Q&A Hero

Q: If a buyer breaches a contract while the seller is still in possession of the goods, the seller can resell the goods and hold the buyer liable for any loss.

Q: Omar can be described as "a reasonably competent general practitioner of ordinary skill, experience, and capacity." This is the normal standard for judging a. a client's performance. b. an attorney's performance. c. anyone's performance. d. no one's performance.

Q: Merchant Supply Company and National Discount Stores enter into a contract for a lease of cash registers. Merchant assures National that it has valid title to the goods. Under the UCC, a warranty of title arises a. automatically in most lease contracts. b. only if the lessee asks for such a warranty. c. only if the lessor expresses such a warranty. d. only in conjunction with sales contracts, not lease contracts.

Q: On a lessee's insolvency, the lessor can stop delivery of the goods.

Q: Yvon, an accountant, is charged with negli­gence by Zesty Sauce, Inc., a client. Yvon may successfully defend against the claim if she can show that a. scienter was lacking. b. she complied with all generally accepted accounting principles. c. the negligence was not the proximate cause of the client's losses. d. the negligence was only contributory.

Q: If, before the time for performance, a buyer communicates an intent not to perform, the seller can consider the buyer in breach and pursue a remedy.

Q: City Car Company and Dave's Autos enter into a contract for a sale of motor vehicles. City assures Dave's that it has valid title to the vehicles. Under the UCC, a warranty of title arises a. automatically in most sales contracts. b. only if the buyer asks for such a warranty. c. only if the seller expresses such a warranty. d. only in conjunction with lease contracts, not sales contracts.

Q: Jaime, an accountant, contracts to perform services for Kase. Jaime acts in good faith and conforms to generally accepted accounting principles, but makes a mistake in judgment. Jaime is most likely a. liable if Jaime failed to discover a defalcation. b. liable if Jaime failed to discover a fraud. c. liable if Jaime failed to discover an impropriety. d. not liable.

Q: Once the seller has tendered delivery, the buyer is obligated to accept the goods and pay for them.

Q: In many states, the plaintiff's negligence is a defense that may be raised in a product liability suit based on strict liability.

Q: In general, a buyer's duty to pay for tendered goods becomes absolute be­fore the buyer has had an opportunity to inspect the goods.

Q: Tiny is an accountant. Tiny's violation of generally accepted accounting principles and generally accepted auditing standards a. does not indicate that Tiny was negligent. b. is prima facie evidence that Tiny was negligent. c. precludes Tiny from raising any defense against a negligence claim. d. will never subject Tiny to liability.

Q: Unless otherwise agreed, inspection of goods can take place at any reasonable place and time and in any reasonable manner.

Q: Strict liability applies to the suppliers of component parts.

Q: Pluto accuses Quark, an accountant, of committing defalcation. This is a. embezzlement. b. general misconduct. c. professional negligence. d. throwing something out of a window.

Q: If goods identified to a contract are destroyed through no fault of either party, both parties are excused from performance.

Q: A seller must warn those who buy a product of harm that could result from the foreseeable misuse of the product.

Q: Leslie, an accountant, enters into a contract to provide services to Marty. Leslie does not finish the work within the contract's deadline. Leslie is a. liable for breach of contract. b. not liable, because Leslie is a professional. c. not liable, because Leslie's failure must have been Marty"˜s fault. d. not liable, because the work took longer than foreseen.

Q: An inadequate warning is not a product defect that will support the imposition of liability on a strict product liability basis.

Q: The doctrine of commercial impracticability only extends to problems that are unforeseen.

Q: Gert, an accountant, contracts to conduct an audit for Hailey. In performing the audit, Gert fails to detect certain misconduct. Gert is most likely a. liable if a normal audit would have revealed the misconduct. b. liable if Gert issues a specifically qualified opinion. c. not liable if Gert generally disclaims any liability. d. not liable if the misconduct was due to Hailey's negligence.

Q: A design defect is not the sort of product defect that will support the imposition of liability on a strict product liability basis.

Q: Estes, an accountant, contracts to perform services for Frasier. In performing those services, Estes uncovers a suspicious financial transaction. Estes is most likely not liable if he a. acted negligently in failing to discover the transaction sooner. b. conceals the discovery and otherwise finishes the work. c. investigates and reports the discovery to Frasier. d. obtains restitution from the perpetrator without Frasier's knowledge.

Q: If a contract specifies a certain carrier, a substitution of a different carrier for any reason breaches the contract.

Q: Only the manufacturer of a defective product can be strictly liable for an injury or damage caused by the product.

Q: Travis, an accountant, is subject to the ac­counting conventions, rules, and procedures that constitute generally ac­cepted accounting principles (GAAP). GAAP are determined by a. state courts. b. the American Bar Association. c. the American Institute of Certified Public Accountants. d. the Financial Accounting Standards Board.

Q: An installment contract is a single contract that requires or authorizes delivery in two or more separate lots to be paid for in one payment.

Q: To support the imposition of strict product liability, a product must be substantially changed from the time it is sold to the time an injury occurs.

Q: Rex, an accountant, enters into a contract to provide services to Sofi. Rex does not finish the work within the contract's deadline. Sofi pays a penalty as a result of the missed deadline and hires Trey to complete the job. Rex is most likely liable for a. nothing. b. Sofi's penalty and the cost to hire Trey. c. Sofi's penalty only. d. the cost to hire Trey only.

