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Q:
Ollie negotiates an order instrument to Phil by
A.assignment of its rights under a contract.
B.delivery with any necessary indorsement.
C.making an unconditional promise to pay.
D.presenting it in response to a demand by B.
Q:
On May 1, Dooley signs a check that is payable to the order of Extra Credit Corporation and that is dated July 1. This check is
A.negotiable.
B.nonnegotiable, because it is payable to Extra Credit Corporation.
C.nonnegotiable, because it is postdated.
D.nonnegotiable, because it is signed by Dooley.
Q:
Wilbur signs a note that includes a clause under which the note's holder can delay the date of its payment indefinitely. This is
A.an acceleration clause.
B.an extension clause.
C.an immaturity clause.
D.a stop-payment clause.
Q:
Tyrone draws a check payable to "Cash" and presents it to United Bank for payment. This instrument is
A.a bearer instrument.
B.an order instrument.
C.valid but nonnegotiable.
D.void.
Q:
Quincy draws a check payable to "Replay Stadium" to buy two season tickets to the next year's State College football games. This instrument is
A.a bearer instrument.
B.an order instrument.
C.valid but nonnegotiable.
D.void.
Q:
EZ Credit Company signs an instrument payable to the order of Flem that states, "The maker of this note at the date of maturity, May 1, 2013, can extend the time of payment, but for no more than a reasonable time." This instrument is
A.negotiable.
B.nonnegotiable, because it includes an extension clause.
C.nonnegotiable, because it is not payable at a definite time.
D.nonnegotiable, because it is payable to a specific payee.
Q:
Ray signs a promissory note for $10,000 in favor of State University (SU). The note does not specify the date of its payment. Ray defaults. In SU's suit to collect on the note, the court will most likely rule in favor of
A.Ray, because SU assumed the risk that the note would not be paid.
B.Ray, because the note is not payable at a definite time or on demand.
C.SU, because the note is an unconditional promise to pay the holder.
D.SU, because there is a uniform "default time" for repayment when a date is not specified.
Q:
Opal signs a promissory note payable to the order of Payday Loan Company. The note states that it is payable "with interest at the legal rate." This note is
A.negotiable.
B.nonnegotiable, because it does not specify a rate of interest.
C.nonnegotiable, because it is a promissory note.
D.nonnegotiable, because it is payable only with interest.
Q:
To finance the purchase of a car from Giant Auto Sales, Hoppy signs an instrument promising to pay to "Ideal Credit Union" $18,000 with interest in installments with the final payment due May 15, 2014. To be negotiable, this instrument must include on its face
A.any conditions on the sale of the car.
B.any conditions to the disbursement of the funds.
C.any conditions to the repayment of the loan.
D.no conditions.
Q:
USA Oil Corporation signs an instrument that states it is being executed "in accord with a contract for the purchase of 4,000 barrels of oil dated May 1." This instrument is
A.negotiable.
B.nonnegotiable, because information about the sale must be obtained from another source.
C.nonnegotiable, because it states an express condition to payment.
D.nonnegotiable, because the terms of the sale are not clear.
Q:
To finance the purchase of a house from Tuna, Uri signs an instrument promising to pay to "Verity Mortgage Service" $160,000 with interest in installments with the final payment due July 10, 2040. To be negotiable, this instrument must include the signature of
A.a non-party witness.
B.Tuna or Tuna's realtor.
C.Uri.
D.Verity's chief financial officer.
Q:
Fact Pattern 16-1
Ewa signs an instrument unconditionally promising to pay to "First State Bank" $5,000 with interest in installments with the final payment due June 1, 2012.
Refer to Fact Pattern 16-1. With respect to this instrument, First States Bank is
A.the drawee.
B.the drawer.
C.the maker.
D.the payee.
Q:
Fact Pattern 16-1
Ewa signs an instrument unconditionally promising to pay to "First State Bank" $5,000 with interest in installments with the final payment due June 1, 2012.
Refer to Fact Pattern 16-1. The instrument that Ewa signed is most likely
A.a certificate of deposit.
B.a draft.
C.an order to pay.
D.a promissory note.
Q:
When the drawee of an unaccepted draft or check pays to a holder the amount due in full, all parties to the instrument are discharged.
Q:
A lack or failure of consideration is no defense to payment of a negotiable instrument to any holder.
Q:
An alteration of an instrument is material if it changes the terms between two parties in any way.
Q:
The completion of an originally incomplete instrument in an unauthorized manner is a defense against payment on the instrument to an HDC.
Q:
A person whose name is forged on an instrument is liable to pay only a holder in due course the value of the forged instrument.
Q:
Presentment warranties protect the person who presents an instrument for payment.
Q:
Transfer warranties attempt to impose liability on the wrongdoer or the party who dealt most immediately with the wrongdoer.
