes.
  2. B) The enactment of state criminal codes and zoning laws.
  3. C) The enactment of criminal laws, building codes, zoning laws, sanitation standards for restaurants, and regulations for the practice of medicine.
  4. D) The enactment of criminal laws, building codes, zoning laws, and regulations for the practice of medicine, but not sanitation standards for restaurants.
  5. E) The enactment of laws governing regulations for law enforcement only.

 

Answer:  C

Explanation:  Police power consists of the residual powers retained by each state to safeguard the health and welfare of its citizenry. Typical exercises of a state’s police power include state criminal laws, building codes, zoning laws, sanitation standards for restaurants, and regulations for the practice of medicine.

Difficulty: 3 Hard

Topic:  The Commerce Clause

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Analyze

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

35) Which of the following was the result in the Black Star Farms, LLC et al. v. Jerry Olive, Arizona Department of Liquor License and Control et al. case referenced in the textbook, in which it was alleged that an Arizona law limiting direct sales of wine by producers was unconstitutional on the basis that it discriminated against out-of-state wineries?

  1. A) The Arizona law discriminated against out-of-state wineries in violation of the dormant Commerce Clause.
  2. B) The Arizona law discriminated against out-of-state wineries in violation of the regular Commerce Clause, not the dormant Commerce Clause.
  3. C) The Arizona law discriminated against out-of-state wineries in violation of the dormant Commerce Clause but that it was a valid exercise of the state’s police power.
  4. D) The Arizona law discriminated against out-of-state wineries in violation of the Equal Protection Clause of the Fourteenth Amendment.
  5. E) The Arizona law was valid and did not discriminate against out-of-state wineries.

 

Answer:  E

Explanation:  The United States Court of Appeals for the Ninth Circuit concluded that Arizona’s statutory exceptions to its three-tier distribution system, which treated similarly situated in-state and out-of-state wineries the same and imposed no new impermissible burdens on out-of-state wineries, did not have the practical effect of favoring in-state economic interests over out-of-state interests.

Difficulty: 2 Medium

Topic:  The Commerce Clause

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

36) Which of the following is true regarding federal taxation?

  1. A) The United States Constitution explicitly grants the U.S. Congress the power to tax.
  2. B) The taxes laid by Congress must be uniform across the states.
  3. C) Congress can legitimately use taxes to encourage the development of certain industries and discourage the development of others.
  4. D) The Constitution explicitly grants Congress the power to tax; the taxes laid by Congress must be uniform across the states; and Congress can legitimately use taxes to encourage the development of certain industries and discourage the development of others.
  5. E) None of these.

 

Answer:  D

Explanation:  Article I, Section 8, of the Constitution gives the federal government the “Power to lay and collect Taxes, Duties, Imports and Excises.” The taxes laid by Congress, however, must be uniform across the states. Although tax collection allows the government to provide essential services, the government can also use taxes for other purposes. For example, to encourage the development of certain industries and discourage the development of others, the government can provide tax credits for firms entering favored industries.

Difficulty: 3 Hard

Topic:  Taxing and Spending Powers of the Federal Government

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Analyze

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

37) In the ________ case, the United States Supreme Court upheld a federal statute that grants federal funds for state highways to only those states in which 21 is the legal drinking age.

  1. A) North Dakota v. Dole
  2. B) South Dakota v. Dole
  3. C) North Dakota v. Chiquita
  4. D) South Dakota v. Chiquita
  5. E) North Dakota v. United States of America

 

Answer:  B

Explanation:  Article I, Section 8 of the United States Constitution grants the United States Congress spending power by authorizing it to “Pay the Debts and provide for the common Defense and general Welfare of the United States.” As with its power to tax, the U.S. Congress can use its spending power to achieve social welfare objectives. For example, in South Dakota v. Dole, the U.S. Supreme Court upheld a federal statute that grants federal funds for state highways to only those states in which 21 is the legal drinking age.

Difficulty: 2 Medium

Topic:  Taxing and Spending Powers of the Federal Government

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

38) Which of the following is true regarding the Privileges and Immunities Clause of the United States Constitution?

  1. A) Under the clause, a state cannot prohibit nonresidents from opening restaurants in the state.
  2. B) Under the clause, a state can allow state universities to charge higher tuition to out-of-state students because residents pay taxes that fund state universities, while out-of-state students do not.
  3. C) Under the clause, states may not discriminate against citizens of other states in the buying and selling of property.
  4. D) Under the clause, a state cannot prohibit nonresidents from opening restaurants in the state; a state can allow state universities to charge higher tuition to out-of-state students because residents pay taxes that fund state universities, while out-of-state students do not; and states may not discriminate against citizens of other states in the buying and selling of property.
  5. E) None of these. There is no Privileges and Immunities Clause in the United States Constitution. The Privileges and Immunities Clause is contained in a statute passed by Congress.

 

Answer:  D

Explanation:  The Privileges and Immunities Clause of the United States Constitution prohibits states from discriminating against citizens of other states when those nonresidents engage in ordinary and essential activities. States can, however, allow state universities to charge higher tuition to out-of-state students because residents pay taxes that fund state universities, while out-of-state students do not.

Difficulty: 3 Hard

Topic:  Other Constitutional Restrictions on Government

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Analyze

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

39) Which of the following references the clause of the United States Constitution that provides “Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State”?

  1. A) The Full Faith and Credit Clause
  2. B) The Privileges and Immunities Clause
  3. C) The Commerce Clause
  4. D) The Fifth Amendment Due Process Clause
  5. E) The Fourteenth Amendment Due Process Clause

 

Answer:  A

Explanation:  Article IV, Section 1 of the United States Constitution contains the Full Faith and Credit Clause, which states that “Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State.” This provision requires courts in all states to uphold contracts and public acts established in other states.

Difficulty: 1 Easy

Topic:  Other Constitutional Restrictions on Government

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

40) Courts interpret the ________ Clause of the United States Constitution to mean that no law can be passed that will unreasonably interfere with existing contracts.

  1. A) Commerce
  2. B) Due Process
  3. C) Emoluments
  4. D) Privileges and Immunities
  5. E) Contract

 

Answer:  E

Explanation:  Article I, Section 10 of the United States Constitution contains the Contract Clause, which states that government may not pass any “Law impairing the Obligation of Contracts.” In its application, courts interpret this clause to mean that no law can be passed that will unreasonably interfere with existing contracts.

Difficulty: 1 Easy

Topic:  Other Constitutional Restrictions on Government

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

41) Which constitutional amendment extends most of the provisions in the Bill of Rights to the states, prohibiting state interference in citizens’ exercise of their rights?

  1. A) The Thirteenth Amendment
  2. B) The Fourteenth Amendment
  3. C) The Twenty-first Amendment
  4. D) The Twenty-second Amendment
  5. E) The Twenty-seventh Amendment

 

Answer:  B

Explanation:  The Fourteenth Amendment to the United States Constitution extends most of the provisions in the Bill of Rights to the states, prohibiting state interference in citizens’ exercise of their rights. Thus, the federal and state governments cannot deprive individuals of the freedoms protected by the Bill of Rights.

Difficulty: 2 Medium

Topic:  The Amendments to the Constitution

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

42) Which constitutional amendment provides that the government cannot infringe on citizens’ right to bear arms?

  1. A) The First Amendment
  2. B) The Second Amendment
  3. C) The Fifth Amendment
  4. D) The Sixth Amendment
  5. E) None; the right to bear arms was actually established in 1871 by the United States Supreme Court in the National Rifle Association, et al. v. The United States of America, et al.

 

Answer:  B

Explanation:  The Second Amendment to the United States Constitution states that the government cannot infringe on citizens’ right to bear arms (See Exhibit 5-1, “Summary of the Bill of Rights”).

Difficulty: 1 Easy

Topic:  The Amendments to the Constitution

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

43) Which constitutional amendment protects citizens from unreasonable searches and seizures and requires a finding of probable cause to issue a warrant?

  1. A) The First Amendment
  2. B) The Third Amendment
  3. C) The Fourth Amendment
  4. D) The Sixth Amendment
  5. E) The Tenth Amendment

 

Answer:  C

Explanation:  The Fourth Amendment to the United States Constitution protects citizens from unreasonable searches and seizures and ensures that the government issue warrants only with probable cause (See Exhibit 5-1, “Summary of the Bill of Rights”).

Difficulty: 1 Easy

Topic:  The Amendments to the Constitution

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

44) Which constitutional amendment gives citizens the right not to testify against themselves in a criminal case?

  1. A) The First Amendment
  2. B) The Third Amendment
  3. C) The Fourth Amendment
  4. D) The Fifth Amendment
  5. E) The Tenth Amendment

 

Answer:  D

Explanation:  The Fifth Amendment to the United States Constitution  protects against self-incrimination, meaning that in a criminal case, the defendant does not have to testify in court as a witness against himself or herself (See Exhibit 5-1, “Summary of the Bill of Rights”).

Difficulty: 2 Medium

Topic:  The Amendments to the Constitution

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

45) Which constitutional amendment prohibits cruel and unusual punishment?

  1. A) The Second Amendment
  2. B) The Fourth Amendment
  3. C) The Fifth Amendment
  4. D) The Eighth Amendment
  5. E) The Tenth Amendment

 

Answer:  D

Explanation:  The Eighth Amendment to the United States Constitution prohibits cruel and unusual punishment (See Exhibit 5-1, “Summary of the Bill of Rights”).

Difficulty: 1 Easy

Topic:  The Amendments to the Constitution

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

46) ________ cannot deprive individuals of the freedoms protected by the Bill of Rights.

  1. A) Federal and state governments
  2. B) The federal government
  3. C) State governments
  4. D) The federal government, state governments, and private employers
  5. E) The federal government and private employers

 

Answer:  A

Explanation:  The federal and state governments cannot deprive individuals of the freedoms protected by the Bill of Rights. The constitutional amendments established in the Bill of Rights are a limit only on the actions of government—they do not limit the behavior of private employers. This distinction is commonly misunderstood by many citizens.

Difficulty: 2 Medium

Topic:  The Amendments to the Constitution

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

47) Which of the following is included in the Central Hudson Gas & Electric Corp. v. Public Service Commission of New York test for commercial speech?

  1. A) The principle that speech that is misleading is not protected by the First Amendment to the United States Constitution.
  2. B) The principle that the government must show that a substantial governmental interest is served by a restriction on commercial speech.
  3. C) The principle that any restriction on commercial speech must not be more extensive than necessary.
  4. D) The principle that speech that is misleading is not protected by the First Amendment to the U.S. Constitution; the principle that the government must show that a substantial governmental interest is served by a restriction on commercial speech; and the principle that any restriction on commercial speech must not be more extensive than necessary.
  5. E) None of these.

 

Answer:  D

Explanation:  The Central Hudson Gas & Electric Corp. v. Public Service Commission of New York test for commercial speech is as follows: (1) does the speech concern an illegal activity? Is it misleading? (2) Is the government interest served by the restriction on commercial speech substantial? (3) Does the regulation directly advance the government interest asserted? (4) Is the regulation more extensive than necessary to serve the government interest? (See Figure 5-2, “The Central Hudson Test for Commercial Speech.”)

Difficulty: 3 Hard

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Analyze

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

48) What type of speech does the First Amendment to the United States Constitution not protect?

  1. A) Only defamation.
  2. B) Only obscenity.
  3. C) Only commercial speech.
  4. D) Defamation, obscenity, and commercial speech.
  5. E) Defamation and obscenity.

 

Answer:  E

Explanation:  The First Amendment to the United States Constitution does not protect defamation (speech that harms the reputation of another), nor does it protect obscenity. Courts analyze government restrictions on commercial speech according to a four-part test established in Central Hudson Gas & Electric Corp. v. Public Service Commission of New York.

Difficulty: 3 Hard

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Analyze

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

49) Which of the following is true regarding the protection of “fighting words” under the First Amendment to the United States Constitution?

  1. A) Fighting words are unprotected speech under the First Amendment.
  2. B) Fighting words are protected speech under the First Amendment only if they are uttered by an individual citizen, not by a corporate representative.
  3. C) Fighting words are protected speech under the First Amendment only if they involve political activity.
  4. D) Fighting words are protected speech under the First Amendment only if they are made in connection with a protest march.
  5. E) Fighting words are protected speech under the First Amendment only if they are made in conjunction with self-defense.

 

Answer:  A

Explanation:  The First Amendment to the United States Constitution does not protect fighting words. According to the U.S. Supreme Court, “The English language has a number of words and expressions which by general consent are ‘fighting words’ when said without a disarming smile. . . . Such words, as ordinary men know, are likely to cause a fight.”

Difficulty: 2 Medium

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

50) Which constitutional amendment protects freedom of religion?

  1. A) The First Amendment
  2. B) The Second Amendment
  3. C) The Fourth Amendment
  4. D) The Sixth Amendment
  5. E) The Eighth Amendment

 

Answer:  A

Explanation:  The First Amendment to the United States Constitution contains two provisions that protect citizens’ freedom of religion: The Establishment Clause and the Free-Exercise Clause.

Difficulty: 1 Easy

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

51) Which of the following is relevant in determining whether a particular government statute violates the Establishment Clause?

  1. A) Whether the statute has a secular legislative purpose.
  2. B) Whether the statute’s principal or primary effect either advances or inhibits religion.
  3. C) Whether the statute fosters an excessive government entanglement with religion.
  4. D) Whether the statute has a secular legislative purpose; whether the statute’s principal or primary effect either advances or inhibits religion; and also whether the statute fosters an excessive government entanglement with religion.
  5. E) Whether the statute has a secular legislative purpose and whether the statute’s principal or primary effect either advances or inhibits religion; but not whether the statute fosters an excessive government entanglement with religion.

 

Answer:  D

Explanation:  In the 1971 case Lemon v. Kurtzman, the U.S. Supreme Court codified the following three tests to determine whether a particular government statute violates the Establishment Clause: (1) Does the statute have a secular legislative purpose? (2) Does the statute’s principal or primary effect either advance or inhibit religion? (3) Does the statute foster an excessive government entanglement with religion? To determine whether the statute fosters an excessive government entanglement with religion, courts examine the character and purpose of the institutions benefited, the nature of the aid that the government provides, and the resulting relationship between the government and the religious authority.

Difficulty: 2 Medium

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

52) What does the Establishment Clause of the First Amendment to the United States Constitution provide?

  1. A) That government cannot make a law prohibiting the free exercise of religion.
  2. B) That government cannot make a law respecting an establishment of religion.
  3. C) That government cannot make a law referencing religion in any manner.
  4. D) That government cannot make a law prohibiting the free exercise of religion; that government cannot make a law respecting an establishment of religion; and that government cannot make a law referencing religion in any manner.
  5. E) None of these

 

Answer:  B

Explanation:  The First Amendment’s Establishment Clause maintains that government “shall make no law respecting an establishment of religion.”

Difficulty: 2 Medium

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

53) What does the Free-Exercise Clause of the First Amendment to the United States Constitution provide?

  1. A) That government cannot make a law prohibiting the free exercise of religion.
  2. B) That government cannot make a law establishing a religion.
  3. C) That government cannot make a law referencing religion in any manner.
  4. D) That government cannot make a law prohibiting the free exercise of religion; that government cannot make a law establishing a religion; and that government cannot make a law referencing religion in any manner.
  5. E) None of these.

 

Answer:  A

Explanation:  The First Amendment’s Free-Exercise Clause states that government cannot make a law “prohibiting the free exercise” of religion.

Difficulty: 2 Medium

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

54) A ________ is a court order that authorizes law enforcement agents to search for or seize items specifically described in the warrant.

  1. A) search warrant
  2. B) subpoena
  3. C) search authorization form
  4. D) seek warrant
  5. E) review authorization

 

Answer:  A

Explanation:  A search is unreasonable if the government official conducting the search does not first obtain a search warrant from a court. A search warrant is a court order that authorizes law enforcement agents to search for or seize items specifically described in the warrant.

Difficulty: 1 Easy

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

55) When can government agents obtain a search warrant?

  1. A) When they can establish reasonable cause
  2. B) When they can establish probable cause
  3. C) When they can establish cause to a substantial certainty
  4. D) Anytime they have an informant
  5. E) Anytime the judge is in his office and they show identification as government agents

 

Answer:  B

Explanation:  Government officials can obtain search warrants only if they can show probable cause to believe that the search will uncover specific evidence of criminal activity. In other words, the government officials must have a sufficient reason based on known facts to obtain a warrant.

Difficulty: 2 Medium

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

56) When may government agents search without a search warrant?

  1. A) When law enforcement officials believe it likely that the items sought will be removed before they can obtain a warrant
  2. B) Outside of normal working hours for a judge
  3. C) When they can show that the suspect who lives in the residence at issue has been in jail previously
  4. D) When they can show that a felony is involved
  5. E) All of these

 

Answer:  A

Explanation:  When law enforcement officials believe it is likely that the items sought will be removed before they can obtain a warrant, they may conduct a search without a warrant. Law enforcement officials frequently conduct automobile searches without a warrant according to this rule.

Difficulty: 3 Hard

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Apply

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

57) Which of the following is an exception to the rule that administrative searches usually require search warrants?

  1. A) The rational-relationship exception
  2. B) The reasonable-search exception
  3. C) The pervasive-regulation exception
  4. D) The compelling-need exception
  5. E) The controlling-principle exception

 

Answer:  C

Explanation:  Although administrative searches usually require search warrants, courts have established an exception to this rule. Under the pervasive-regulation exception, if an industry has a long history of pervasive regulation, a warrantless search is not unreasonable. In such industries, administrative agencies can use warrantless searches to ensure that firms uphold regulations.

Difficulty: 3 Hard

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Apply

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

58) What does the Fifth Amendment’s protection against self-incrimination mean?

