Q&A Hero

Q: A seller must provide a written warranty for consumer goods.

Q: In most courts, accountants can be liable for negligence to any known us­ers of the accountants' finan­cial reports.

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: Secure Courier, Inc., has a requirements contract with Petro Distribution Corporation that obligates Petro to supply Secure with all the gasoline it needs for its delivery vehicles for one year at $2.30 per gallon. A clause inserted in small print in the contract by Secure, and not noticed by Petro, states, "The buyer reserves the right to reject any shipment for any reason without liability." For six months, Secure orders and Petro delivers under the contract without any controversy. Then, because of a war in the Middle East, the price of gasoline to Petro increases substantially. Petro tells Secure it cannot possibly fulfill their contract unless Secure agrees to pay $2.50 per gallon. Secure, in need of the gasoline, agrees in writing to modify the contract. Later that month, Secure learns it can buy gasoline at $2.40 per gallon from Refined Oil Company. Secure refuses delivery of its most recent order from Petro, claiming, first that the contract allows it to do so without liability, and second, that it is required to pay only $2.30 per gallon if it accepts the delivery. Discuss Secure's contentions.

Q: If a third party will be affected by a contract, the parties to the contract are in privity with the third party.

Q: Summit Sales Corporation orders goods from OverStock Company. Summit plans to market the goods to consumers generally. OverStock identifies the goods. Before they are shipped to Summit, an insurable interest in the goods exists in a. Summit and OverStock, but not consumers generally. b. Summit, OverStock, and consumers generally. c. Summit only. d. OverStock only.

Q: Merchants are required to warrant that the goods they sell are fit for their ordinary purpose.

Q: Traditionally, a professional owed a duty only to those with whom the professional had a direct contractual relationship.

Q: Good Food Corporation buys from Home Farms, Inc., a rice crop that Home Farms plans to plant and harvest during the next growing season. Good Food plans to sell the rice to Interstate Grocery Stores. After the rice is planted, but before it is harvested, an insurable interest in the rice ex­ists in a. Good Food and Home Farms, but not Interstate Grocery. b. Good Food, Home Farms, and Interstate Grocery. c. Good Food only. d. Home Farms only.

Q: A product is unmerchantable if an accident could arise in connection with the goods.

Q: A professional cannot be liable for fraud in the absence of fraudulent intent.

Q: An expression of opinion by a seller will not usually create a warranty.

Q: Sweetwater Café orders five gallons of transfat-free cooking oil from Restaurant Supply, Inc. The seller mistakenly ships the wrong oil, which the buyer keeps, despite the nonconform­ity. The oil is destroyed in a kitchen fire. The loss is suffered by a. Sweetwater and Restaurant Supply, but not Sweetwater customers. b. Sweetwater, Restaurant Supply, and Sweetwater customers. c. Sweetwater only. d. Restaurant Supply only.

Q: Each state establishes rules that govern the conduct of attorneys

Q: Under rules of professional misconduct, an attorney should not engage in conduct involving dishonesty.

Q: A-1 Furnishings, Inc., agrees to lease a desk to Business Resources, Inc. (BRI), which requests that the desk be left outside City Warehouse for BRI to pick up. Before BRI retrieves the desk, it is stolen. The loss is suf­fered by a. A-1 Furnishings and BRI, but not City Warehouse. b. A-1 Furnishings, BRI, and City Warehouse. c. A-1 Furnishings only. d. BRI only.

Q: Only a statement made after a contract is entered into can be an express warranty.

Q: Under rules of professional misconduct, an attorney should not engage in conduct involving deceit.

Q: Thorpe buys an HD TV from Viewpoint Electronics store, which agrees to keep the TV for Thorpe until he picks it up. Before Thorpe gets the TV, a fire destroys the store and the set. The loss is suffered by a. neither Thorpe nor Viewpoint b. Thorpe and Viewpoint. c. Thorpe only. d. Viewpoint only.

Q: A seller must use words such as "warrant" to make an express warranty.

Q: A client's negligence may constitute a defense to a charge of negligence against an accountant.

Q: Advertisements can include express warranties.

Q: Fay pays $800 for a new iPad to Global Goods, Inc. Global holds the iPad until Fay picks it up. Global is a. a bailee. b. a consignee. c. a lessee. d. a seller.