Q:
When an instrument has a forged indorsement, the loss usually falls on the first party to take the instrument.
Q:
An unauthorized signature binds the person whose name is forged.
Q:
The dishonor of an instrument relieves secondary parties of liability.
Q:
A drawer is primarily liable on an instrument.
Q:
A maker is secondarily liable on an instrument.
Q:
An instrument is not defective because it has been previously dishonored.
Q:
If a note is payable in thirty days, payment is due by midnight on the thirtieth day.
Q:
An instrument is not defective simply because it is overdue.
Q:
A person who in good faith acquires a negotiable instrument from a thief cannot become an HDC.
Q:
A holder takes an instrument for value by performing the promise for which the instrument was issued.
Q:
A person who receives an instrument as a gift normally possesses the rights of an HDC.
Q:
An instrument payable to two persons jointly requires the indorsement of only one of the payees for negotiation.
Q:
A payee whose name is misspelled on an instrument cannot indorse the instrument.
Q:
A blank indorsement specifies no particular indorsee.
Q:
The recipient of a negotiable instrument becomes a holder regardless of the form of the transfer.
Q:
A transfer by negotiation can make it possible for a holder to receive more rights in the instrument than its prior possessor had.
Q:
An instrument payable "with interest" must specify a particular rate to be negotiable.
Q:
Normally, if the numerical amount and the written amount on a check differ, the words outweigh the figures.
Q:
A check "payable to the order of bearer" is neither an order instrument nor a bearer instrument.
Q:
To be negotiable, an instrument must be payable in money.
Q:
A conditional promise to pay is not a negotiable instrument.
Q:
An order stating "I wish you would pay" is sufficient to create a negotiable instrument.
Q:
To be negotiable, an instrument must be signed in the lower right-hand corner.
Q:
A certificate of deposit may be negotiable even if it does not contain an express promise to pay.
Q:
A signature can consist of initials signed by a party.
Q:
An instrument is nonnegotiable unless the word "negotiable" is printed on it.
Q:
A certificate of deposit is a type of draft.
Q:
A time draft is payable at a definite future time.
Q:
Express warranties displace all inconsistent implied warranties.
Q:
A contract cannot contain both implied and express warranties.
Q:
A contract can contain both a warranty of merchantability and a warranty of fitness for a particular purpose.
Q:
A seller must provide a written warranty for consumer goods.
Q:
A seller must use words such as "warrant" to make an express warranty.
Q:
Advertisements can include express warranties.
Q:
An expression of opinion by a seller will not usually create a warranty.
Q:
An implied warranty of merchantability arises in every sale or lease by a merchant who deals in goods of the kind sold or leased.
Q:
Merchants are required to warrant that the goods they sell are fit for their ordinary purpose.
Q:
A product is unmerchantable if an accident could arise in connection with the goods.
Q:
Only a statement made after a contract is entered into can be an express warranty.
Q:
Promises of fact made during the bargaining process are not express warranties.
Q:
A warranty against infringement is a promise by the seller that the product was constructed in a workmanlike manner.
Q:
Warranties of title do not arise in most sales contracts.
Q:
In sales law, a warranty is an assurance by one party of the existence of a fact on which the other party can rely.
Q:
Bob is shopping in Carl's Hardware Store when a nail gun in use by Dan, one of Carl's employees, fires without warning and hits Bob in the leg. Carl checks the gun and discovers that it was assembled improperly. Bob files a suit against Eagle Tools, Inc., the manufacturer of the gun, for product liability, on the ground of strict liability. What are the elements for an action based on strict liability? In whose favor is the court likely to rule and why?
Q:
Cutter Company makes and sells table saws, which are designed to be safe if used properly. Erin buys a Cutter saw and lends it to her neighbor Frank. To reach a toolbox on a high shelf in his garage, Frank props the saw at an angle against a cabinet and climbs onto the saw. Frank loses his footing, slips off the saw, falls on the blade, and is injured. He files a product liability suit against Cutter, on the ground of negligence. On what basis could the maker prevail?
Q:
Gretel, an obese individual, files a suit against Hot n' Tasty, Inc., alleging that its food is unhealthy because, as is well known, it contains high levels of salt and sugar. Gretel's suit is most likely to
A.fail, because salt and sugar are not unhealthy ingredients in food.
B.fail, because the danger is well known to a reasonable consumer.
C.succeed, because consumers are not aware of the danger.
D.succeed, because the food is most likely a cause of Gretel's obesity.
Q:
The brakes on a Coastal Railroad train malfunction and it rolls towards maintenance workers on the tracks. Everyone gets out of the way except Dick, who wants to show off. The train hits Dick, who sues Everest, Inc., the brakes' manufacturer. Everest can raise the defense of
A.a component-part manufacturer.