  1. A) That a person only has to be a witness against himself or herself if a felony is involved.
  2. B) That a person does not have to be a witness against himself or herself if a first offense is involved.
  3. C) That a person does not have to be a witness against himself or herself if prison time is involved as opposed to a mere fine.
  4. D) That a person does not have to be a witness against himself or herself in a criminal case.
  5. E) That a person has to be a witness against himself or herself in a criminal case.

 

Answer:  D

Explanation:  The Fifth Amendment protects against self-incrimination, meaning that in a criminal case, the defendant does not have to testify in court as a witness against himself or herself.

Difficulty: 2 Medium

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

59) Which constitutional amendment protects against double jeopardy?

  1. A) The First Amendment
  2. B) The Second Amendment
  3. C) The Third Amendment
  4. D) The Fourth Amendment
  5. E) The Fifth Amendment

 

Answer:  E

Explanation:  The Fifth Amendment to the United States Constitution protects against double jeopardy.

Difficulty: 1 Easy

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

60) What does the protection against “double jeopardy” mean?

  1. A) That the government cannot try a person more than once for the same crime.
  2. B) That the government cannot try a person more than twice for the same crime.
  3. C) That the government must have double proof to prosecute a person twice for the same crime.
  4. D) That the government must show that at least two people were injured by the defendant in order to justify trying the defendant twice for the same crime.
  5. E) That the government may impose a double sentence on a repeat offender in order to protect the public.

 

Answer:  A

Explanation:  The Fifth Amendment to the United States constitution protects against double jeopardy, meaning that the government cannot try a person more than once for the same crime.

Difficulty: 2 Medium

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

61) Which of the following are types of due process?

  1. A) Procedural due process only
  2. B) Substantive due process only
  3. C) Independent due process only
  4. D) Procedural, substantive, and independent due process
  5. E) Procedural and substantive due process, but not independent due process

 

Answer:  E

Explanation:  The Due Process Clause of the Fifth Amendment to the United States Constitution guarantees two types of due process: procedural and substantive.

Difficulty: 2 Medium

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

62) Which of the following refer(s) to the basic fairness of laws that may deprive an individual of her life, liberty, or property?

  1. A) Procedural due process
  2. B) Substantive due process
  3. C) Prospective due process
  4. D) Both procedural and substantive due process, but not prospective due process
  5. E) The Privileges and Immunities Clause of the United States Constitution

 

Answer:  B

Explanation:  Substantive due process refers to the basic fairness of laws that may deprive an individual of her life, liberty, or property. To satisfy the substantive due process requirement, the government must have a proper purpose for enacting laws the restrict individuals’ liberty or the use of their property.

Difficulty: 2 Medium

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

63) What does the Fifth Amendment’s Takings Clause reference?

  1. A) The right of the government to take private property for public use without paying compensation to the owner.
  2. B) The requirement that the government pay the owner just compensation if the government wants to take private property for public use.
  3. C) The right of the government to put individuals in jail for up to ten days without a hearing.
  4. D) The right of the government to put individuals in jail for up to five days without a hearing.
  5. E) The requirement that the government compensate an owner for anything destroyed during a search.

 

Answer:  B

Explanation:  The Fifth Amendment’s Takings Clause provides that when government takes private property for public use, it must pay the owner just compensation, or fair market value, for her property.

Difficulty: 2 Medium

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

64) Which of the following is true regarding privacy rights?

  1. A) The U.S. Supreme Court has said that the U.S. Constitution does not provide any right to privacy.
  2. B) The U.S. Supreme Court has found that U.S. citizens have a right to privacy based upon the U.S. Constitution.
  3. C) The U.S. Constitution specifically provides for a right to privacy within the Second Amendment.
  4. D) The U.S. Constitution specifically provides for a right to privacy within the Sixth Amendment.
  5. E) Both that the U.S. Supreme Court has found that U.S. citizens have a right to privacy based upon the U.S. Constitution and that the U.S. Constitution specifically provides for a right to privacy within the Sixth Amendment.

 

Answer:  B

Explanation:  The Ninth Amendment to the United States Constitution states, “The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.” Although this amendment does not expressly guarantee the right to privacy, courts have interpreted the Ninth Amendment, together with the First, Third, Fourth, and Fifth Amendments, as providing individuals with a right to privacy. In Griswold v. Connecticut, the U.S. Supreme Court ruled that a Connecticut law prohibiting the use of contraceptives was unconstitutional because it violated individuals’ right to privacy.

Difficulty: 2 Medium

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

65) If a law prevents individuals from exercising a fundamental right, the law will be subject to ________ scrutiny.

  1. A) intermediate
  2. B) rational basis
  3. C) severe
  4. D) strict
  5. E) subjective

 

Answer:  D

Explanation:  If a law prevents individuals from exercising a fundamental right, or if the law’s classification scheme involves suspect classifications, the action will be subject to strict scrutiny. Suspect classifications include classifications based on race, national origin, and citizenship.

Difficulty: 2 Medium

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

66) The legislators of New State institute a law that mothers of children in elementary school, but not fathers, are entitled to seven days off each year in order to attend school events. Several fathers bring a lawsuit challenging the law on equal protection grounds. Which level of scrutiny will the court apply to the law?

  1. A) Intermediate scrutiny
  2. B) Rational basis scrutiny
  3. C) Severe scrutiny
  4. D) Strict scrutiny
  5. E) Subjective scrutiny

 

Answer:  A

Explanation:  If the law’s classification scheme is based on gender or on the legitimacy of children, courts use intermediate scrutiny. According to this standard, the law is constitutional only if it is substantially related to an important government objective.

Difficulty: 3 Hard

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

67) New State passes a law prohibiting the importation of out-of-state apples in order to help in-state growers. Which of the following is the best argument for the out-of-state growers who wish to challenge the new law?

  1. A) That it violates the Dormant Commerce Clause.
  2. B) That it violates the explicit preemption clause.
  3. C) That it violates the First Amendment.
  4. D) That it violates the Fourth Amendment.
  5. E) That it violates due process.

 

Answer:  A

Explanation:  Sometimes a state’s use of its police power affects interstate commerce. If the purpose of a state law is to regulate interstate commerce or to discriminate against interstate commerce, the law is usually unconstitutional. Likewise, if a law substantially interferes with interstate commerce, it is generally unconstitutional. This restriction on states’ authority to pass laws that substantially affect interstate commerce is called the Dormant Commerce Clause.

Difficulty: 3 Hard

Topic:  The Commerce Clause

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

68) Junk Food. Mary Dogood, a member of the school board in ABC County, is appalled at the amount of junk food in the schools. She convinces the state legislature to pass an ordinance that no stores may sell any unhealthy junk food within 500 feet of any school or day care center. A teacher of political science raises the issue of whether the regulation is valid and is told that it is a valid exercise of the jurisdiction’s police power to protect its citizens. Convenience stores balk at the regulation and challenge it in court. What concept is addressed regarding the reference to “police power”?

  1. A) The residual powers retained by each state to safeguard the health and welfare of its citizenry.
  2. B) The residual powers retained by the federal government to enforce valid laws and regulations.
  3. C) The powers granted to local government to enter residences without a search warrant.
  4. D) The powers granted to state governments to tax for the purposes of having law enforcement.
  5. E) The powers granted to state government to imprison citizens of other states who commit crimes within a state.

 

Answer:  A

Explanation:  Police power consists of the residual powers retained by each state to safeguard the health and welfare of its citizenry. Typical exercises of a state’s police power include state criminal laws, building codes, zoning laws, sanitation standards for restaurants, and regulations for the practice of medicine.

Difficulty: 3 Hard

Topic:  The Commerce Clause

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Analyze

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

69) Junk Food. Mary Dogood, a member of the school board in ABC County, is appalled at the amount of junk food in the schools. She convinces the state legislature to pass an ordinance that no stores may sell any unhealthy junk food within 500 feet of any school or day care center. A teacher of political science raises the issue of whether the regulation is valid and is told that it is a valid exercise of the jurisdiction’s police power to protect its citizens. Convenience stores balk at the regulation and challenge it in court. In determining whether the law is constitutional, which of the following will a court likely ask?

  1. A) Whether the state regulation is needed for a compelling reason.
  2. B) Whether the state regulation is rationally related to a legitimate state end.
  3. C) Whether the state regulation is needed for an important reason.
  4. D) Whether the state regulation will impact tax revenue.
  5. E) Whether the state regulation is needed for a compelling reason and also whether the state regulation will impact tax revenue.

 

Answer:  B

Explanation:  In balancing these competing interests, a court generally asks whether the state regulation is rationally related to a legitimate state end. If it is, the court then asks whether the regulatory burden imposed on interstate commerce is outweighed by the state’s interest in enforcing the legislation. The court may also inquire whether there is a less drastic alternative available to attain the legitimate state purpose.

Difficulty: 3 Hard

Topic:  The Commerce Clause

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

70) Junk Food. Mary Dogood, a member of the school board in ABC County, is appalled at the amount of junk food in the schools. She convinces the state legislature to pass an ordinance that no stores may sell any unhealthy junk food within 500 feet of any school or day care center. A teacher of political science raises the issue of whether the regulation is valid and is told that it is a valid exercise of the jurisdiction’s police power to protect its citizens. Convenience stores balk at the regulation and challenge it in court. What do courts generally presume regarding laws passed in accordance with states’ police power?

  1. A) There is no presumption.
  2. B) That the law is valid.
  3. C) That the law is invalid.
  4. D) That the law is valid unless it involves a First Amendment right.
  5. E) That the law is valid unless it involves the Commerce Clause.

 

Answer:  B

Explanation:  Although the Supremacy Clause establishes the sovereignty of federal law, courts generally presume that laws passed in accordance with states’ police power are valid.

Difficulty: 2 Medium

Topic:  The Commerce Clause

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

71) Insurance. Susan, a trained nurse, was recently elected to the U.S. Senate. Susan is very concerned about the lack of insurance for many children and also working adults who cannot afford the insurance premiums. She proposes legislation that states are taxed sufficiently to provide health insurance coverage to children and that federal funds for state highways are denied to any state that does not also provide insurance coverage for uninsured adults. She also proposed that states with citizens earning higher than average incomes be taxed at a higher rate than other states. Bill, a senator, tells Susan that Congress lacks the authority to tax in this manner because the U.S. Constitution expressly reserves that right to the states. Ellen, another senator, tells Susan that Congress has no authority to link highway funds or any other funds with social welfare objectives. Sam, an administrative assistant, tells Susan that Congress is prohibited from taxing residents of one state at a higher rate than citizens of another state. Which of the following is true regarding Bill’s statement?

  1. A) He is incorrect. The U.S. Constitution contains no such reservation.
  2. B) He is partially correct. The U.S. Constitution prohibits taxation in areas in which states also tax, but most states are not taxing for insurance purposes at this time.
  3. C) He is incorrect in saying that the U.S. Constitution expressly reserves the right to tax to the states, but he is correct in saying that Congress lacks the authority to tax in this manner because Congress cannot lay taxes for any reason other than essential needs of the federal government.
  4. D) He is incorrect in saying that the U.S. Constitution expressly reserves the right to tax to the states, but he is correct in saying that Congress lacks the authority to tax in this manner because the president has issued an executive order prohibiting such taxation.
  5. E) He is incorrect because the prohibition is contained in a federal statute passed by Congress, not in the U.S. Constitution.

 

Answer:  A

Explanation:  Article I, Section 8 of the United States Constitution gives the federal government the “Power to lay and collect Taxes, Duties, Imports, and Excises.” Although tax collection allows the federal government to provide essential services, the government can also use taxes for other purposes and can use its spending power to achieve social welfare objectives.

Difficulty: 3 Hard

Topic:  Taxing and Spending Powers of the Federal Government

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Apply

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

 

72) Insurance. Susan, a trained nurse, was recently elected to the U.S. Senate. Susan is very concerned about the lack of insurance for many children and also working adults who cannot afford the insurance premiums. She proposes legislation that states are taxed sufficiently to provide health insurance coverage to children and that federal funds for state highways are denied to any state that does not also provide insurance coverage for uninsured adults. She also proposed that states with citizens earning higher than average incomes be taxed at a higher rate than other states. Bill, a senator, tells Susan that Congress lacks the authority to tax in this manner because the U.S. Constitution expressly reserves that right to the states. Ellen, another senator, tells Susan that Congress has no authority to link highway funds or any other funds with social welfare objectives. Sam, an administrative assistant, tells Susan that Congress is prohibited from taxing residents of one state at a higher rate than citizens of another state. Which of the following is true regarding Ellen’s statement?

  1. A) Ellen is correct.
  2. B) Ellen is correct only if the state is making efforts to put social programs into effect and is not acting unreasonably in refusing to provide needed services.
  3. C) Ellen is partially correct in that Congress has no authority to link highway funds with social services, but any other funds may be linked to social services by executive order.
  4. D) Ellen is partially correct in that Congress has no authority to link highway funds with social services, but other funds may be linked to social services by an act of Congress.
  5. E) Ellen is incorrect.

 

Answer:  E

Explanation:  Article I, Section 8 of the United States Constitution grants the U.S. Congress spending power by authorizing it to “pay the Debts and provide for the common Defense and general Welfare of the United States.” As with its power to tax, Congress can use its spending power to achieve social welfare objectives. For example, in South Dakota v. Dole, the U.S. Supreme Court upheld a federal statute that grants federal funds for state highways to only those states in which 21 is the legal drinking age.

Difficulty: 3 Hard

Topic:  Taxing and Spending Powers of the Federal Government

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Apply

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

 

73) Insurance. Susan, a trained nurse, was recently elected to the U.S. Senate. Susan is very concerned about the lack of insurance for many children and also working adults who cannot afford the insurance premiums. She proposes legislation that states are taxed sufficiently to provide health insurance coverage to children and that federal funds for state highways are denied to any state that does not also provide insurance coverage for uninsured adults. She also proposed that states with citizens earning higher than average incomes be taxed at a higher rate than other states. Bill, a senator, tells Susan that Congress lacks the authority to tax in this manner because the U.S. Constitution expressly reserves that right to the states. Ellen, another senator, tells Susan that Congress has no authority to link highway funds or any other funds with social welfare objectives. Sam, an administrative assistant, tells Susan that Congress is prohibited from taxing residents of one state at a higher rate than citizens of another state. Which of the following is true regarding Sam’s statement?

  1. A) Sam is incorrect. The U.S. Congress has complete discretion on taxation.
  2. B) Sam is incorrect, but before the U.S. Congress taxes one state’s residents at a higher rate than citizens of other states, a compelling need must be shown.
  3. C) Sam is incorrect, but before the U.S. Congress taxes one state’s residents at a higher rate than citizens of other states, an important need must be shown.
  4. D) Sam is incorrect, but before the U.S. Congress taxes one state’s residents at a higher rate than citizens of other states, a disparity of income of over 30% must be shown.
  5. E) Sam is correct.

 

Answer:  E

Explanation:  Article I, Section 8 of the United States Constitution gives the federal government the “Power to lay and collect Taxes, Duties, Imports, and Excises.” The taxes imposed by the U.S. Congress, however, must be uniform across the states. In other words, the government cannot impose higher taxes on residents of one state than it imposes on those of another.

Difficulty: 3 Hard

Topic:  Taxing and Spending Powers of the Federal Government

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Apply

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

 

74) Scruffy. Sam is engaged in the criminal activity of growing marijuana in his home. A couple of police officers, while randomly passing through the neighborhood, saw Sam go to the mailbox. They thought that he looked a little scruffy, and they were concerned that they had not made a sufficient number of arrests in the past month. They decided to “check out” Sam. Therefore, they immediately broke down Sam’s door, searched his home, and arrested him. The police officer in charge told Sam that because marijuana was involved, he lost his rights against self-incrimination and that he might as well confess. Sam proceeded to confess to growing marijuana and a number of other crimes. The judge was so angry with Sam that he threw him in jail for two months without any kind of hearing. Sam’s lawyer, who just graduated from law school, is not sure if the police acted legally in Sam’s case by breaking down the door. Which of the following is true on that issue?

  1. A) The police acted legally so long as they can show that Sam really did look scruffy.
  2. B) The police acted legally so long as they can show that the street was truly chosen at random for patrol.
  3. C) The police acted legally so long as they can show that Sam had been in jail previously on a drug offense charge.
  4. D) The police acted legally so long as they can show that Sam had been in jail previously for any offense.
  5. E) The police violated Sam’s Fourth Amendment rights.

 

Answer:  E

Explanation:  The Fourth Amendment to the United States Constitution guarantees the right to be “secure in their persons, their homes, and their personal property.” Thus, it prohibits the government from conducting unreasonable searches of individuals and seizing their property to use as evidence against them. A search is unreasonable if the government official conducting the search does not first obtain a search warrant from a court.

Difficulty: 3 Hard

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Evaluate

AACSB:  Technology

Accessibility:  Keyboard Navigation

 

 

 

75) Scruffy. Sam is engaged in the criminal activity of growing marijuana in his home. A couple of police officers, while randomly passing through the neighborhood, saw Sam go to the mailbox. They thought that he looked a little scruffy, and they were concerned that they had not made a sufficient number of arrests in the past month. They decided to “check out” Sam. Therefore, they immediately broke down Sam’s door, searched his home, and arrested him. The police officer in charge told Sam that because marijuana was involved, he lost his rights against self-incrimination and that he might as well confess. Sam proceeded to confess to growing marijuana and a number of other crimes. The judge was so angry with Sam that he threw him in jail for two months without any kind of hearing. Sam’s lawyer questions whether Sam had lost his right against self-incrimination. Which of the following is true on that issue?

  1. A) Sam did not lose his right against self-incrimination.
  2. B) The office was correct. Sam lost his right against self-incrimination because marijuana was involved.
  3. C) Sam lost his right against self-incrimination because he did not immediately ask for a lawyer.
  4. D) Sam lost his right against self-incrimination because he did not immediately say he raised his right against self-incrimination.
  5. E) Sam lost his right against self-incrimination both because marijuana was involved and also because he did not immediately ask for a lawyer.