Q: An accountant can avoid liability by proving that his or her negligence was only the proximate cause of the cli­ent's loss.

Q: Sweets Store buys chocolate from Tasty Candies, Inc. The parties agree that the chocolate will be shipped "F.O.B. Sweets" via United Railroad Corporation. The chocolate is lost in transit. The loss is suffered by a. Sweets and Tasty, but not United. b. Sweets only. c. Sweets, Tasty, and United. d. Tasty only.

Q: A warranty against infringement is a promise by the seller that the prod­uct was con­structed in a workmanlike manner.

Q: Levi, a well-known lumber dealer with a good reputation, buys a load of lumber and pays for it with a check that is later dishonored. Sam, who is unaware of the bad check, buys the lumber from Levi. Sam is a(n) a. good faith purchaser. b. bad faith purchaser. c. insolvent purchaser. d. bailee.

Q: Promises of fact made during the bargaining process are not express warranties.

Q: Professionals can limit their liability for the misconduct of other profes­sionals with whom they work to some extent by disclaiming it.

Q: Elizabeth buys a car from Silas, who is sixteen years old. Elizabeth then wants to sell the car to her neighbor, John. Elizabeth's title to the car is a. valid. b. voidable. c. void. d. good.

Q: Warranties of title do not arise in most sales contracts.

Q: An opinion that disclaims any liability for false or misleading financial statements is too general.

Q: Southern Distribution, Inc., signs a receipt for goods that will also serve as a contract for the good' transport. This is a. a bill of lading. b. a destination contract. c. a shipment contract. d. a warehouse receipt.

Q: A qualified opinion must be specific and identify the reason for the qualification.

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: Grace purchases three tons of fine merino wool on behalf of Woolen Creations. Woolen Creations wants the wool to remain in the warehouse where it is being stored until it is needed. Grace makes an offer for the wool on Monday. The offer is accepted on Tuesday. The warehouser gives Woolen Creations a warehouse receipt on Wednesday. Woolen Creations picks up the wool from the warehouse three months after the sale. Title for the wool passed to Woolen creations a. on Monday. b. on Tuesday. c. on Wednesday. d. three months after the sale.

Q: Gen­erally ac­cepted auditing standards represent guidelines rather than standards of care.

Q: Colby contracts in writing to sell his 2005 Dodge-brand pick-up truck to Efrem for $10,500. Colby agrees to deliver the truck on Friday, and Efrem promises to pay the $10,500 on the following Monday. On Thursday, Efrem tells Colby that he changed his mind and will not buy the truck. Over the weekend, Efrem changes his mind again and tenders $10,500 to Colby on Monday. Colby has not sold the truck to another party but refuses the tender and refuses to deliver. Efrem claims that Colby has breached their contract. Colby contends that Efrem's repudiation released him from his duty to perform under the contract. Who is correct, and why?

Q: An accountant's violation of generally accepted accounting principles is prima facie evidence of negligence.

Q: Signal Sets Company contracts to deliver one hundred 52-inch plasma high-definition television sets to a new retail customer, Tuner TV Store, on May 1, with payment to be made on delivery. Signal tenders delivery in its own truck. Tuner's manager notices that some of the cartons have scrape marks. Tuner's owner phones Signal's office and asks whether the sets might have been damaged as they were being loaded. Signal assures Tuner that the sets are in perfect condition. Tuner tenders Signal a check, which Signal refuses, claiming that the first delivery to new customers is always for cash. Tuner promises to pay the cash within two days. Signal leaves the sets with Tuner, which stores them in its warehouse pending its "Grand Opening Sale" on May 15. Two days later, Tuner's stocker opens some of the cartons and discovers that a number of the sets are damaged beyond ordinary repair. Signal claims Tuner has accepted the sets and is in breach by not paying on delivery. Will Signal succeed on these claims? Explain.

Q: Big Red Drinks, Inc. contracts to buy two tons of cranberries from Super Fruits, Inc. The contract states that Super Fruits is required to ship the cranberries to Big Red Drinks by Speedy Wind Air Freight. The contract is a. a bill of lading. b. a destination contract. c. a shipment contract. d. a warehouse receipt.