B.assumption of risk.
C.consumer participation.
D.product misuse.
Q:
Pharma Company, Oral Meds Corporation, and Narco, Inc., are drug makers. Medico Company and Lab Source, Inc., are drug distributors. In a suit against all of these parties in which market-share liability is imposed, most likely to be liable are
A.neither the distributors nor the manufacturers.
B.the distributors and the manufacturers.
C.the distributors only.
D.the manufacturers only.
Q:
Safe-Rite Company makes electrical cords and other connectors for electronic devices. Tina files a product liability suit against Safe-Rite, alleging a warning defect. Under the Restatement (Third) of Torts: Products Liability, in deciding whether to hold Safe-Rite liable, the court may consider
A.neither the characteristics of expected users nor the content of any warning.
B.only the characteristics of expected users.
C.only the content of any warning.
D.the characteristics of expected users and the content of any warning.
Q:
Open Country, Inc., makes grills, camp ovens, and other outdoor cooking appliances. Under the Restatement (Third) of Torts: Products Liability, Open Country could be liable for a warning defect if there is a foreseeable risk of harm posed by one of its products and
A.the omission of a warning renders the product not reasonably safe.
B.there is a reasonable alternative design.
C.there is a lack of care in making of the product.
D.none of the choices.
Q:
Horizon Corporation makes cell phones. Inez files a product liability suit against Horizon, alleging a design defect. Under the Restatement (Third) of Torts: Products Liability, in deciding whether to hold Horizon liable, the court may consider
A.neither the effect of an alternative design on the products' costs and life nor the range of consumer choice among products.
B.only the effect of an alternative design.
C.only the range of products.
D.the effect of an alternative design and the range of products.
Q:
Cold Stuf, Inc., makes snowboards, which it sells to Deep Freeze Sports Store (DFS). DFS sells Cold Stuf boards to consumers, including Ed. Ed is injured while using the board. In a product liability suit based on strict liability, Ed may recover from
A.Cold Stuf only.
B.Cold Stuf or DFS.
C.DFS only.
D.no one.
Q:
Oven Products Company makes microwave ovens. Pico discovers that his Oven Products oven is defective and sues the maker for product liability based on strict liability. To win, Pico must show that
A.Oven Products sold the oven to Pico.
B.Pico knew and appreciated the risk caused by the defect.
C.Pico suffered an injury caused by the defect.
D.the "defect" was a commonly known danger.
Q:
Fun Toyz Corporation makes skateboards, which it sells to consumers, including Holly and Ira. Due to a defect, Holly is injured while using her new board. Ira's board has the same defect, but he is not injured. In a product liability suit based on strict product liability, Fun Toyz may be liable to
A.Holly and Ira.
B.Holly only.
C.Ira only.
D.no one.
Q:
Universal Assembly Company makes espresso machines and sells one to Vim through a misrepresentation on the label on which Vim relies and that results in an injury to Vim. Universal is most likely liable for
A.a commonly known danger.
B.fraud.
C.privity.
D.puffery.
Q:
Farm Equip, Inc., makes farming machinery. Gail discovers that her Farm Equip tractor is defective and sues the maker for product liability based on negligence. To win, Gail must show that
A.Farm Equip sold the tractor to Gail.
B.Gail knew and appreciated the risk caused by the defect.
C.Gail suffered an injury caused by the defect.
D.the "defect" was a commonly known danger.
Q:
Ceramic Tile Company designs and makes floor tiles. In a product liability suit based on negligence, Ceramic could be liable for violating its duty of care with respect to
A.neither the design nor the making of the tiles.
B.the design and the making of the tiles.
C.the design of the tiles only.
D.the making of the tiles only.
Q:
Garden Tool Company makes hedge trimmers. Troy is injured while using a Garden Tool trimmer and sues the company for product liability based on negligence. To win, Troy must show that
A.Garden Tool did not use due care with respect to the trimmer.
B.Garden Tool misrepresented a material fact regarding the trimmer.
C.Troy was experienced in the use of trimmers.
D.Troy was in privity of contract with Garden Tool.
Q:
Forest & Field Company makes and leases a backhoe to Zach. Due to a defect attributable to Forest & Field's negligence, Zach is injured in an accident in which his neighbor Aron is also hurt. In a product liability suit based on negligence, Forest & Field may be liable to
A.Aron only.
B.no one.
C.Zach and Aron.
D.Zach only.
Q:
GR8 Skates Company makes and sells a pair of skates to Hugh. GR8 fails to exercise "due care" to make the skates safe, and Hugh is injured as a result. GR8 is most likely liable for
A.assumption of risk.
B.knowledgeable use.
C.negligence.
D.product misuse.