 

Answer:  A

Explanation:  The Fifth Amendment to the United States Constitution protects against self-incrimination, meaning that in a criminal case, the defendant does not have to testify in court as a witness against himself or herself.

Difficulty: 3 Hard

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

76) Scruffy. Sam is engaged in the criminal activity of growing marijuana in his home. A couple of police officers, while randomly passing through the neighborhood, saw Sam go to the mailbox. They thought that he looked a little scruffy, and they were concerned that they had not made a sufficient number of arrests in the past month. They decided to “check out” Sam. Therefore, they immediately broke down Sam’s door, searched his home, and arrested him. The police officer in charge told Sam that because marijuana was involved, he lost his rights against self-incrimination and that he might as well confess. Sam proceeded to confess to growing marijuana and a number of other crimes. The judge was so angry with Sam that he threw him in jail for two months without any kind of hearing. Sam’s lawyer is concerned that the judge has not granted Sam a hearing. Which of the following is one right that the judge has violated?

  1. A) Sam’s right to substantive due process.
  2. B) Sam’s First Amendment rights.
  3. C) Sam’s right to procedural due process.
  4. D) Sam’s Fourth Amendment rights.
  5. E) Sam’s Second Amendment rights.

 

Answer:  C

Explanation:  Procedural due process, guaranteed by the Fifth Amendment to the United States Constitution, requires the government to use fair procedures when taking the life, liberty, or property of an individual or corporation. At a minimum, procedural due process entitles a person to notice of any legal action against her and to a hearing before an impartial tribunal.

Difficulty: 3 Hard

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

77) Explain the system of checks and balances established by the United States Constitution, and set forth your opinion as to whether such a system adequately supports a democratic form of government.

 

Answer:  The United States Constitution establishes the system of checks and balances. Each branch’s powers keep the other branches from dominating the government. Congress, the legislative branch, has the power to enact legislation, but the president can veto a law that Congress passes. The legislature, however, can overturn a presidential veto with a two-thirds vote of the members of Congress. Also, if Congress passes a bill and the president signs it, the judiciary can strike it down as unconstitutional. Student answers on the issue of whether or not this system supports a democratic form of government will vary.

Difficulty: 3 Hard

Topic:  The U.S. Constitution

Learning Objective:  05-01 What is federalism?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

 

78) Explain the concept of the “Dormant Commerce Clause.” Address whether a state law banning the importation of out-of-state apples in order to assist in-state growers would violate the Dormant Commerce Clause.

 

Answer:  The Dormant Commerce Clause is a restriction on a state’s authority to pass laws that substantially affect interstate commerce. Sometimes a state’s use of its police power affects interstate commerce. If the purpose of a state law is to regulate interstate commerce or to discriminate against interstate commerce, the law is usually unconstitutional. Likewise, if a law substantially interferes with interstate commerce, it is generally unconstitutional. A law banning the importation of out-of-state apples in order to assist in-state growers would likely violate the Dormant Commerce Clause because it discriminates against out-of-state activity without sufficient reason.

Difficulty: 3 Hard

Topic:  The Commerce Clause

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Apply

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

79) Christen who just turned eighteen is out with several friends. They decide to see a movie, but it is sold out. Christen hid in the back of the theatre and yelled “Fire” as loudly as she could. Everyone ran out of the theatre, and a number got in their vehicles and left. Christen and her friends thought that seeing the movie was now possible. Unfortunately, a theatre employee saw Christen yelling, called the police, and she was arrested. Christen told the police officers that she was only exercising her free speech rights. She also told the police that the theatre employee lied and that she personally saw him stealing popcorn. The theatre employee told Christen that he was going to sue for defamation, and she told him that she would win based on her right to free speech. Discuss whether Christen is right on one or both counts and why.

 

Answer:  While the First Amendment to the United States Constitution protects freedom of speech, this right is not absolute. For that reason, Christen did not have the right to yell “Fire” when there actually was no fire. Additionally, the First Amendment does not protect defamatory speech, false statements about another that are injurious to that person’s reputation.

Difficulty: 3 Hard

Topic:  The Amendments to the Constitution

Learning Objective:  05-04 How does the commerce clause affect the power of both the state and federal governments to regulate?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

80) Explain the Central Hudson Gas & Electric Corp. v. Public Service Commission of New York test for commercial speech and set forth your opinion as to whether the Central Hudson test should be expanded to provide additional protection for commercial speech.

 

Answer:  Commercial speech is speech that conveys information related to the sale of goods and services. Courts analyze government restrictions on commercial speech according to the following four-part test established in Central Hudson Gas & Electric Corp. v. Public Service Commission of New York:

 

(1) Does the speech concern an illegal activity? Is it misleading?

(2) Is the government interest served by the restriction on commercial speech substantial?

(3) Does the regulation directly advance the government interest asserted?

(4) Is the regulation more extensive than necessary to serve the government interest?

 

Student opinion on whether the test should be expanded to provide additional protection for commercial speech will vary.

Difficulty: 3 Hard

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

81) When is a strict scrutiny standard used to examine laws, how is this standard applied, and what presumption do courts apply (if any) in cases involving this standard? Explain whether you believe the strict scrutiny standard should be applied when a state government institutes a law distinguishing between individuals or groups.

 

Answer:  If a law prevents individuals from exercising a fundamental right, or if the law’s classification scheme involves suspect classifications, the action will be subject to strict scrutiny. Suspect classifications include classifications based on race, national origin, and citizenship. Courts uphold suspect classifications only if they are necessary to promote a compelling state interest. In cases involving suspect classifications, courts do not begin their analysis with a presumption that the classification is constitutional, so few laws pass the strict-scrutiny standard. Student opinion on whether the strict-scrutiny standard should always apply in cases implicating equal protection issues will vary.

Difficulty: 3 Hard

Topic:  The Amendments to the Constitution

Learning Objective:  05-06 How do the rights guaranteed by the Bill of Rights affect business managers?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

 

 

Dynamic Business Law: The Essentials, 4e (Kubasek)

Chapter 16   Sales and Lease Contracts: Performance, Warranties, and Remedies

 

1) Under the Uniform Commercial Code, buyers and lessees are obligated to accept and pay for conforming goods in accordance with the contract.

 

Answer:  TRUE

Explanation:  Under the Uniform Commercial Code, sellers and lessors are obligated to transfer and deliver conforming goods. Buyers and lessees are obligated to accept and pay for conforming goods in accordance with the contract.

Difficulty: 1 Easy

Topic:  The Basic Performance Obligation

Learning Objective:  16-01 What is the difference between conforming and nonconforming goods?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

2) Courts rely on Uniform Contract Code rules to clarify the obligations of buyers and sellers when the contract they agreed to is unclear.

 

Answer:  FALSE

Explanation:  The Uniform Contract Code does not exist. Under the Uniform Commercial Code (UCC), sellers and lessors are obligated to transfer and deliver conforming goods, while buyers and lessees are obligated to accept and pay for conforming goods in accordance with the contract. Courts rely on UCC rules to clarify these obligations when the contract the parties agreed to is unclear.

Difficulty: 1 Easy

Topic:  The Basic Performance Obligation

Learning Objective:  16-01 What is the difference between conforming and nonconforming goods?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

3) The Uniform Commercial Code requires good faith in the performance and enforcement of a contract, but only if the parties expressly include the good faith obligation in their agreement.

 

Answer:  FALSE

Explanation:  The Uniform Commercial Code requires good faith in the performance and enforcement of every contract.

Difficulty: 1 Easy

Topic:  The Basic Performance Obligation

Learning Objective:  16-01 What is the difference between conforming and nonconforming goods?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

4) Conforming goods are goods that conform to contract specifications.

 

Answer:  TRUE

Explanation:  The Uniform Commercial Code requires sellers to tender conforming goods to buyers. Conforming goods are goods that conform to contract specifications.

Difficulty: 1 Easy

Topic:  Specific Obligations of Sellers and Lessors

Learning Objective:  16-01 What is the difference between conforming and nonconforming goods?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

5) The perfect tender rule requires that the seller deliver goods in conformity with the terms of the contract.

 

Answer:  TRUE

Explanation:  A common law rule known as the perfect tender rule requires that the seller deliver goods in conformity with the terms of the contract, right down to the last detail.

Difficulty: 2 Medium

Topic:  Specific Obligations of Sellers and Lessors

Learning Objective:  16-02 What is the perfect tender rule?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

6) The perfect tender rule is established by local, municipal, and/or state ordinance.

 

Answer:  FALSE

Explanation:  The perfect tender rule is a common law rule.

Difficulty: 1 Easy

Topic:  Specific Obligations of Sellers and Lessors

Learning Objective:  16-02 What is the perfect tender rule?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

7) As an exception to the perfect tender rule, parties may agree with a level of performance that is less than perfect.

 

Answer:  TRUE

Explanation:  Sometimes, language in the parties’ agreement limits the rigidity of the perfect tender rule. As an example, parties may agree with a level of performance that is less than perfect. They could indicate, by agreement, the expectation regarding performance.

Difficulty: 1 Easy

Topic:  Specific Obligations of Sellers and Lessors

Learning Objective:  16-02 What is the perfect tender rule?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

8) Common law usually substitutes the perfect tender rule with the doctrine of substantial performance.

 

Answer:  TRUE

Explanation:  A common law rule known as the perfect tender rule requires the seller to deliver goods in conformity with the terms of the contract, right down to the last detail. Although the Uniform Commercial Code embraces the perfect tender rule, common law usually substitutes the perfect tender rule with the doctrine of substantial performance. Substantial performance occurs when all the material elements of a contract are satisfied, even if some non-material requirements may not be satisfied. The perfect tender rule would not recognize the distinction between material and immaterial contractual requirements.

Difficulty: 3 Hard

Topic:  Specific Obligations of Sellers and Lessors

Learning Objective:  16-02 What is the perfect tender rule?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

9) The Uniform Commercial Code defines course of dealing as previous commercial transactions between the same parties.

 

Answer:  TRUE

Explanation:  Uniform Commercial Code Section 1-205(1) defines course of dealing as previous commercial transactions between the same parties.

Difficulty: 2 Medium

Topic:  Specific Obligations of Sellers and Lessors

Learning Objective:  16-02 What is the perfect tender rule?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

10) Under Uniform Commercial Code Sections 2-508 and 2A-513, sellers and lessors have the right to fix problems with nonconforming goods. This is known as the right to an accord and satisfaction.

 

Answer:  FALSE

Explanation:  Under Uniform Commercial Code Sections 2-508 and 2A-513, sellers and lessors have the right to fix problems with nonconforming goods. This is known as the right to cure.

Difficulty: 2 Medium

Topic:  Exceptions to the Perfect Tender Rule

Learning Objective:  16-03 What is the right to cure?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

11) According to the Uniform Commercial Code, if goods are identified at the time the parties enter into a contract and the goods are destroyed through no fault of the parties before risk passes to the buyer or lessee, the parties are excused from performance.

 

Answer:  TRUE

Explanation:  Under Uniform Commercial Code Sections 2-613 and 2A-221, if goods are identified at the time the parties entered into a contract and the goods are destroyed through no fault of the parties before risk passes to the buyer or lessee, the parties are excused from performance.

Difficulty: 2 Medium

Topic:  Exceptions to the Perfect Tender Rule

Learning Objective:  16-03 What is the right to cure?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

12) According to the Uniform Commercial Code, a buyer who has accepted goods may later revoke the acceptance even if the buyer cannot demonstrate that the defects substantially impair the value of the goods.

 

Answer:  FALSE

Explanation:  Uniform Commercial Code Section 2-608 indicates that a buyer who has accepted goods may later revoke the acceptance only if the buyer can show that the defects substantially impair the value of the goods.

Difficulty: 2 Medium

Topic:  Exceptions to the Perfect Tender Rule

Learning Objective:  16-03 What is the right to cure?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

13) According to the Uniform Commercial Code, a buyer or lessee may reject an installment of a particular item only if the defects substantially impair the value of the goods and cannot be cured.

 

Answer:  TRUE

Explanation:  Uniform Commercial Code Sections 2-612(2) and 2A-510(1) indicate that a buyer or lessee may reject an installment of a particular item only if the defects substantially impair the value of the goods and cannot be cured.

Difficulty: 2 Medium

Topic:  Exceptions to the Perfect Tender Rule

Learning Objective:  16-03 What is the right to cure?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

14) Under the Uniform Commercial Code, a delay in delivery is a breach of contract even in circumstances in which performance has been made impracticable because a contingency has occurred that was not contemplated when the parties reached an agreement.

 

Answer:  FALSE

Explanation:  Uniform Commercial Code Sections 2-615(a) and 2A-405(a) state that a delay in delivery or nondelivery, in whole or in part, is not a breach in circumstances in which performance has been made impracticable because a contingency has occurred that was not contemplated when the parties reached an agreement.

Difficulty: 2 Medium

Topic:  Exceptions to the Perfect Tender Rule

Learning Objective:  16-04 What is commercial impracticability?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

15) Unless the parties have agreed otherwise, the buyer or lessee typically inspects the goods after paying for them.

 

Answer:  FALSE

Explanation:  Unless the parties have agreed otherwise, the buyer or lessee typically inspects the goods before paying for them. Under Uniform Commercial Code Sections 2-513(1) and 2A-515(1), the seller or lessor must provide the buyer or lessee an opportunity to inspect the goods before enforcing payment.

Difficulty: 2 Medium

Topic:  Exceptions to the Perfect Tender Rule

Learning Objective:  16-04 What is commercial impracticability?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

16) At common law, the obligations and responsibilities of the contractual parties are determined by the express terms of the contract.

 

Answer:  TRUE

Explanation:  At common law, the obligations and responsibilities of the contractual parties are determined by the express terms of the contract. Uniform Commercial Code contracts are the same but with a major addition: implied warranties.

Difficulty: 2 Medium

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

17) With regard to implied warranties, implied means that the warranty or guarantee is automatically part of the contract.

 

Answer:  TRUE

Explanation:  An implied warranty is automatically part of the contract.

Difficulty: 1 Easy

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

18) There are three basic categories of warranties: conditional warranties, unconditional warranties, and implied warranties.

 

Answer:  FALSE

Explanation:  There are three basic categories of warranties: warranties of title, express warranties, and implied warranties.

Difficulty: 2 Medium

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

19) Express warranties cannot be created by statements found in advertisements or brochures.

 

Answer:  FALSE

Explanation:  An express warranty is any description of a good’s physical nature or its use, in either general or specific circumstances, that becomes part of the contract. Express warranties may be found in advertisements or brochures.

Difficulty: 2 Medium

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

20) The Uniform Commercial Code assumes that the seller has valid title to the goods.

 

Answer:  TRUE

Explanation:  Although no warranties automatically arise under the common law, the Uniform Commercial Code assumes that the seller has good and valid title to goods.

Difficulty: 1 Easy

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

21) The Uniform Commercial Code assumes that the seller has the right to transfer title free and clear of any liens, judgments, or infringement of intellectual property rights of which the buyer does not have knowledge.

 

Answer:  TRUE

Explanation:  Although no warranties automatically arise under the common law, the Uniform Commercial Code assumes that the seller has the right to transfer title free and clear of any liens, judgments, or infringements of intellectual property rights of which the buyer does not have knowledge.

Difficulty: 1 Easy

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

22) A dirt bike purchased at a bicycle shop is covered by the implied warranty of merchantability, but a bike that is bought from a neighbor is not, unless the neighbor is a bicycle merchant.

 

Answer:  TRUE

Explanation:  To invoke the implied warranty of merchantability, the buyer or lessee must have purchased or leased the good from a merchant. Thus, a dirt bike purchased at a bicycle shop is covered by the implied warranty of merchantability, but a bike that is bought from a neighbor is not, unless the neighbor is a bicycle merchant.

Difficulty: 3 Hard

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Apply

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

23) An implied warranty is any description of the good’s physical nature or its use, either in general or specific circumstances, that becomes part of the contract.

 

Answer:  FALSE

Explanation:  An express warranty is any description of a good’s physical nature or its use, in either general or specific circumstances, that becomes part of the contract.

Difficulty: 1 Easy

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

24) An express warranty is a non-material term of a sale or lease contract.

 

Answer:  FALSE

Explanation:  An express warranty is any description of a good’s physical nature or its use, in either general or specific circumstances, that becomes part of the contract. To use common law language, an express warranty is a material term of a sale or lease contract.

Difficulty: 2 Medium

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

25) In terms of third-party beneficiaries of warranties, most states hold that a seller’s warranties extend to anyone injured by the good.

 

Answer:  FALSE

Explanation:  In terms of third-party beneficiaries of warranties, the states are given the following three choices regarding third-party beneficiaries of warranties:

 

  1. Seller’s warranties extend to the buyer’s household members and guests.
  2. Seller’s warranties extend to any reasonable and foreseeable user.
  3. Seller’s warranties extend to anyone injured by the good.

Difficulty: 2 Medium

Topic:  Warranty Rights of Third Parties

Learning Objective:  16-06 How are third parties affected by implied warranties?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

26) In order for an implied warranty of fitness for a particular purpose to be created, the seller must be a merchant.

 

Answer:  FALSE

Explanation:  The implied warranty of fitness for a particular purpose comes about when a seller or lessor knows or has reason to know why the buyer or lessee is purchasing or leasing the goods in question, and that the buyer or lessee is relying on him or her to make the selection. Under this warranty, a seller or lessor does not have to be a merchant.

Difficulty: 2 Medium

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

27) A seller may disclaim the implied warranty of fitness for a particular purpose either orally or in writing.