Q: An installment contract is breached if a seller tenders any nonconforming goods.

Q: To succeed in a strict product liability suit, an injured plaintiff must show that a product's defect was the proximate cause of the injury.

Q: In a few states, communications between an accountant and his or her client are privileged.

Q: An installment contract is breached if a buyer accepts any nonconforming goods.

Q: Aiding or assisting in the preparation of a false tax return is a felony.

Q: Once the time for performance under the contract has expired, the seller or lessor can never exercise the right to cure.

Q: One requirement for a product liability suit based on strict liability is a failure to exercise reasonable care.

Q: Accountants may be subject to criminal penalties for violations of federal securities laws.

Q: The term cure refers to the right of the buyer to reject, adjust, or replace nonconforming goods.

Q: A public policy underlying the imposition of strict product liability is that consumers should be protected against unsafe products.

Q: A product is not so unreasonably dangerous as to support the imposition of liability in a strict product liability suit solely because a less dangerous alternative was commercially feasible but was not produced.

Q: Until the time for performance under a contract expires, the seller has a right to cure.

Q: A tax preparer that fails to give a taxpayer a copy of his or her tax return may be subject to a penalty under the Internal Revenue Code.

Q: Any product may be made entirely safe for all consumption.

Q: Under the UCC, there are no exceptions to the perfect tender rule.

Q: An accountant's liability under the Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 re­quires privity of contract.

Q: Under the perfect tender rule, if tender is not perfect, the seller is obligated to try again.

Q: Under the Securities Exchange Act of 1934, an accountant may be liable for a misleading statement that affects the price of a security even if the accountant acted in good faith.

Q: A public policy underlying the imposition of strict product liability is that a manufacturer who makes an unsafe product should be put out of business.

Q: If the goods or their tender fail to conform to the contract, the buyer can accept part and reject part.

Q: An accountant who prepares a financial state­ment in good faith may avoid liability under Section 18 of the Securities Ex­change Act of 1934.

Q: A manufacturer's liability to an injured party on a strict product liability theory is limited to a refund or a replacement of the defective product.

Q: An accountant is not liable for a misstatement to a purchaser of securities who knew of the misstatement but invested anyway.

Q: Privity of contract between the plaintiff and the defendant is required to bring a product liability suit based on negligence.

Q: Under the UCC, a seller's tender of goods that do not conform in every way to a contract is still a valid tender.

Q: In contracts involving a carrier, a seller can complete performance through a shipment contract or a destination contract.

Q: A failure to follow generally accepted accounting principles and gener­ally accepted auditing standards is proof of a lack of due diligence.

Q: A product liability action may be based on warranty theory.

Q: A shipment contract requires that the seller deliver the goods to a particular location.

Q: An accountant's liability under the Securities Act of 1933 re­quires privity of contract with the purchaser of a security.

Q: A manufacturer's duty of care does not extend to the inspection and test­ing of products bought to incorporate in the final product.

Q: The Magnuson-Moss Warranty Act modifies UCC warranty rules to some extent in consumer transactions.

Q: Under the UCC, if a contract does not designate the place of delivery for the goods, then the goods must be made available at a location halfway between the seller's and the buyer's places of business.

Q: Under the Sarbanes-Oxley Act of 2002, an accountant must destroy working papers on the conclusion of the audit to which the papers relate.

Q: An express warranty cannot be limited.

Q: There are no circumstances under which a contract can be tendered by multiple deliveries of goods.

Q: Working papers are the documents through which a court orders an accountant to audit a public company.

Q: An accountant's working papers are the documents that are used and developed during an audit.

Q: A merchant can disclaim an implied warranty of merchantability.

Q: Tender of delivery requires that the seller or lessor hold the goods at the buyer's or lessee's disposal, but not that the goods be conforming.

Q: A public accounting firm is a firm engaged in the practice of accounting "in the public interest."

Q: Express warranties displace all inconsistent implied warranties.

Q: Tender must occur at a reasonable hour and in a reasonable manner.

Q: The seller's or lessor's major obligation under a sales contract is to tender conforming goods to the buyer or lessee.

Q: An attorney may be liable in negligence to any third party who the attorney knows will rely on the attorney's work.

Q: A contract cannot contain both implied and express warranties.

Q: The duty of good faith is imposed on the parties involved in commercial contracts by the Uniform Commercial Code.

Q: A contract can contain both a warranty of merchantability and a war­ranty of fit­ness for a particular purpose.

Q: An attorney may be liable to a third party who relies on the attorney's legal opinion to the third party's detriment

Q: Under the Restatement (Second) of Torts, accountants can be held li­able for negligence to any third parties.

Q: In the following situations, two parties claim the same goods. Who is most likely to prevail in each circumstance? Explain. (a) Olan steals Phil's television set and sells it to Quincy, an innocent purchaser, for value. Phil learns Quincy has the set and demands its return. (b) Riley takes his television set for repair to Slick, a merchant who sells new and used television sets. By accident, one of Slick's employees sells the set to Tuna, an innocent purchaser-customer, who takes possession. Riley wants his set back from Tuna.