 

Answer:  FALSE

Explanation:  In order to disclaim the implied warranty of fitness for a particular purpose, the seller must disclaim the warranty in writing.

Difficulty: 2 Medium

Topic:  Warranty Disclaimers and Waivers

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

28) According to the Magnuson-Moss Act, if a written warranty is silent regarding whether it is a full or limited warranty, it is presumed to be a limited warranty.

 

Answer:  FALSE

Explanation:  The 1975 federal law known as the Magnuson-Moss Act requires that if a seller decides to issue a written warranty for a consumer good (the seller is not required to do so), the seller must indicate whether that warranty is a full warranty or a limited warranty. If the written warranty is silent, it is presumed to be a full warranty.

Difficulty: 2 Medium

Topic:  Warranty Disclaimers and Waivers

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

29) The Uniform Commercial Code allows a seller or lessor to cancel the contract if the buyer or lessee is in breach.

 

Answer:  TRUE

Explanation:  Uniform Commercial Code Sections 2-703(f) and 2A-523(1)(a) allow a seller or lessor to cancel the contract if the buyer or lessee is in breach.

Difficulty: 1 Easy

Topic:  Remedies Available to Sellers and Lessors under the UCC

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

30) The Uniform Commercial Code does not allow a seller to resell or dispose of the goods when the buyer is in breach and the goods have not yet been delivered; instead, the seller must seek an order of specific performance against the breaching buyer.

 

Answer:  FALSE

Explanation:  Sellers are allowed to resell or dispose of the goods when the buyer is in breach and the goods have not yet been delivered. The seller can then hold the buyer liable for any loss.

Difficulty: 1 Easy

Topic:  Remedies Available to Sellers and Lessors under the UCC

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

31) According to the Uniform Commercial Code, in transit means that the seller has delivered the goods to a carrier, and the carrier has turned the goods over to the buyer.

 

Answer:  FALSE

Explanation:  In transit means that the seller has delivered the goods to a carrier or bailee, but the carrier or bailee has not yet turned them over to the buyer.

Difficulty: 1 Easy

Topic:  Remedies Available to Sellers and Lessors under the UCC

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

32) According to the Uniform Commercial Code, in order for a buyer to properly “cover,” he or she need not demonstrate good faith in obtaining the substitute goods because the seller initially breached the contract.

 

Answer:  FALSE

Explanation:  Under Uniform Commercial Code Sections 2-712 and 2A-518, buyers and lessees are allowed to cover, or substitute, goods for those due under the sales or lease agreement. The buyer must: a) demonstrate good faith in obtaining the substitute goods; b) pay a reasonable amount for the substitute goods; c) act without unreasonable delay in purchasing the substitute goods; and d) purchase goods that are reasonable substitutes.

Difficulty: 2 Medium

Topic:  Remedies Available to Buyers and Lessees under the UCC

Learning Objective:  16-08 What is cover and resale?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

33) Liquidated damages are identified before a breach of contract occurs.

 

Answer:  TRUE

Explanation:  Liquidated damages are damages identified before a breach of contract occurs. The parties are free to negotiate, as part of the contract, a liquidated-damage clause in which the parties agree in advance what the damages will be for each party if a breach occurs.

Difficulty: 2 Medium

Topic:  Remedies Available to Buyers and Lessees under the UCC

Learning Objective:  16-09 When are money damages available?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

34) The Uniform Commercial Code does not allow buyers and sellers to seek the remedy of specific performance when the goods are unique or a remedy at law is inadequate.

 

Answer:  FALSE

Explanation:  Uniform Commercial Code Sections 2-716(1) and 2A-521(1) allow buyers and sellers to seek the remedy of specific performance when either a) the goods are unique or b) a remedy at law is inadequate.

Difficulty: 2 Medium

Topic:  Remedies Available to Buyers and Lessees under the UCC

Learning Objective:  16-09 When are money damages available?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

35) Specific performance usually allows the seller to deliver substitute goods to the buyer.

 

Answer:  FALSE

Explanation:  Specific performance usually requires the seller to deliver the particular goods identified in the contract to the buyer.

Difficulty: 2 Medium

Topic:  Remedies Available to Buyers and Lessees under the UCC

Learning Objective:  16-09 When are money damages available?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

36) According to the Uniform Commercial Code, a buyer may always revoke acceptance of nonconforming goods.

 

Answer:  FALSE

Explanation:  UCC Sections 2-608 and 2A-517 sometimes allow the buyer or lessee to revoke acceptance of nonconforming goods.

Difficulty: 2 Medium

Topic:  Remedies Available to Buyers and Lessees under the UCC

Learning Objective:  16-09 When are money damages available?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

37) If a buyer accepts nonconforming goods, the buyer may not seek damages.

 

Answer:  FALSE

Explanation:  Under Uniform Commercial Code Sections 2-607, 2-715, and 2A-519, buyers or lessees are allowed to accept nonconforming goods and then seek monetary damages to give them the benefit of the bargain. The buyer or lessee must give the seller or lessor reasonable notice of the defect.

Difficulty: 2 Medium

Topic:  Remedies Available to Buyers and Lessees under the UCC

Learning Objective:  16-09 When are money damages available?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

38) Which of the following determines the obligations of sellers and buyers?

  1. A) Terms the parties outline in agreements
  2. B) Custom
  3. C) Rules outlined by the Uniform Commercial Code
  4. D) Terms the parties outline in agreements, custom, and rules outlined by the Uniform Commercial Code
  5. E) Terms the parties outline in agreements and custom, but not rules outlined by the Uniform Commercial Code

 

Answer:  D

Explanation:  The obligations of sellers/lessors and buyers/lessees are determined by: a) terms the parties outline in agreements; b) custom; and c) rules outlined by the Uniform Commercial Code.

Difficulty: 2 Medium

Topic:  The Basic Performance Obligation

Learning Objective:  16-01 What is the difference between conforming and nonconforming goods?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

39) The Uniform Commercial Code requires that buyers are obligated to accept and pay for ________ goods in accordance with the contract.

  1. A) substantially conforming
  2. B) select conforming
  3. C) even nonconforming
  4. D) preponderantly conforming
  5. E) conforming

 

Answer:  E

Explanation:  According to the Uniform Commercial Code, buyers and lessees are obligated to accept and pay for conforming goods in accordance with the contract.

Difficulty: 2 Medium

Topic:  The Basic Performance Obligation

Learning Objective:  16-01 What is the difference between conforming and nonconforming goods?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

40) What law does the judicial system rely on to clarify the obligations of a seller and a buyer if their agreement is unclear?

  1. A) The United States Constitution
  2. B) Common law
  3. C) The Restatement of Contracts
  4. D) The Uniform Commercial Code
  5. E) Local and municipal ordinances

 

Answer:  D

Explanation:  The courts rely on the Uniform Commercial Code to clarify the obligations of a seller and a buyer if their agreement is unclear.

Difficulty: 1 Easy

Topic:  The Basic Performance Obligation

Learning Objective:  16-01 What is the difference between conforming and nonconforming goods?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

41) With respect to non-merchants, how does the Uniform Commercial Code define good faith?

  1. A) Honesty in fact
  2. B) Equity
  3. C) Honesty in fact and reasonable commercial standards of fair dealing
  4. D) Equity and reasonable commercial standards of fair dealing
  5. E) Honesty in fact and equity

 

Answer:  A

Explanation:  Uniform Commercial Code Section 1-304 requires good faith in the performance and enforcement of every contract, and good faith for non-merchants means honesty in fact.

Difficulty: 2 Medium

Topic:  The Basic Performance Obligation

Learning Objective:  16-01 What is the difference between conforming and nonconforming goods?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

42) When the parties are merchants, the Uniform Commercial Code requires ________.

  1. A) perfection in customer service
  2. B) equity
  3. C) honesty in fact and reasonable commercial standards of fair dealing
  4. D) equity and reasonable commercial standards of fair dealing
  5. E) honesty in fact and perfection in customer service

 

Answer:  C

Explanation:  Uniform Commercial Code Section 1-304 requires good faith in the performance and enforcement of every contract, and good faith for non-merchants means honesty in fact. When the parties are merchants, the Code imposes an even higher standard, requiring not only honesty in fact but also reasonable commercial standards of fair dealing.

Difficulty: 2 Medium

Topic:  The Basic Performance Obligation

Learning Objective:  16-01 What is the difference between conforming and nonconforming goods?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

43) The term “reasonable commercial standards of fair dealing” is often called ________.

  1. A) commercial equity
  2. B) commercial reasonableness
  3. C) transactional equity
  4. D) good faith
  5. E) capitalism with a conscience

 

Answer:  B

Explanation:  Uniform Commercial Code Section 1-304 requires good faith in the performance and enforcement of every contract, and good faith for non-merchants means honesty in fact. When the parties are merchants, the Code imposes an even higher standard, requiring not only honesty in fact but also reasonable commercial standards of fair dealing. This second requirement is often called commercial reasonableness.

Difficulty: 1 Easy

Topic:  The Basic Performance Obligation

Learning Objective:  16-01 What is the difference between conforming and nonconforming goods?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

44) The Uniform Commercial Code requires lessors to ________ goods to lessees.

  1. A) tender materially conforming
  2. B) proffer substantially conforming
  3. C) tender conforming
  4. D) factor in equity
  5. E) proffer in equity

 

Answer:  C

Explanation:  The Uniform Commercial Code requires lessors to tender conforming goods to lessees.

Difficulty: 1 Easy

Topic:  Specific Obligations of Sellers and Lessors

Learning Objective:  16-01 What is the difference between conforming and nonconforming goods?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

45) Under the Uniform Commercial Code, ________ requires that the seller have and hold conforming goods at the disposal of the buyer and give the buyer reasonable notification to enable him or her to take delivery.

  1. A) tender of delivery
  2. B) substantial performance
  3. C) proffer of performance
  4. D) conforming delivery
  5. E) service of process

 

Answer:  A

Explanation:  Tender of delivery requires that the seller have and hold conforming goods at the disposal of the buyer and give the buyer reasonable notification to enable the buyer to take delivery.

Difficulty: 1 Easy

Topic:  Specific Obligations of Sellers and Lessors

Learning Objective:  16-02 What is the perfect tender rule?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

46) What was the result in Alaska Pacific Trading Co. v. Eagon Forest Products Inc., the case in the textbook in which the defendant rejected a shipment of logs?

  1. A) By not shipping the logs in a timely manner according to the contract, the seller failed to satisfy the perfect tender rule, thereby releasing the defendant buyer from its duty to accept the logs.
  2. B) The seller satisfied the perfect tender rule despite the fact that the logs were late, and the defendant buyer breached the contract by refusing to accept the logs.
  3. C) The seller was entitled to rely on the common law doctrine of material breach, but the seller did not substantially perform, thereby releasing the buyer from its contractual duties.
  4. D) The seller was entitled to rely on the common law doctrine of material breach, the seller substantially performed, and the buyer was in breach of contract.
  5. E) The seller was entitled to rely on the perfect tender rule, and the buyer materially breached the contract by refusing to accept the logs.

 

Answer:  A

Explanation:  The Washington (state) Appellate Court applied the literal language of the Uniform Commercial Code, holding that the perfect tender rule applied and that Alaska Pacific Trading Company’s failure to deliver the logs was a breach of contract.

Difficulty: 2 Medium

Topic:  Specific Obligations of Sellers and Lessors

Learning Objective:  16-02 What is the perfect tender rule?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

47) A common law standard known as ________ requires that the seller deliver goods in conformity with the terms of the contract, right down to the last detail.

  1. A) substantial performance
  2. B) preponderant performance
  3. C) the principle of good faith
  4. D) the principle of good faith and reasonable commercial standards of fair dealing
  5. E) the perfect tender rule

 

Answer:  E

Explanation:  A common law standard known as the perfect tender rule requires that the seller deliver goods in conformity with the terms of the contract, right down to the last detail.

Difficulty: 1 Easy

Topic:  Specific Obligations of Sellers and Lessors

Learning Objective:  16-02 What is the perfect tender rule?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

48) What do Uniform Commercial Code Sections 2-601 and 2A-509 indicate regarding the perfect tender rule?

  1. A) If goods or tender of delivery fails in any respect to conform to the contract, the buyer has the right to accept the goods, reject the entire shipment, or accept part and reject part.
  2. B) If goods or tender of delivery fails in any material respect to conform to the contract, the buyer has the right to accept the goods, reject the entire shipment, or accept part and reject part.
  3. C) If goods or tender of delivery fails in any respect to conform to the contract, the buyer has the right to accept all of the goods or reject the entire shipment, but not the right to accept part and reject part.
  4. D) If goods or tender of delivery fails in any material respect to conform to the contract, the buyer has the right to accept all of the goods or reject the entire shipment, but not the right to accept part and reject part.
  5. E) If goods or tender of delivery fails in any respect to conform to the contract, the buyer only has the right to accept the entire shipment and sue for damages.

 

Answer:  A

Explanation:  Uniform Commercial Code Sections 2-601 and 2A-509 indicate that if goods or tender of delivery fails in any respect to conform to the contract, the buyer or lessee has the right to accept the goods, reject the entire shipment, or accept part and reject part.

Difficulty: 2 Medium

Topic:  Specific Obligations of Sellers and Lessors

Learning Objective:  16-02 What is the perfect tender rule?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

49) Under Uniform Commercial Code Section 1-205(2), any practice that members of an industry expect to be part of their dealings is known as ________.

  1. A) trade dress
  2. B) course of dealing
  3. C) commercial equity
  4. D) usage of trade
  5. E) course of performance

 

Answer:  D

Explanation:  Uniform Commercial Code Section 1-205(2) defines usage of trade is any practice that members of an industry expect to be part of their dealings.

Difficulty: 1 Easy

Topic:  Specific Obligations of Sellers and Lessors

Learning Objective:  16-02 What is the perfect tender rule?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

50) Uniform Commercial Code Section 1-205(1) defines ________ as previous commercial transactions between the same parties.

  1. A) trade dress
  2. B) course of dealing
  3. C) commercial equity
  4. D) usage of trade
  5. E) course of performance

 

Answer:  B

Explanation:  Uniform Commercial Code Section 1-205(1) defines course of dealing as previous commercial transactions between the same parties.

Difficulty: 1 Easy

Topic:  Specific Obligations of Sellers and Lessors

Learning Objective:  16-02 What is the perfect tender rule?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

51) According to the Uniform Commercial Code, which of the following refers to the history of dealings between the parties in the particular contract at issue?

  1. A) Trade dress
  2. B) Course of dealing
  3. C) Commercial equity
  4. D) Usage of trade
  5. E) Course of performance

 

Answer:  E

Explanation:  Under Uniform Commercial Code Section 2-208(1), course of performance refers to the history of dealings between the parties in the particular contract at issue.

Difficulty: 1 Easy

Topic:  Specific Obligations of Sellers and Lessors

Learning Objective:  16-02 What is the perfect tender rule?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

52) A seller’s right to provide conforming goods when nonconforming goods were initially delivered is known as ________.

  1. A) substantial performance
  2. B) usage of trade
  3. C) cure
  4. D) parlay
  5. E) course of dealing

 

Answer:  C

Explanation:  A seller’s right to provide conforming goods when nonconforming goods were initially delivered is known as cure.

Difficulty: 1 Easy

Topic:  Exceptions to the Perfect Tender Rule

Learning Objective:  16-03 What is the right to cure?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

53) If goods are identified at the time the parties entered into a contract and these goods are destroyed through no fault of the parties before risk passes to the buyer, which of the following is true?

  1. A) The parties are excused from performance.
  2. B) The seller has 7 days within which to cure.
  3. C) The seller has 10 days within which to cure.
  4. D) The seller has 30 days within which to cure.
  5. E) The seller has 60 days within which to cure.

 

Answer:  A

Explanation:  According to Uniform Commercial Code Sections 2-613 and 2A-221, if goods are identified at the time the parties entered into a contract and the goods are destroyed through no fault of the parties before risk passes to the buyer or lessee, the parties are excused from performance.

Difficulty: 2 Medium

Topic:  Exceptions to the Perfect Tender Rule

Learning Objective:  16-03 What is the right to cure?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

54) Which of the following is true if goods are identified at the time the parties entered into a contract and these goods are partially destroyed through no fault of the parties before risk passes to the buyer?

  1. A) The contract is void.
  2. B) The buyer may inspect the goods and decide whether to a) treat the contract as void or b) ask the seller for a reduction of the contract price and then accept the damaged goods.
  3. C) The buyer has three business days to determine whether to void the contract or enforce the seller’s obligations under it.
  4. D) Unless the parties can agree on a reduced price, the matter must be submitted to arbitration for a determination regarding an appropriate price.
  5. E) Unless the parties can agree on a reduced price, the contract is voidable at the option of the seller if the seller chooses not to remedy the partial destruction of the goods.

 

Answer:  B

Explanation:  According to the Uniform Commercial Code, if goods are only partially destroyed, the buyer can inspect the goods and decide whether to a) treat the contract as void or b) ask the seller for a reduction of the contract price and then accept the damaged goods.

Difficulty: 2 Medium

Topic:  Exceptions to the Perfect Tender Rule

Learning Objective:  16-03 What is the right to cure?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

55) A buyer may revoke acceptance of goods if the buyer can show that defects in the goods have caused their value to be ________.

  1. A) reduced preponderantly
  2. B) reduced by ten percent or more
  3. C) reduced by twenty-five percent or more
  4. D) substantially impaired
  5. E) compromised

 

Answer:  D

Explanation:  Uniform Commercial Code Section 2-608 indicates that a buyer who has accepted goods may later revoke the acceptance only if the buyer can show that the defects substantially impair the value of the goods.

Difficulty: 2 Medium

Topic:  Exceptions to the Perfect Tender Rule

Learning Objective:  16-03 What is the right to cure?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

56) According to the Uniform Commercial Code, a delay in delivery or non-delivery, in whole or in part, is not a breach in circumstances in which performance has been made ________ because a contingency has occurred that was not contemplated when the parties reached the agreement.

  1. A) cumbersome
  2. B) unprofitable
  3. C) less profitable
  4. D) impracticable
  5. E) more difficult

 

Answer:  D

Explanation:  Uniform Commercial Code Sections 2-615(a) and 2A-405(a) state that a delay in delivery or non-delivery, in whole or in part, is not a breach in circumstances in which performance has been made impracticable because a contingency has occurred that was not contemplated when the parties reached an agreement.

Difficulty: 2 Medium

Topic:  Exceptions to the Perfect Tender Rule

Learning Objective:  16-04 What is commercial impracticability?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

57) Under which sections of the Uniform Commercial Code are buyers and lessees obligated to accept and pay for conforming goods in accordance with the contract?

  1. A) 2-301 and 2A-516(1)
  2. B) 2-508 and 2A-513
  3. C) 2-613 and 2A-221
  4. D) 2-612(2) and 2A-510(1)
  5. E) 1-205(1) and 2-208(1)

 

Answer:  A

Explanation:  Uniform Commercial Code Sections 2-301 and 2A-516(1) require buyers and lessees to accept and pay for conforming goods in accordance with the contract.

Difficulty: 2 Medium

Topic:  Exceptions to the Perfect Tender Rule

Learning Objective:  16-04 What is commercial impracticability?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

58) Under Uniform Commercial Code Sections 2-513(1) and 2A-515(1), the seller or lessor must provide the buyer or lessee _____.

  1. A) the right to revoke nonconforming goods
  2. B) the right to be excused from performance if the goods are destroyed
  3. C) an opportunity for inspection before enforcing payment
  4. D) a reasonable extension of time, at the buyer’s request, to accept delivery of non-conforming goods
  5. E) a reasonable opportunity to comply with reasonable commercial standards of fair dealing

 

Answer:  C

Explanation:  According to the Uniform Commercial Code, the seller or lessor must provide the buyer or lessee an opportunity for inspection before enforcing payment.

Difficulty: 2 Medium

Topic:  Exceptions to the Perfect Tender Rule

Learning Objective:  16-04 What is commercial impracticability?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

59) Which of the following is true regarding a buyer’s acceptance of goods?

  1. A) Goods may be accepted in total even if they are nonconforming.
  2. B) The seller may presume acceptance if the buyer fails to reject goods within a reasonable period of time.
  3. C) The buyer may make a partial acceptance of nonconforming goods when the seller has failed to cure defects.
  4. D) Goods may be accepted in total even if they are nonconforming, the seller may presume acceptance if the buyer fails to reject goods within a reasonable period of time, and the buyer may make a partial acceptance of nonconforming goods when the seller has failed to cure defects.
  5. E) Goods may be accepted in total even if they nonconforming, and the seller may presume acceptance if the buyer fails to reject goods within a reasonable period of time; however, the buyer may not make a partial acceptance of nonconforming goods when the seller has failed to cure defects.

 

Answer:  D

Explanation:  According to the Uniform Commercial Code, a buyer may find goods acceptable even though they are nonconforming; Uniform Commercial Code Sections 2-602(1), 2-606(1), and 2A-515(1)(b) allow the seller or lessor to presume acceptance if the buyer or lessee fails to reject the goods within a reasonable period of time; and Uniform Commercial Code Sections 2-601(c) and 2A-509(1) allow the buyer or lessee to make a partial acceptance when the goods are nonconforming and the seller or lessor has failed to cure the defects.

Difficulty: 2 Medium

Topic:  Exceptions to the Perfect Tender Rule

Learning Objective:  16-04 What is commercial impracticability?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

60) Uniform Commercial Code Section ________ requires good faith in the performance and enforcement of every contract.

  1. A) 1-204
  2. B) 2-205
  3. C) 3-301
  4. D) 3-302
  5. E) 1-304

 

Answer:  E

Explanation:  According to Uniform Commercial Code Section 1-203, good faith is required in the performance and enforcement of every contract.

Difficulty: 1 Easy

Topic:  The Basic Performance Obligation

Learning Objective:  16-01 What is the difference between conforming and nonconforming goods?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

61) Belinda orders a certain type of hybrid rose for her wedding. A disease sweeps through that type of rose and the florist could only obtain the roses at great cost, if at all. Which of the following is the appropriate term for the florist’s best defense?

  1. A) Frustration of purpose
  2. B) Commercial impracticability
  3. C) Substantial performance
  4. D) Unforeseen circumstances
  5. E) Substantial impairment

 

Answer:  B

Explanation:  Uniform Commercial Code Sections 2-615(a) and 2A-405(a) state that a delay in delivery or non-delivery, in whole or in part, is not a breach in circumstances in which performance has been made impracticable because a contingency has occurred that was not contemplated when the parties reached an agreement.

Difficulty: 3 Hard

Topic:  Exceptions to the Perfect Tender Rule

Learning Objective:  16-04 What is commercial impracticability?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

62) Which of the following represent the three basic categories of warranties?

  1. A) Express, implied, and equitable warranties
  2. B) Express, implied, and due-on-sale warranties
  3. C) Warranties of title, equitable warranties, and due-on-sale-warranties
  4. D) Warranties of title, express warranties, and due-on-sale warranties
  5. E) Warranties of title, express warranties, and implied warranties

 

Answer:  E

Explanation:  Warranties generally arise in conjunction with a sale or a lease. They impose certain duties on the seller or lessor, and if the seller of lessor fails to live up to these duties, he or she may be sued for breach of warranty. There are three basic categories of warranties: warranties of title, express warranties, and implied warranties.

Difficulty: 1 Easy

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

63) Which of the following types of warranties arises by operation of law under certain circumstances?

  1. A) Express
  2. B) Implied
  3. C) Due-on-sale
  4. D) Express, implied, and due-on-sale
  5. E) Express and implied, but not due-on-sale

 

Answer:  B

Explanation:  Implied warranties arise by operation of law under certain circumstances. “Implied” means that the warranty or guarantee is automatically a part of the contract; the parties do not negotiate for it.

Difficulty: 2 Medium

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

64) Which of the following is true regarding warranties under common law?

  1. A) For a warranty to exist, it must first be requested by the buyer.
  2. B) Only the implied warranty of assignability arises automatically under common law.
  3. C) Only the implied warranty of merchantability arises automatically under common law.
  4. D) Only warranties of title arise automatically under common law.
  5. E) Express warranties, the implied warranty of assignability, and warranties of title arise automatically under common law.

 

Answer:  B

Explanation:  At common law, the only implied warranty in a contract is the implied warranty of assignability.

Difficulty: 2 Medium

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

65) The three warranties of quality that arise under the Uniform Commercial Code are the:

  1. A) Warranty of title, express warranty, and implied warranty
  2. B) Warranty of title, express warranty, and implied warranty of merchantability
  3. C) Warranty of title, express warranty, and implied warranty of fitness for a particular purpose.
  4. D) Implied warranty of merchantability, implied warranty of fitness for a particular purpose, and implied warranty of trade usage.
  5. E) Express warranty, implied warranty of merchantability, and implied warranty of fitness for a particular purpose.

 

Answer:  D

Explanation:  According to the Uniform Commercial Code, there are three warranties of quality: the implied warranty of merchantability, the implied warranty of fitness for a particular purpose, and the implied warranty of trade usage.

Difficulty: 2 Medium

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

66) A(n) ________ warranty is any description of the good’s physical nature or its use, either in general or specific circumstances, that becomes part of the contract.

  1. A) express
  2. B) implied
  3. C) trade usage
  4. D) course of dealing
  5. E) equitable

 

Answer:  A

Explanation:  An express warranty is any description of a good’s physical nature or its use, in either general or specific circumstances, that becomes part of the contract.

Difficulty: 1 Easy

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

67) Which of the following is an accurate statement regarding common law and express warranties?

  1. A) Although the common law does not use the term express warranty, the concept and its application do exist in the common law.
  2. B) The common law specifically incorporates and defines the term express warranty
  3. C) To use common law language, an express warranty is a non-material term of the sale or lease contract.
  4. D) To use common law language, an express warranty is an equitable requirement of any sale or lease contract.
  5. E) To use common law language, an express warranty must be incorporated in a written sale or lease contract in order to be enforceable.

 

Answer:  A

Explanation:  Although the common law does not use the term express warranty, the concept and its application do exist in common law. It seems only fair and equitable that promises made by a seller to induce a buyer to execute a sales contract should be enforceable. An express warranty is any description of a good’s physical nature or its use, in either general or specific circumstances, that becomes part of the contract. To use common law language, an express warranty is a material term of the sale or lease contract.

Difficulty: 2 Medium

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

68) Which of the following is true regarding express warranties?

  1. A) They may be part of a brochure.
  2. B) They may arise from a salesperson’s oral promise.
  3. C) A sample or model may provide an express warranty.
  4. D) They may be part of a brochure, they may arise from a salesperson’s oral promise, and a sample or model may provide an express warranty.
  5. E) They may be part of a brochure and they may arise from a salesperson’s oral promise, but a sample or model may not provide an express warranty.

 

Answer:  D

Explanation:  Express warranties may be found in advertisements or brochures, it may be a salesperson’s oral promise concerning the good, and a sample or model may also provide an express warranty.

Difficulty: 2 Medium

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

69) Which of the following was the result on appeal in Webster v. Blue Ship Tea Room, Inc., the case in the textbook in which the plaintiff sued after getting a bone caught in her throat while eating New England seafood chowder?

  1. A) The plaintiff could recover based upon the implied warranty of merchantability.
  2. B) The plaintiff could recover based upon the implied warranty of fitness for a particular purpose.
  3. C) The plaintiff could recover based on an express warranty.
  4. D) The plaintiff could not recover, because she waited too long to sue and because she was not the immediate purchaser of the fish.
  5. E) The plaintiff could not recover, because she should have anticipated that fish bones might remain in New England seafood chowder.

 

Answer:  E

Explanation:  According to the Supreme Judicial Court of Massachusetts, completely eliminating the possibility of bones in New England seafood chowder would require a cook to finely mince the seafood, thereby depriving the chowder of one of its hallmark characteristics, the richness of its thick, plump, delicious pieces of fish and shellfish. The court surmised that anyone eating proper New England seafood chowder would know or should know that fish bones are a distinct possibility.

Difficulty: 2 Medium

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

70) Which of the following is true regarding the implied warranty of fitness for a particular purpose?

  1. A) It applies in every case in which an express warranty arises.
  2. B) It applies in every case in which an implied warranty of merchantability arises.
  3. C) It applies in every case in which either an express warranty or an implied warranty of merchantability arises.
  4. D) It applies in every sales transaction involving a merchant.
  5. E) It applies when the seller knows why the buyer is purchasing the goods, and that the buyer is relying on him or her to make the selection.

 

Answer:  E

Explanation:  One important implied warranty recognized by the Uniform Commercial Code is the implied warranty of fitness for a particular purpose. The warranty of fitness for a particular purpose comes about when a seller knows or has reason to know a) why the buyer is purchasing the goods in question and b) that the buyer is relying on him or her to make the selection.

Difficulty: 2 Medium

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

71) In order for goods to be merchantable, the goods must ________.

  1. A) pass without substantial objection in the trade or market for similar goods
  2. B) pass without objection in the trade or market for similar goods; and be fit for the particular purpose(s) for which the buyer intends to use such goods
  3. C) pass without substantial objection in the trade or market for similar goods; be fit for the particular purpose(s) for which the buyer intends to use such goods; and be adequately contained, packaged, and labeled as the agreement may require
  4. D) pass without substantial objection in the trade or market for similar goods; be fit for the particular purpose(s) for which the buyer intends to use such goods; be adequately contained, packaged, and labeled as the agreement may require; and conform to the promises or affirmations made on the container or label (if any)
  5. E) pass without objection in the trade or market for similar goods; be fit for the ordinary purposes for which such goods are used; be adequately contained, packaged, and labeled as the agreement may require; and conform to the promises or affirmations made on the container or label, if any

 

Answer:  E

Explanation:  Under the Uniform Commercial Code, goods must be merchantable, meaning that they must be able to pass without objection in the trade or market for similar goods; in the case of fungible goods, be of fair average quality within the description; be fit for the ordinary purposes for which such goods are used; be produced, within the variations permitted by the agreement, with even kind, quality, and quantity in each unit and among all units involved; be adequately contained, packaged, and labeled as the agreement may require; and conform to the promises or affirmations made on the container or label (if any).

Difficulty: 2 Medium

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

72) Which of the following is needed in order for the implied warranty of merchantability to be applied?

  1. A) Both parties must be merchants, and a sale must be involved.
  2. B) Both parties must be merchants, and either a sale or lease must be involved.
  3. C) The seller must be a merchant, and a sale must be involved.
  4. D) A seller or lessor must be a merchant, and either a sale or lease must be involved.
  5. E) The seller must be a merchant, goods valued at over $500 must be involved, and either a sale or lease must be involved.

 

Answer:  D

Explanation:  To invoke the implied warranty of merchantability, the buyer or lessee must have purchased or leased the good from a merchant. For example, a dirt bike purchased at a bicycle shop is covered by the implied warranty of merchantability, but a bike purchased from a residential neighbor at a garage sale is not.

Difficulty: 2 Medium

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

73) Which of the following is needed in order for the implied warranty of fitness for a particular purpose to arise?

  1. A) Both parties must be merchants, and a sale must be involved.
  2. B) Both parties must be merchants, and either a sale or lease must be involved.
  3. C) The seller must be a merchant, and a sale must be involved.
  4. D) The seller or lessor must be a merchant, and either a sale or lease must be involved.
  5. E) A sale or lease must be involved, but the seller or lessor does not have to be a merchant.

 

Answer:  E

Explanation:  One important implied warranty recognized by the Uniform Commercial Code is the implied warranty of fitness for a particular purpose. The warranty of fitness for a particular purpose comes about when a seller knows or has reason to know a) why the buyer is purchasing the goods in question and b) that the buyer is relying on him or her to make the selection. Under this warranty, a seller or lessor does not have to be a merchant.

Difficulty: 2 Medium

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

74) If it is generally accepted in the trade that a certain product is always preassembled and shrink-wrapped, the failure of the seller to deliver the goods in that condition would be a breach of the ________.

  1. A) implied warranty of merchantability
  2. B) implied warranty of fitness for a particular purpose
  3. C) implied warranty of trade usage
  4. D) implied warranty of merchantability, the implied warranty of fitness for a particular purpose, and the implied warranty of trade usage
  5. E) implied warranty of merchantability and the implied warranty of trade usage, but not the implied warranty of fitness for a particular purpose

 

Answer:  C

Explanation:  The Uniform Commercial Code, always diligent in its goal to facilitate the flow and ease of commercial activity, recognizes that a well-accepted course of dealing or trade usage may create implied warranties dependent on the circumstances. For example, if it is generally accepted in the trade that a certain product is always preassembled and shrink-wrapped, the failure of the seller to deliver the goods in that condition would be a breach of the implied warranty of trade usage.

Difficulty: 2 Medium

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

75) Which of the following is an accurate statement regarding state choice(s) in recognizing the rights of third-party beneficiaries of warranties?

  1. A) According to the Uniform Commercial Code, states must recognize that a seller’s warranties extend to the buyer’s household members and guests only.
  2. B) According to the Uniform Commercial Code, states must recognize that a seller’s warranties extend to any reasonable and foreseeable user.
  3. C) According to the Uniform Commercial Code, states must recognize that a seller’s warranties extend to anyone injured by the good.
  4. D) States are given the following three choices regarding third-party beneficiaries of warranties: a) a seller’s warranties extend to the buyer’s household members and guests; b) a seller’s warranties extend to any reasonable and foreseeable user; or c) a seller’s warranties extend to anyone injured by the good.
  5. E) States are given the following two choices regarding third-party beneficiaries of warranties: a) a seller’s warranties extend to the buyer’s household members and guests; or b) a seller’s warranties extend to any reasonable and foreseeable user.

 

Answer:  D

Explanation:  States are given the following three choices regarding third-party beneficiaries of warranties: a) a seller’s warranties extend to the buyer’s household members and guests; b) a seller’s warranties extend to any reasonable and foreseeable user; or c) a seller’s warranties extend to anyone injured by the good.

Difficulty: 2 Medium

Topic:  Warranty Rights of Third Parties

Learning Objective:  16-06 How are third parties affected by implied warranties?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

76) Which option have most states adopted regarding the rights of third-party beneficiaries of warranties?

  1. A) A seller’s warranties extend to the buyer’s household members and guests.
  2. B) A seller’s warranties extend to any reasonable and foreseeable user.
  3. C) A seller’s warranties extend to anyone injured by the good.
  4. D) A seller’s warranties do not extend beyond the buyer and the buyer’s immediate family.
  5. E) A seller’s warranties do not extend beyond the buyer and the buyer’s immediate family living in the same household.

 

Answer:  B

Explanation:  States are given the following three choices regarding third-party beneficiaries of warranties: a) a seller’s warranties extend to the buyer’s household members and guests; b) a seller’s warranties extend to any reasonable and foreseeable user; or c) a seller’s warranties extend to anyone injured by the good. Most states have adopted the second option, holding that a seller’s warranty extends to any reasonable and foreseeable user.

Difficulty: 2 Medium

Topic:  Warranty Rights of Third Parties

Learning Objective:  16-06 How are third parties affected by implied warranties?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

77) In terms of sale of goods transactions in the United States, which of the following is true regarding disclaimer of the warranty of merchantability?

  1. A) The disclaimer must be in writing in order to be enforceable.
  2. B) Some states require the term merchantability to be used in the disclaimer.
  3. C) The disclaimer may be made either orally or in writing.
  4. D) The disclaimer must be in writing, and some states require the term merchantability to be used in the disclaimer.
  5. E) The disclaimer may be made either orally or in writing, and some states require the term merchantability to be used in the disclaimer.

 

Answer:  E

Explanation:  The seller may disclaim the warranty of merchantability either orally or in writing; however, some states require the term merchantability to be used in the disclaimer.

Difficulty: 2 Medium

Topic:  Warranty Disclaimers and Waivers

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

78) Which is true regarding a buyer’s right to waive warranties?

  1. A) A buyer may not waive warranties.
  2. B) A buyer may waive implied warranties, but not express warranties.
  3. C) A buyer may waive express warranties, but not implied warranties.
  4. D) A buyer may waive both implied and express warranties.
  5. E) A buyer may waive express warranties and the implied warranty of fitness for a particular purpose, but not the implied warranty of merchantability.

 

Answer:  D

Explanation:  The buyer may waive both implied and express warranties.

Difficulty: 2 Medium

Topic:  Warranty Disclaimers and Waivers

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

79) How can a buyer waive warranty rights?

  1. A) By failing to examine goods for which an express warranty was created by a sample or model.
  2. B) By failing to comply with the seller’s request to inspect the goods.
  3. C) By failing to examine goods for which an express warranty was created by a sample or model, or by failing to comply with the seller’s request to inspect the goods.
  4. D) By failing to require that warranties be given in writing, or by failing to comply with the seller’s request to inspect the goods.
  5. E) Pursuant to a Uniform Commercial Code mandate advancing the public policy interests of consumer protection, a buyer cannot waive rights associated with implied and express warranties.

 

Answer:  C

Explanation:  A buyer may waive express and implied warranties by either a) failing to examine goods for which an express warranty was created by a sample or model or b) failing to comply with the seller’s request to inspect the goods.

Difficulty: 2 Medium

Topic:  Warranty Disclaimers and Waivers

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

80) What is the effect of a buyer’s failure to comply with the statute of limitations recognized by the Uniform Commercial Code for a breach of contract action?

  1. A) The buyer waives his or her warranty rights under the contract.
  2. B) There is no effect if the buyer can establish that he or she was not aware of the statute of limitations.
  3. C) It operates as a waiver of the buyer’s warranty rights, but only if the seller can establish by a preponderance of the evidence that the buyer had actual knowledge of the statute of limitations.
  4. D) It results in the buyer only having the right to sue the seller for injunctive relief, not damages.
  5. E) It results in the buyer only having the right to sue the seller for damages, not injunctive relief.

 

Answer:  A

Explanation:  A buyer may waive his or her warranty rights under the contract by failing to comply with the statute of limitations.

Difficulty: 2 Medium

Topic:  Warranty Disclaimers and Waivers

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

81) Under the Uniform Commercial Code, a buyer must bring a lawsuit on a breached contract within ________ of when the breach occurred or when the buyer became aware of it.

  1. A) 180 days
  2. B) one year
  3. C) three years
  4. D) four years
  5. E) six years

 

Answer:  D

Explanation:  According to the Uniform Commercial Code, a buyer must bring a lawsuit on a breached contract within four years of when the breach occurred or when the buyer became aware of it.

Difficulty: 1 Easy

Topic:  Warranty Disclaimers and Waivers

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

82) Under the Uniform Commercial Code, a seller must bring a lawsuit on a breached contract within ________ of when the breach occurred or when the seller became aware of it.

  1. A) 180 days
  2. B) one year
  3. C) two years
  4. D) four years
  5. E) six years

 

Answer:  D

Explanation:  According to the Uniform Commercial Code, a seller must bring a lawsuit on a breached contract within four years of when the breach occurred or when the seller became aware of it.

Difficulty: 1 Easy

Topic:  Warranty Disclaimers and Waivers

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

83) Which of the following is true regarding whether the buyer and seller may negotiate contractually for a shorter time period to sue for breach of contract than the statute of limitations period ordinarily recognized by the Uniform Commercial Code?

  1. A) The buyer and seller may not negotiate for a shorter time period to sue for breach of contract; instead, they must recognize the statute of limitations period established by the Uniform Commercial Code.
  2. B) Without limitation, the buyer and seller may negotiate for a shorter time period to sue for breach of contract than the statute of limitations period ordinarily recognized by the Uniform Commercial Code.
  3. C) The buyer and seller may negotiate for a shorter time period to sue for breach of contract than the statute of limitations period ordinarily recognized by the Uniform Commercial Code, so long as the contractually-agreed-upon time period is not for less than one year.
  4. D) The buyer and seller may negotiate for a shorter time period to sue for breach of contract than the statute of limitations period ordinarily recognized by the Uniform Commercial Code, so long as the contractually-agreed-upon time period is not for less than six months.
  5. E) The buyer and seller may negotiate for a shorter time period to sue for breach of contract than the statute of limitations period ordinarily recognized by the Uniform Commercial Code, so long as the time period is not for less than two years.

 

Answer:  C

Explanation:  According to the Uniform Commercial Code, the buyer and seller are free to negotiate contractually a shorter time period to sue for breach of contract than the four-year statute of limitations ordinarily recognized by the Uniform Commercial Code, so long as the contractually-agreed-upon time period is not for less than one year. They are not free to negotiate a longer time period than four years.

Difficulty: 2 Medium

Topic:  Warranty Disclaimers and Waivers

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

84) When was the Magnuson-Moss Act enacted?

  1. A) 1950
  2. B) 1955
  3. C) 1970
  4. D) 1975
  5. E) 2000

 

Answer:  D

Explanation:  The Magnuson-Moss Act was enacted in 1975.

Difficulty: 1 Easy

Topic:  Warranty Disclaimers and Waivers

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

85) Which of the following is required by the Magnuson-Moss Act when the seller issues a written warranty for a consumer good?

  1. A) The seller must indicate whether that warranty is a full warranty or a limited warranty.
  2. B) The seller must provide a full warranty, and the seller must indicate full warranty protection in its written contract with the buyer.
  3. C) The seller must provide an express warranty and a warranty of merchantability, and the seller must indicate the express warranty and the warranty of merchantability in its written contract with the buyer.
  4. D) The seller must provide a warranty of trade usage, and the seller must indicate the warranty of trade usage in its written contract with the buyer.
  5. E) The seller must provide a warranty of trade usage and a warranty of merchantability, and the seller must indicate the warranty of trade usage and the warranty of merchantability in its written contract with the buyer.

 

Answer:  A

Explanation:  The 1975 federal law known as the Magnuson-Moss Act requires that with regard to a seller’s warranty, the seller must indicate whether the warranty is a full warranty or a limited warranty.

Difficulty: 2 Medium

Topic:  Warranty Disclaimers and Waivers

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

86) Which of the following is true regarding whether a seller must provide a warranty under the Magnuson-Moss Act?

  1. A) A seller must provide an express, full warranty.
  2. B) A seller must provide an implied, full warranty.
  3. C) A seller must provide at least an express, limited warranty.
  4. D) A seller must provide at least an implied, limited warranty.
  5. E) The act does not require that the seller provide any warranties.

 

Answer:  E

Explanation:  The 1975 federal law known as the Magnuson-Moss Act requires that if a seller decides to issue a written warranty for a consumer good (the seller is not required to do so), the seller must indicate whether that warranty is a full warranty or a limited warranty.

Difficulty: 2 Medium

Topic:  Warranty Disclaimers and Waivers

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

87) Which of the following is true under the Magnuson-Moss Act if a written warranty is silent as to whether or not it is a full warranty?

  1. A) It is presumed to be a limited warranty.
  2. B) It is presumed to be an express, limited warranty.
  3. C) It is presumed to be a limited warranty of merchantability.
  4. D) It is presumed to be a limited usage of trade warranty.
  5. E) It is presumed to be a full warranty.

 

Answer:  E

Explanation:  Under the Magnuson-Moss Act, if a written warranty is silent, it is presumed to be a full warranty.

Difficulty: 2 Medium

Topic:  Warranty Disclaimers and Waivers

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

88) Under the Magnuson-Moss Act, what is the effect of a full warranty?

  1. A) It means that if the good fails or is defective, the good or its defective part will be replaced; and that if replacement cannot be timely effected, the buyer has the right to a refund or a full replacement.
  2. B) It means only that the good or its defective part will be repaired. The buyer has no other remedy.
  3. C) It means that if the good fails or is defective, the good or its defective part will be replaced; that if replacement cannot be timely effected, the buyer has the right to a refund or a full replacement; and that the buyer will receive additional funds to account for expenses incurred in seeking warranty recognition and enforcement.
  4. D) It means that the seller must immediately refund the buyer the full purchase price.
  5. E) It means that the buyer has the option of either an immediate refund of the full purchase price or repair of the good.

 

Answer:  A

Explanation:  A full warranty under the Magnuson-Moss Act means that if the good fails or is defective, the good or its defective part will be replaced. If replacement cannot be timely effected, the buyer has the right to a refund or a full replacement.

Difficulty: 2 Medium

Topic:  Warranty Disclaimers and Waivers

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

89) The obligations of sellers and buyers are determined by which of the following?

  1. A) Terms the parties outline in agreements
  2. B) Custom
  3. C) Rules outlined by the Uniform Commercial Code
  4. D) Terms the parties outline in agreements, custom, and rules outlined by the Uniform Commercial Code
  5. E) Terms the parties outline in agreements and custom, but not rules outlined by the Uniform Commercial Code

 

Answer:  D

Explanation:  The obligations of sellers and buyers are determined by: a) terms the parties outline in agreements; b) custom; and c) rules outlined by the Uniform Commercial Code.

Difficulty: 2 Medium

Topic:  The Basic Performance Obligation

Learning Objective:  16-01 What is the difference between conforming and nonconforming goods?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

90) Which of the following damages may a seller receive if the seller resells goods to another buyer when the original buyer is in breach of contract?

  1. A) The difference between the resale price and the contract price, plus incidental damages and minus expenses saved.
  2. B) The difference between the resale price and the contract price.
  3. C) The difference between the resale price and the contract price, minus expenses and without any allowance for incidental damages.
  4. D) The difference between the resale price and the contract price, plus incidental damages, with no deduction for expenses saved.
  5. E) Nominal damages.

 

Answer:  A

Explanation:  Sellers are allowed to resell or dispose of the goods when the buyer is in breach and the goods have not yet been delivered. The seller then holds the buyer liable for any loss. Uniform Commercial Code Section 2-706 allows the seller to recover the difference between the resale price and contract price, plus incidental damages and minus expenses saved.

Difficulty: 2 Medium

Topic:  Remedies Available to Sellers and Lessors under the UCC

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

 

91) Which of the following are damages identified before the breach occurs?

  1. A) Nominal
  2. B) Compensatory
  3. C) Reliance
  4. D) Liquidated
  5. E) Consequential

 

Answer:  D

Explanation:  Liquidated damages are damages identified before the breach occurs. Buyers and sellers are free to negotiate, as part of the contract, a liquidated-damage clause in which the parties agree in advance what the damages will be for each party if a breach occurs.

Difficulty: 1 Easy

Topic:  Remedies Available to Buyers and Lessees under the UCC

Learning Objective:  16-09 When are money damages available?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

92) Which of the following is generally true regarding a liquidated-damage clause?

  1. A) A liquidated-damage clause is per se
  2. B) A liquidated-damage clause is void in the interests of public policy.
  3. C) A liquidated-damage clause is voidable in the interests of public policy.
  4. D) A liquidated-damage clause is enforceable if it is not punitive in nature.
  5. E) A liquidated-damage clause will be enforced, regardless of whether it is punitive in nature.

 

Answer:  D

Explanation:  Liquidated-damage are damages identified before the breach occurs. Buyers and sellers are free to negotiate, as part of the contract, a liquidated-damage clause in which the parties agree in advance what the damages will be for each party if a breach occurs. Generally speaking, a court will enforce a liquidated-damage clause as long as it is not so far out of reasonable range as to be punitive in nature. Liquidated-damage clauses that are deemed punitive in nature are not enforceable.

Difficulty: 2 Medium

Topic:  Remedies Available to Buyers and Lessees under the UCC

Learning Objective:  16-09 When are money damages available?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

93) What does the Uniform Commercial Code provide for liquidated damages if the parties do not otherwise agree to them?

  1. A) That the nonbreaching seller may claim against a breaching buyer 20 percent of the purchase price or $500, whichever is less, as liquidated damages.
  2. B) That the nonbreaching seller may claim against a breaching buyer 20 percent of the purchase price or $500, whichever is more, as liquidated damages.
  3. C) That the nonbreaching seller may claim against a breaching buyer 30 percent of the purchase price or $1,000, whichever is less, as liquidated damages.
  4. D) That the nonbreaching seller may claim against a breaching buyer 30 percent of the purchase price or $1,000, whichever is more, as liquidated damages.
  5. E) The Uniform Commercial Code does not establish an amount for liquidated damages if the parties do not otherwise agree to them.

 

Answer:  A

Explanation:  The Uniform Commercial Code (UCC) provides for liquidated damages if the parties have not expressly negotiated a liquidated-damage clause. Uniform Commercial Code Section 2-718 pertains to liquidated damages and allows the nonbreaching seller to claim against a breaching buyer 20 percent of the purchase price or $500, whichever is less, as liquidated damages.

Difficulty: 2 Medium

Topic:  Remedies Available to Buyers and Lessees under the UCC

Learning Objective:  16-09 When are money damages available?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

94) Which of the following means that the seller has delivered the goods to a carrier, but the carrier has not yet turned them over to the buyer?

  1. A) In process
  2. B) In transit
  3. C) Intermediation
  4. D) Carrier-ready
  5. E) Transport-ready

 

Answer:  B

Explanation:  In transit means that the seller has delivered the goods to a carrier, but the carrier has not yet turned them over to the buyer.

Difficulty: 1 Easy

Topic:  Remedies Available to Sellers and Lessors under the UCC

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

95) Assuming a buyer that is insolvent has breached a contract by not paying for goods that are in transit, which of the following may occur?

  1. A) The carrier may stop delivery regardless of the quantity shipped.
  2. B) The carrier may stop delivery, but only if the quantity shipped is a large shipment.
  3. C) The carrier may stop delivery, but only if the buyer expressly agreed in a signed writing to the remedy of stopping shipment.
  4. D) The carrier may stop delivery, but only if ordered to do so by a bankruptcy judge.
  5. E) The carrier may not stop delivery under any circumstances.

 

Answer:  A

Explanation:  If the buyer is insolvent, the carrier can stop delivery regardless of the quantity shipped.

Difficulty: 2 Medium

Topic:  Remedies Available to Sellers and Lessors under the UCC

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

96) Which of the following is the right of a buyer to substitute goods for those due under a sales agreement?

  1. A) Consignment
  2. B) Subrogation
  3. C) Cover
  4. D) Revocation
  5. E) Reallocation

 

Answer:  C

Explanation:  Under Uniform Commercial Code Sections 2-712 and 2A-518, buyers and lessees are allowed to cover, or substitute, goods for those due under the sales agreement.

Difficulty: 2 Medium

Topic:  Remedies Available to Buyers and Lessees under the UCC

Learning Objective:  16-08 What is cover and resale?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

97) Which of the following must a buyer do in obtaining cover?

  1. A) Demonstrate good faith in obtaining the substitute goods, and pay a reasonable amount for the substitute goods
  2. B) Pay a reasonable amount for the substitute goods, and act without unreasonable delay in purchasing the substitute goods
  3. C) Act without unreasonable delay in purchasing the substitute goods, and purchase goods that are reasonable substitutes
  4. D) Pay a reasonable amount for the substitute goods, act without unreasonable delay in purchasing the substitute goods, and purchase goods that are reasonable substitutes
  5. E) Demonstrate good faith in obtaining the substitute goods, pay a reasonable amount for the substitute goods, act without unreasonable delay in purchasing the substitute goods, and purchase goods that are reasonable substitutes.

 

Answer:  E

Explanation:  When seeking to cover, the buyer must: a) demonstrate good faith in obtaining the substitute goods; b) pay a reasonable amount for the substitute goods; c) act without unreasonable delay in purchasing the substitute goods; and d) purchase goods that are reasonable substitutes.

Difficulty: 2 Medium

Topic:  Remedies Available to Buyers and Lessees under the UCC

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

98) Which of the following are damages for lost profits a buyer may recover in the event of a breach of contract?

  1. A) Nominal
  2. B) Consequential
  3. C) Reformation
  4. D) Nominal, consequential, and reformation
  5. E) Nominal and consequential, but not reformation

 

Answer:  B

Explanation:  Consequential damages include damages for lost profits, as long as such damages are not too speculative.

Difficulty: 1 Easy

Topic:  Remedies Available to Buyers and Lessees under the UCC

Learning Objective:  16-09 When are money damages available?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

99) Under the Uniform Commercial Code, buyers may recover goods identified in the contract if the seller becomes insolvent within ________ days after receiving the first payment due under the agreement.

  1. A) 5
  2. B) 10
  3. C) 16
  4. D) 30
  5. E) 60

 

Answer:  B

Explanation:  Uniform Commercial Code Sections 2-502 and 2A-522 allow buyers or lessees to recover the goods identified in the contract if the seller or lessor becomes insolvent within ten days after receiving the first payment due under the agreement. Buyers and lessees are obligated to pay the remaining balance according to the terms of the agreement.

Difficulty: 1 Easy

Topic:  Remedies Available to Buyers and Lessees under the UCC

Learning Objective:  16-09 When are money damages available?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

100) Which of the following usually requires that the seller deliver the particular goods identified in the contract?

  1. A) Substantial performance
  2. B) Strict performance
  3. C) Specific performance
  4. D) Commercial equity
  5. E) Commercial practicability

 

Answer:  C

Explanation:  Specific performance usually requires that the seller or lessor deliver the particular goods identified in the contract.

Difficulty: 1 Easy

Topic:  Remedies Available to Buyers and Lessees under the UCC

Learning Objective:  16-09 When are money damages available?

Bloom’s:  Remember

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

101) When does the Uniform Commercial Code allow buyers to seek the remedy of specific performance?

  1. A) Only when the goods are unique
  2. B) Only when a remedy at law is inadequate
  3. C) Only when the goods are worth more than $500
  4. D) When the goods are unique, when a remedy at law is inadequate, or when the goods are worth more than $500
  5. E) When the goods are unique or when a remedy at law is inadequate, but not because the goods are worth more than $500

 

Answer:  E

Explanation:  Uniform Commercial Code Sections 2-716(1) and 2A-521(1) allow buyers and lessees to seek the remedy of specific performance when either a) the goods are unique or b) a remedy at law is inadequate.

Difficulty: 2 Medium

Topic:  Remedies Available to Buyers and Lessees under the UCC

Learning Objective:  16-09 When are money damages available?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

102) Which of the following is true regarding buyers or lessees who want to accept nonconforming goods and then seek monetary damages?

  1. A) Buyers and lessees are allowed to do so in order to receive the benefit of the bargain, but they must give the seller/lessor reasonable notice of the defect.
  2. B) Buyers and lessees are allowed to do so in order to receive the benefit of the bargain, and there is no requirement that they give the seller/lessor prior notice of the defect.
  3. C) Buyers may do so in order to receive the benefit of the bargain so long as reasonable notice of the defect is given, but lessors may not.
  4. D) Lessors may do so in order to receive the benefit of the bargain so long as reasonable notice of the defect is given, but buyers may not.
  5. E) Buyers and lessors may do so, but only if the seller/lessee agrees to the retention of the nonconforming goods and does not request their return.

 

Answer:  A

Explanation:  Under Uniform Commercial Code Sections 2-607, 2-715, and 2A-519, buyers or lessees are allowed to accept nonconforming goods and then seek monetary damages to give them the benefit of the bargain. The buyer or lessee must give the seller or lessor reasonable notice of the defect.

Difficulty: 2 Medium

Topic:  Remedies Available to Buyers and Lessees under the UCC

Learning Objective:  16-09 When are money damages available?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

103) Under which of the following circumstances will a court refuse to uphold modifications or limitations to remedies agreed upon by the parties?

  1. A) When they seem unfair according to a subjective standard of reasonableness.
  2. B) When they seem unfair according to an objective standard of reasonableness.
  3. C) When the party seeking to enforce the modification or limitation is a corporation.
  4. D) When one or both parties were not represented by an attorney.
  5. E) When the remedies fail in their essential purpose.

 

Answer:  E

Explanation:  Courts uphold modifications or limitations to remedies unless the remedies fail in their essential purpose.

Difficulty: 2 Medium

Topic:  Modifications or Limitations to the Remedies Otherwise Provided by the UCC

Learning Objective:  16-09 When are money damages available?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

104) Which of the following was the result in Hill v. Gateway 2000, the case in the textbook in which the purchaser of a computer failed to read a contract requiring arbitration that came packaged with the computer and asked the court to determine that a seller of computers could not limit buyers’ remedies or require arbitration by bundling hardware and legal documents?

  1. A) The contract was binding on the purchaser because the purchaser accepted the risk of not reading the contract.
  2. B) The contract was binding on the purchaser because the contract’s requirement of arbitration was reasonable.
  3. C) The contract was binding on the purchaser because the contract’s requirement of arbitration was actually in the purchaser’s favor.
  4. D) The contract was unconscionable and nonbinding.
  5. E) The contract was nonbinding because it should have been provided to the purchaser for review before the computer was shipped.

 

Answer:  A

Explanation:  The court ruled that the contract was binding on the parties. The court stated, “A contract need not be read to be effective; people who accept take the risk that the unread terms may in retrospect prove unwelcome.”

Difficulty: 2 Medium

Topic:  Remedies Available to Buyers and Lessees under the UCC

Learning Objective:  16-09 When are money damages available?

Bloom’s:  Understand

AACSB:  Technology

Accessibility:  Keyboard Navigation

 

 

105) Stacy, located in Florida, is entering into a contract with Natasha, located in Russia, for the purchase of snow globes to sell to people who do not typically get to see snow. Stacy is familiar with the Uniform Commercial Code, but she is uneasy about what law would apply if she has a dispute with Natasha regarding the contract. She would like for Florida law to apply. Which of the following is the best advice to Stacy?

  1. A) Stacy should attempt to have a contract clause inserted providing that the law of Florida would govern any dispute.
  2. B) While a requirement that Florida law would govern the dispute would likely be deemed unconscionable, Stacy should attempt to have a contract clause inserted providing that international law would govern any dispute.
  3. C) There is nothing that Stacy can do because Russian law, the law of the seller, would govern any dispute.
  4. D) Stacy does not need to do anything because as a matter of law, Florida law, the law of the buyer in this case, would govern any dispute.
  5. E) It depends on the value of the contract. If it is for $1,000 or more, Stacy should attempt to secure a provision in the contract that Florida law governs; otherwise, she has no option but to allow a court to later determine the conflict-of-law issue.

 

Answer:  A

Explanation:  It is a common practice for parties to any contract to indicate in the very contract itself which laws will govern the transaction if a dispute arises.

Difficulty: 3 Hard

Topic:  Specific Obligations of Sellers and Lessors

Learning Objective:  16-01 What is the difference between conforming and nonconforming goods?

Bloom’s:  Evaluate

AACSB:  Diversity

Accessibility:  Keyboard Navigation

106) Ann chipped a tooth on a peach pit while eating a can of mixed fruit. She wants to sue the manufacturer of the fruit mix. Which of the following would be the manufacturer’s best defense?

  1. A) That food products do not come with an implied warranty of merchantability.
  2. B) That no express warranty was made.
  3. C) That no implied warranty of fitness for a particular purpose was made.
  4. D) That the presence of the peach pit should not have been unexpected.
  5. E) That the injury was minor.

 

Answer:  D

Explanation:  As indicated in the Webster v. Blue Ship Tea Room, Inc. case in the textbook addressing the implied warranty of merchantability, in cases where the buyer should expect a problem, the buyer must be prepared to accept the situation.

Difficulty: 3 Hard

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

107) Priscilla, who worked for a dry cleaner, came up with a great new idea for a type of press that speeded up the process immensely. She quit her job, hired labor and purchased materials, and manufactured a number of the presses. She sold the presses to her friend Phil for resale. Phil began advertising and distributing the press, but was notified by ABC Company that the sales violated its patent. After investigation, Phil determined that ABC had the better argument and demanded that Priscilla refund the purchase price. Priscilla declined on the basis that she had no idea that a patent on a similar press was in existence. Who will likely win the dispute and why?

  1. A) Phil will likely win, because Priscilla violated the implied warranty of merchantability.
  2. B) Phil will likely win, because Priscilla violated the implied warranty of fitness for a particular purpose.
  3. C) Phil will likely win, because Priscilla violated the warranty of title.
  4. D) Priscilla will likely win, because she had no knowledge of any previous patent.
  5. E) Priscilla will likely win, because she had no knowledge of any previous patent and because the duty was on Phil to investigate whether any patents existed prior to his purchase of the presses.

 

Answer:  C

Explanation:  The Uniform Commercial Code assumes that the seller has good and valid title to the good and has the right to transfer title free and clear of any liens, judgments, or infringements of intellectual property rights of which the buyer does not have knowledge.

Difficulty: 3 Hard

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

108) Mary sells handmade earrings for a living. Susan is a new lawyer and a friend of Mary who gives legal advice to Mary in return for earrings. Susan tells Mary that under the Magnuson-Moss Act she is required to provide all buyers with a written warranty setting forth their rights as consumers. Mary asks if there is not a way around that because she is tired of complaining customers who do not take care of their earrings and that she would love to find a way to provide no warranties whatsoever. Which of the following is true regarding Susan’s advice and warranties on the earrings?

  1. A) Susan is wrong, and Mary is not required to offer any warranties.
  2. B) Susan is partially correct, and Mary must provide a limited written warranty to comply with the Magnuson-Moss Act.
  3. C) Susan is correct, and Mary must provide a full written warranty to comply with the Magnuson-Moss Act.
  4. D) Susan is partially correct, and Mary must provide a limited written warranty under the Magnuson-Moss Act only if her average gross sales are over $5,000.
  5. E) Susan is partially correct, and Mary must provide a full written warranty under the Magnuson-Moss Act only if her average gross sales are over $10,000.

 

Answer:  A

Explanation:  The 1975 federal law known as the Magnuson-Moss Act requires that if a seller decides to issue a written warranty for a consumer good (the seller is not required to do so), the seller must indicate whether that warranty is a full warranty or a limited warranty.

Difficulty: 3 Hard

Topic:  Warranty Disclaimers and Waivers

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

109) New Furniture. Penny purchased $3,000 worth of furniture from Bob’s furniture shop. Through an arrangement with Bob, Penny financed the purchase through a financing company called Let Us Help You. Twenty-nine days after the goods were delivered to her, Penny had a disagreement with Let Us Help You regarding the amount of interest she would be required to pay. She notified Bob on that day that she was rejecting the goods. Bob claimed that she did not properly reject the furniture and also that she acted in bad faith. Penny says that she properly rejected and denies that she acted in bad faith. She also says that, in any event, she cannot be sued for with both wrongful rejection and also bad faith because of double jeopardy. Which of the following is true regarding Bob’s claim that Penny failed to properly reject the goods?

  1. A) Bob is incorrect because under the Uniform Commercial Code, Penny had 30 days within which to reject the goods.
  2. B) Bob is incorrect, but only if Penny can establish that Let Us Help You miscalculated the amount of interest she owed.
  3. C) Bob is incorrect, but only if Penny can show that the goods were overpriced.
  4. D) Bob is correct, but only if Bob can show that the goods were priced at reasonable market value.
  5. E) Bob is correct.

 

Answer:  E

Explanation:  As in the case referenced in the textbook, Y&N Furniture Inc. v. Nwabuoku, there was no claim of nonconforming goods.

Difficulty: 3 Hard

Topic:  Specific Obligations of Sellers and Lessors

Learning Objective:  16-02 What is the perfect tender rule?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

110) New Furniture. Penny purchased $3,000 worth of furniture from Bob’s furniture shop. Through an arrangement with Bob, Penny financed the purchase through a financing company called Let Us Help You. Twenty-nine days after the goods were delivered to her, Penny had a disagreement with Let Us Help You regarding the amount of interest she would be required to pay. She notified Bob on that day that she was rejecting the goods. Bob claimed that she did not properly reject the furniture and also that she acted in bad faith. Penny says that she properly rejected and denies that she acted in bad faith. She also says that, in any event, she cannot be sued for both wrongful rejection and also bad faith because of double jeopardy. Which of the following is true regarding Bob’s claim that Penny failed to act in good faith?

  1. A) Bob is incorrect because under the Uniform Commercial Code, Penny had 30 days within which to reject the goods.
  2. B) Bob is incorrect, but only if Penny can establish that Let Us Help You miscalculated the amount of interest she owed.
  3. C) Bob is incorrect, but only if Penny can show that the goods were overpriced.
  4. D) Bob is correct, because Penny made no claim that the goods were nonconforming.
  5. E) Bob is correct, but only if Bob can show that the goods were priced at reasonable market value.

 

Answer:  D

Explanation:  As in the case referenced in the textbook, Y&N Furniture Inc. v. Nwabuoku, a rejection that does not even purport to rest on an honest assessment of conformity of the goods is in bad faith.

Difficulty: 3 Hard

Topic:  Specific Obligations of Sellers and Lessors

Learning Objective:  16-02 What is the perfect tender rule?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

111) New Furniture. Penny purchased $3,000 worth of furniture from Bob’s furniture shop. Through an arrangement with Bob, Penny financed the purchase through a financing company called Let Us Help You. Twenty-nine days after the goods were delivered to her, Penny had a disagreement with Let Us Help You regarding the amount of interest she would be required to pay. She notified Bob on that day that she was rejecting the goods. Bob claimed that she did not properly reject the furniture and also that she acted in bad faith. Penny says that she properly rejected and denies that she acted in bad faith. She also says that, in any event, she cannot be sued for both wrongful rejection and also bad faith because of double jeopardy. Which of the following is true regarding the standard of good faith that would be applied regarding Penny?

  1. A) In this case, good faith means honesty in fact.
  2. B) In this case, good faith means honesty in fact and also reasonable commercial standards of fair dealing.
  3. C) In this case, good faith means perfect tender.
  4. D) In this case, good faith means commercial practicability.
  5. E) In this situation, good faith means both perfect tender and commercial practicability.

 

Answer:  A

Explanation:  Uniform Commercial Code Section 1-304 requires good faith in the performance and enforcement of every contract. Good faith means honesty in fact when a non-merchant is involved.

Difficulty: 3 Hard

Topic:  The Basic Performance Obligation

Learning Objective:  16-01 What is the difference between conforming and nonconforming goods?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

112) New Furniture. Penny purchased $3,000 worth of furniture from Bob’s furniture shop. Through an arrangement with Bob, Penny financed the purchase through a financing company called Let Us Help You. Twenty-nine days after the goods were delivered to her, Penny had a disagreement with Let Us Help You regarding the amount of interest she would be required to pay. She notified Bob on that day that she was rejecting the goods. Bob claimed that she did not properly reject the furniture and also that she acted in bad faith. Penny says that she properly rejected and denies that she acted in bad faith. She also says that, in any event, she cannot be sued for both wrongful rejection and also bad faith because of double jeopardy. Which of the following is the correct analysis of Penny’s claim that she cannot be sued for both a wrongful rejection and bad faith because of the constitutional prohibition against double jeopardy?

  1. A) Penny is correct.
  2. B) Penny is correct that she cannot be sued for both a wrongful rejection and bad faith; however, the Uniform Commercial Code requires that conclusion, not the constitutional prohibition against double jeopardy.
  3. C) Penny is correct that she cannot be sued for both a wrongful rejection and bad faith; however, the common law requires that conclusion, not the constitutional prohibition against double jeopardy.
  4. D) Penny is correct that she cannot be sued for both a wrongful rejection and bad faith; however, federal statutory law requires that conclusion, not the constitutional prohibition against double jeopardy.
  5. E) Penny is incorrect. She can be sued for both a wrongful rejection and bad faith.

 

Answer:  E

Explanation:  As in the case referenced in the textbook, Y&N Furniture Inc. v. Nwabuoku, a rejection may be both wrongful and in bad faith.

Difficulty: 3 Hard

Topic:  Specific Obligations of Sellers and Lessors

Learning Objective:  16-02 What is the perfect tender rule?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

113) Boat Tow. Donnie went to a new car dealership and told the salesperson (who was not the manager) that he needed a new car that would both get good gas mileage and pull his big boat. The salesperson encouraged him to buy a smaller car that the salesperson promised would pull the boat. Donnie bought the car and used it to pull the boat. Unfortunately, the heavy pull on the car did significant damage to the car’s engine. Donnie complained to the salesperson, who denied any liability. Donnie, who had taken half-a-semester of business law, informed the salesperson that along with the sale of the car he also received an express warranty and an implied warranty of merchantability, and that he could recover under either of those theories. Is Donnie correct that the car was sold with an implied warranty of merchantability?

  1. A) No, because there was no writing guaranteeing that warranty signed by the salesperson.
  2. B) No, because the salesperson only made an exaggeration.
  3. C) No, because only a manager can make such a warranty.
  4. D) No, both because nothing was in writing and also because only a manager can make such a warranty.
  5. E) Yes.

 

Answer:  E

Explanation:  The implied warranty of merchantability is an assurance, inferred in every sale or lease from a merchant unless clearly disclaimed, that merchantable goods will conform to a reasonable performance expectation.

Difficulty: 3 Hard

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

114) Boat Tow. Donnie went to a new car dealership and told the salesperson (who was not the manager) that he needed a new car that would both get good gas mileage and pull his big boat. The salesperson encouraged him to buy a smaller car that the salesperson promised would pull the boat. Donnie bought the car and used it to pull the boat. Unfortunately, the heavy pull on the car did significant damage to the car’s engine. Donnie complained to the salesperson, who denied any liability. Donnie, who had taken half-a-semester of business law, informed the salesperson that along with the sale of the car he also received an express warranty and an implied warranty of merchantability, and that he could recover under either of those theories. Will Donnie likely be able to recover damages based upon a breach of the implied warranty of merchantability?

  1. A) No, because the implied warranty of merchantability guaranteed that the car would be fit for the ordinary purposes for which it is used. Pulling a boat is not an ordinary purpose for a small car.
  2. B) Yes, because Donnie informed the salesperson about the need for the car to pull the boat.
  3. C) Yes, because the salesperson told Donnie that the car would pull the boat.
  4. D) No, because of the lack of an implied warranty of fitness for a particular purpose.
  5. E) No, because there was no warranty of merchantability.

 

Answer:  A

Explanation:  According to the Uniform Commercial Code, in order to be merchantable, goods must be fit for the ordinary purposes for which such goods are used.

Difficulty: 3 Hard

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

115) Boat Tow. Donnie went to a new car dealership and told the salesperson (who was not the manager) that he needed a new car that would both get good gas mileage and pull his big boat. The salesperson encouraged him to buy a smaller car that the salesperson promised would pull the boat. Donnie bought the car and used it to pull the boat. Unfortunately, the heavy pull on the car did significant damage to the car’s engine. Donnie complained to the salesperson, who denied any liability. Donnie, who had taken half-a-semester of business law, informed the salesperson that along with the sale of the car he also received an express warranty and an implied warranty of merchantability, and that he could recover under either of those theories. Will Donnie be able to recover damages based upon breach of the implied warranty of fitness for a particular purpose?

  1. A) Yes.
  2. B) No, because there was no express warranty.
  3. C) No, because Donnie’s only right of recovery was for breach of the implied warranty of merchantability.
  4. D) No, because Donnie’s only right of recovery was for breach of an express warranty.
  5. E) No, because Donnie as a reasonable person should have known that the car would not pull the boat, regardless of what the salesperson said.

 

Answer:  A

Explanation:  The implied warranty of fitness for a particular purpose arises when a seller knows or has reason to know a) why the buyer is purchasing the goods in question and b) that the buyer is relying on the seller to make the selection.

Difficulty: 3 Hard

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

116) Hot Toaster. Rebecca bought a toaster from Super Store and brought it home. A friend of hers, Greg, was at her house making toast. The toaster malfunctioned and shocked Greg, resulting in a small burn to his hand requiring medical attention. At a garage sale, Rebecca also purchased a blender from a friend, Samantha. When she paid for the blender, Rebecca said that it would be great for making smoothies. Samantha said nothing and just smiled while taking Rebecca’s money. Unfortunately, the blender was not powerful enough to make smoothies. Based on the facts presented, what type of warranty did Super Store give Rebecca?

  1. A) An express warranty.
  2. B) An implied warranty of merchantability.
  3. C) An implied warranty of fitness for a particular purpose.
  4. D) An express warranty, an implied warranty of merchantability, and an implied warranty of fitness for a particular purpose.
  5. E) An implied warranty of merchantability and an implied warranty of fitness for a particular purpose, but not an express warranty.

 

Answer:  B

Explanation:  The implied warranty of merchantability is an assurance, inferred in every sale by a merchant unless clearly disclaimed, that merchantable goods will conform to a reasonable performance expectation.

Difficulty: 3 Hard

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

117) Hot Toaster. Rebecca bought a toaster from Super Store and brought it home. A friend of hers, Greg, was at her house making toast. The toaster malfunctioned and shocked Greg, resulting in a small burn to his hand requiring medical attention. At a garage sale, Rebecca also purchased a blender from a friend, Samantha. When she paid for the blender, Rebecca said that it would be great for making smoothies. Samantha said nothing and just smiled while taking Rebecca’s money. Unfortunately, the blender was not powerful enough to make smoothies. Which of the following rights, if any, does Greg have against Super Store in most states?

  1. A) None, because he did not buy the toaster.
  2. B) None, because he is not married to Rebecca.
  3. C) None, because he is not married or otherwise related to Rebecca.
  4. D) He may sue, but only if Rebecca joins him as a co-plaintiff in the lawsuit.
  5. E) He may sue Super Store for his injuries.

 

Answer:  E

Explanation:  Most states have adopted the option under the Uniform Commercial Code providing that the seller’s warranties extend to any reasonable and foreseeable user who is injured by the good.

Difficulty: 3 Hard

Topic:  Warranty Rights of Third Parties

Learning Objective:  16-06 How are third parties affected by implied warranties?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

118) Hot Toaster. Rebecca bought a toaster from Super Store and brought it home. A friend of hers, Greg, was at her house making toast. The toaster malfunctioned and shocked Greg, resulting in a small burn to his hand requiring medical attention. At a garage sale, Rebecca also purchased a blender from a friend, Samantha. When she paid for the blender, Rebecca said that it would be great for making smoothies. Samantha said nothing and just smiled while taking Rebecca’s money. Unfortunately, the blender was not powerful enough to make smoothies. Which of the following is true regarding whether Samantha made an express warranty to Rebecca that the blender would make smoothies?

  1. A) Samantha made an express warranty by not speaking up regarding the performance limitations of the blender.
  2. B) Samantha made an express warranty by not speaking up regarding the performance limitations of the blender, but only if Rebecca can prove that Samantha knew about the problems.
  3. C) Samantha made an express warranty by not speaking up regarding the performance limitations of the blender, but only if Rebecca cannot prove that Samantha knew about the problems.
  4. D) Samantha made an express warranty by not speaking up regarding the performance limitations of the blender, but only if Samantha can prove that she did not know about the problems.
  5. E) Samantha did not make an express warranty.

 

Answer:  E

Explanation:  Samantha made no description of the blender’s physical nature or its use, in either general or specific circumstances, which became part of the contract of sale.

Difficulty: 3 Hard

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

119) Hot Toaster. Rebecca bought a toaster from Super Store and brought it home. A friend of hers, Greg, was at her house making toast. The toaster malfunctioned and shocked Greg, resulting in a small burn to his hand requiring medical attention. At a garage sale, Rebecca also purchased a blender from a friend, Samantha. When she paid for the blender, Rebecca said that it would be great for making smoothies. Samantha said nothing and just smiled while taking Rebecca’s money. Unfortunately, the blender was not powerful enough to make smoothies. Which of the following is true regarding whether Samantha made an implied warranty of fitness for a particular purpose to Rebecca that the blender would make smoothies?

  1. A) Samantha did not make an implied warranty of fitness for a particular purpose, because there is no proof that Rebecca was relying on Samantha to make the selection.
  2. B) Samantha did not make an implied warranty of fitness for a particular purpose, because Samantha is not a merchant.
  3. C) Samantha did not make an implied warranty of fitness for a particular purpose, because there is no proof that Rebecca was relying on Samantha to make the selection and since Samantha is not a merchant.
  4. D) Samantha made an implied warranty of fitness for a particular purpose to Rebecca that the blender would make smoothies, because she had a duty to tell Samantha otherwise.
  5. E) Regardless of whether she said anything or not, Samantha made an implied warranty of fitness for a particular purpose to Rebecca that the blender would make smoothies because she sold the blender.

 

Answer:  A

Explanation:  The warranty of fitness for a particular purpose requires that the seller knows or has reason to know that the buyer is relying on him or her to make the selection.

Difficulty: 3 Hard

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

120) Refused Furniture. Selina arranges to sell furniture from her furniture store to Roland for $3,000. Roland was supposed to give Selina a $500 deposit on February 1 and pay the remainder in monthly installments. Selina was to deliver the furniture by February 7. Roland did not pay Selina as promised on February 1. He asked her to wait until March 1, but she refused. She also refused to deliver the furniture. Selina was able to sell the furniture for only $2,500 because of a downturn in the economy. Roland told Selina that she had no right to withhold or sell his furniture and that he was suing. Selina incurred $100 in additional amounts in advertising costs to advertise the furniture that Roland initially purchased. Selina saved $40 in delivery costs because the subsequent purchaser picked up her own furniture. Which of the following is true regarding Roland’s claim that Selina had no right to withhold his furniture?

  1. A) Roland is correct. Selina was required to deliver the furniture, but she retained the right to sue him for any deficiency.
  2. B) Roland is correct, but only because of the special Uniform Commercial Code exception for consumer goods.
  3. C) Roland is incorrect. Selina had a right to withhold the furniture.
  4. D) Roland is incorrect, but only if Selina can prove that she had no reason to believe that he was a credit risk prior to signing the contract of sale.
  5. E) Roland is correct because of federal consumer protection laws.

 

Answer:  C

Explanation:  Uniform Commercial Code Sections 2-703(a) and 2A-523(1)(c) allow sellers or lessors to withhold delivery of goods when the buyer or lessee is in breach.

Difficulty: 3 Hard

Topic:  Remedies Available to Sellers and Lessors under the UCC

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

121) Refused Furniture. Selina arranges to sell furniture from her furniture store to Roland for $3,000. Roland was supposed to give Selina a $500 deposit on February 1 and pay the remainder in monthly installments. Selina was to deliver the furniture by February 7. Roland did not pay Selina as promised on February 1. He asked her to wait until March 1, but she refused. She also refused to deliver the furniture. Selina was able to sell the furniture for only $2,500 because of a downturn in the economy. Roland told Selina that she had no right to withhold or sell his furniture and that he was suing. Selina incurred $100 in additional amounts in advertising costs to advertise the furniture that Roland initially purchased. Selina saved $40 in delivery costs because the subsequent purchaser picked up her own furniture. Which of the following is true regarding Roland’s claim that Selina had no right to sell the furniture he initially purchased?

  1. A) Roland is correct. Selina had no right to sell the furniture, but she retained the right to sue him for any deficiency.
  2. B) Roland is correct, but only because of the special Uniform Commercial Code exception for consumer goods.
  3. C) Roland is incorrect. Selina had a right to resell the furniture.
  4. D) Roland is incorrect, but only if Selina can prove that she had no reason to believe that he was a credit risk prior to signing the contract of sale.
  5. E) Roland is correct because of federal consumer protection laws.

 

Answer:  C

Explanation:  Sellers are allowed to resell or dispose of the goods when the buyer is in breach and the goods have not yet been delivered.

Difficulty: 3 Hard

Topic:  Remedies Available to Sellers and Lessors under the UCC

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

122) Refused Furniture. Selina arranges to sell furniture from her furniture store to Roland for $3,000. Roland was supposed to give Selina a $500 deposit on February 1 and pay the remainder in monthly installments. Selina was to deliver the furniture by February 7. Roland did not pay Selina as promised on February 1. He asked her to wait until March 1, but she refused. She also refused to deliver the furniture. Selina was able to sell the furniture for only $2,500 because of a downturn in the economy. Roland told Selina that she had no right to withhold or sell his furniture and that he was suing. Selina incurred $100 in additional amounts in advertising costs to advertise the furniture that Roland initially purchased. Selina saved $40 in delivery costs because the subsequent purchaser picked up her own furniture. Which of the following is true regarding any right of Selina to recover the additional advertising fees she incurred from Roland?

  1. A) She is entitled to recover damages for the fees if she can establish that Roland agreed to pay for such damages in his contract with her.
  2. B) She is entitled to recover damages for the fees if she can establish that Roland orally agreed to pay for such damages.
  3. C) She is entitled to recover damages for the fees if she can establish that Roland has a history of breaching contracts of sale.
  4. D) Selina will be able to recover damages for the fees if they were reasonably incurred as a result of Roland’s breach.
  5. E) She is not entitled to recover damages for the fees because she had no right to resell the furniture.

 

Answer:  D

Explanation:  A seller is entitled to recover incidental damages resulting from the buyer’s breach of contract.

Difficulty: 3 Hard

Topic:  Remedies Available to Sellers and Lessors under the UCC

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

 

123) Refused Furniture. Selina arranges to sell furniture from her furniture store to Roland for $3,000. Roland was supposed to give Selina a $500 deposit on February 1 and pay the remainder in monthly installments. Selina was to deliver the furniture by February 7. Roland did not pay Selina as promised on February 1. He asked her to wait until March 1, but she refused. She also refused to deliver the furniture. Selina was able to sell the furniture for only $2,500 because of a downturn in the economy. Roland told Selina that she had no right to withhold or sell his furniture and that he was suing. Selina incurred $100 in additional amounts in advertising costs to advertise the furniture that Roland initially purchased. Selina saved $40 in delivery costs because the subsequent purchaser picked up her own furniture. Which of the following is true regarding any deduction in damages to which Roland is entitled?

  1. A) Roland is not entitled to any deduction because he was the breaching party.
  2. B) Roland is entitled to a deduction for the delivery expenses, but only if he can establish that Selina agreed in writing to deduct those in the event of a breach.
  3. C) Roland is entitled to a deduction for the delivery expenses, but only if he can establish that Selina agreed orally or in writing to deduct those in the event of a breach.
  4. D) Roland is entitled to a deduction for the delivery expenses because that was a savings to Selina.
  5. E) Roland is entitled to a deduction for the delivery expenses, because Selina breached the contract by not delivering the furniture to him and then pursuing an action for damages.

 

Answer:  D

Explanation:  Sellers are allowed to resell or dispose of the goods when the buyer is in breach and the goods have not yet been delivered. The seller then holds the buyer liable for any loss. Uniform Commercial Code Section 2-706 allows the seller to recover the difference between the resale price and contract price, plus incidental damages and minus expenses saved.

Difficulty: 3 Hard

Topic:  Remedies Available to Sellers and Lessors under the UCC

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

124) Sally, who has a candy shop, agreed to sell Ricky, a teacher, all the chocolate candy bears in her shop for treats for his class. Unfortunately, through no fault of hers, Sally’s air conditioner went out and half of the bears partially melted. What are the rights and duties of the parties in relation to the contract?

 

Answer:  Under the Uniform Commercial Code, if goods are identified at the time the parties entered into a contract and those goods are partially destroyed through no fault of the parties before risk passes to the buyer, the buyer can inspect the goods and decide whether to a) treat the contract as void or b) ask the seller for a reduction of the contract price and then accept the damaged goods.

Difficulty: 3 Hard

Topic:  Exceptions to the Perfect Tender Rule

Learning Objective:  16-03 What is the right to cure?

Bloom’s:  Apply

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

125) Should the perfect tender rule be rejected and replaced with a concept of substantial performance?

 

Answer:  Student responses will vary. In favor of the perfect tender rule, nothing in the Uniform Commercial Code prohibits the parties from negotiating a substantial performance definition in the performance of the contract. The substantial performance rule, however, gives the trier of fact flexibility in determining the impact of nonperformance in the overall scheme of the contractual relationship.

Difficulty: 3 Hard

Topic:  Specific Obligations of Sellers and Lessors

Learning Objective:  16-02 What is the perfect tender rule?

Bloom’s:  Analyze

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

126) Define “course of dealing” and “course of performance” and how these concepts affect the perfect tender rule.

 

Answer:  Uniform Commercial Code Section 1-205(1) defines course of dealing as previous commercial transactions between the same parties. Under Uniform Commercial Code Section 2-208(1), course of performance refers to the history of dealings between the parties in the particular contract at issue. When the buyer alleges that goods failed to conform to contract specifications, the Uniform Commercial Code requires that courts consider the ideas of course of dealing and course of performance in resolving any dispute.

Difficulty: 2 Medium

Topic:  Specific Obligations of Sellers and Lessors

Learning Objective:  16-02 What is the perfect tender rule?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

127) Set forth what the Uniform Commercial Code requires in terms of good faith and the duty imposed on merchants and non-merchants with regard to fair dealing.

 

Answer:  The Uniform Commercial Code (UCC) requires good faith in the performance and enforcement of every contract. Good faith means honesty in fact. When the parties are merchants, the UCC imposes a higher standard. Between merchants, the UCC imposes a duty of not only honesty in fact but also reasonable commercial standards of fair dealing.

Difficulty: 2 Medium

Topic:  The Basic Performance Obligation

Learning Objective:  16-01 What is the difference between conforming and nonconforming goods?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

128) List the exceptions to title warranties.

 

Answer:  The only exceptions to title warranties occur if they are disclaimed or modified by specific language in the contract or if the seller is obviously unable to guarantee title, such as at a sheriff’s sale of seized goods.

Difficulty: 2 Medium

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

129) What needs to be shown under the Uniform Commercial Code for goods to be found merchantable?

 

Answer:  For goods to be merchantable under the Uniform Commercial Code, they must: a) be able to pass without objection in the trade or market for similar goods; b) in the case of fungible goods, be of fair average quality within the description; c) be fit for the ordinary purposes for which such goods are used; d) be produced, within the variations permitted by the agreement, of even kind, quality, and quantity within each unit and among all units involved; e) be adequately contained, packaged, and labeled as the agreement may require; and f) conform to the promises or affirmations made on the container or label, if any.

Difficulty: 2 Medium

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

130) Describe when an implied warranty of fitness for a particular purpose will be found.

 

Answer:  The implied warranty of fitness for a particular purpose arises when a seller or lessor knows or has reason to know: a) why the buyer or lessee is purchasing or leasing the goods in question and b) that the buyer or lessee is relying on him or her to make the selection.

Difficulty: 2 Medium

Topic:  Warranties

Learning Objective:  16-05 What are the implied warranties of title, merchantability, and particular purpose?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

131) Marge ordered for her soccer team t-shirts with the name of the school shown on the front. The seller requested that Marge come in to inspect the first t-shirt before the others were made. Marge refused because she was too busy, and told the seller to go ahead and print the shirts. On receipt of the shirts, Marge discovered that the school name was misspelled. Does Marge have any rights against the seller, and why or why not?

 

Answer:  Marge has no rights against the seller because she refused to inspect the goods. By refusing to inspect the goods, she waived both implied and express warranties.

Difficulty: 3 Hard

Topic:  Warranty Disclaimers and Waivers

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

132) Discuss the damages a seller or lessor may recover when a buyer or lessee is in breach and the goods are sold or leased to another party.

 

Answer:  The seller may recover the difference between the resale price and the contract price, plus incidental damages and minus expenses saved. The seller gets to keep any profits it makes on the resale. The lessor is allowed to lease the goods to another party and recover unpaid lease payments and any deficiency between the lease payments due under the original lease contract, and those due under the new contract. The lessor also can seek incidental damages.

Difficulty: 2 Medium

Topic:  Remedies Available to Sellers and Lessors under the UCC

Learning Objective:  16-07 How can implied warranties be disclaimed?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

133) List the eight options discussed in the text that may be available to a buyer/lessee when the seller/lessor is in breach.

 

Answer:  When the seller/lessor is in breach, the buyer/lessee can: a) cancel the contract and seek remedies giving them the benefit of the bargain; b) obtain cover; c) sue to recover damages; d) recover the goods; e) obtain specific performance; f) reject nonconforming goods; g) revoke acceptance of nonconforming goods; or h) accept the nonconforming goods and seek damages.

Difficulty: 2 Medium

Topic:  Remedies Available to Buyers and Lessees under the UCC

Learning Objective:  16-08 What is cover and resale?; 16-09 When are money damages available?

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

There are no reviews yet.

Add a review

Be the first to review “Dynamic Business Law 4th Edition Kubasek – Test Bank”

Your email address will not be published. Required fields are marked *

Category:
Updating…
  • No products in the cart.