Q: With respect to negligence, an accountant is subject to no greater stan­dard of care than a person who is not an accountant.

Q: BBQ, Inc., makes and sells grills to Grill Mart, a retailer, which sells one of the grills to Hope, a consumer. BBQ and Grill Mart include in their contracts a limitation on consequential damages for personal inju­ries arising from a breach of warranty. This is prima facie un­conscionable with respect to a. all of these parties. b. BBQ and Grill Mart, but not Hope. c. Hope only. d. none of these parties.

Q: A contract between Fresh Fruit Corporation and Green Grocer, Inc., re­quires Fresh Fruit to deliver goods to Green Grocer's place of business. This is a. a bill of lading. b. a destination contract. c. a shipment contract. d. a warehouse receipt.

Q: Gen­erally ac­cepted accounting principles represent guidelines rather than a standard of care.

Q: Natural Foods, Inc., orders "Grade A" oil from Olive Grove Farms to process and sell to Pic "˜N Pay Grocers. Olive Grove ships "Grade B" oil, which Natural Foods accepts. To recover damages for the nonconformity, Natural Foods must give notice of the breach within a reasonable time to a. Olive Grove only. b. Olive Grove, Pic "˜N Pay, and the appropriate government agency. c. Pic "˜N Pay only. d. the appropriate government agency only.

Q: Megan, an agent for a department store, orders one hundred dresses from Sal's Clothing Shop for the Spring Blossom Sale. There is no specific agreement in the sale contract indicating when title will pass to the department store. The title will pass to the department store when a. Megan signs the contract. b. Megan and the Sal's Clothing Shop agent sign the contract. c. Sal's Clothing Shop physically delivers the dresses to the department store. d. Megan pays Sal's Clothing Shop for the dresses.

Q: A professional owes a duty to his or her client to honor the terms of their contract.

Q: Leather Products Stores, Inc., rejects a shipment of goods that does not conform to its contract with Manufactured Cowhide Corporation, but is unable to obtain instructions from the seller. Leather Products may a. resell or return the goods only. b. resell or store the goods only. c. return or store the goods only. d. resell, return, or store the goods.

Q: Bill orders 1,000 nails from Super Hardware, Inc. Super Hardware keeps its nails in packages of 100,000. Bill and the agent for Super Hardware both sign the contract for the sale of the nails on Monday. The agent separates 1,000 nails on Wednesday. The agent delivers the nails to Bill on Thursday morning, and Bill pays for the nails on Friday. Identification of the nails took place on a. Monday. b. Wednesday. c. Thursday. d. Friday.

Q: The liability of professionals is based solely on common law.

Q: Owen and Pablo enter into a contract for a sale of fifty Western saddles. Pablo pays, but Owen does not deliver. Pablo can normally recover as damages the difference between a. any loss avoided and any profit gained. b. the actual price and the hoped-for price. c. the contract price and the market price. d. the current prices in the parties' locations.

Q: Big Beef, Inc. raises calves to sell. Big Beef breeds its cows in April, and the cows calve in February of the following year. In January Andrea contracts with Big Beef to buy fifty calves. Identification takes place in a. January, when the contract is signed. b. April, when the calves are conceived. c. February, when the calves are born. d. a reasonable period of time.

Q: Jack owns land located outside Metro City. Jack sells the land to Quality Disposal, Inc., which establishes a hazardous waste disposal facility at the site. Quality Disposal accepts only waste transported by Regional Trucking Company exclusively from Consolidated Industries, Inc. Several years later, Quality Disposal closes its facility and sells the land to Price Rite Corporation, which builds a Price Rite Discount Store on the site. Meanwhile, some of Metro's citizens complain to the Environmental Protection Agency (EPA) that Metro's municipal water supply is pol­luted. The EPA investigates and discovers that the sources of the pollu­tion are leaks of hazardous waste from what is now the Price Rite prop­erty. The EPA cleans up the site. Who can be held liable for the cost of cleaning up the site? What standards must Metro meet regarding the water?

Q: Bayou Boats, Inc., and Eventide Fishing Tours enter into a contract for a sale of seven swamp boats. Eventide pays for the goods, but Bayou does not deliver. Eventide can use replevin as a remedy if a. Bayou is lawfully withholding the goods. b. Eventide cannot effectively cure the defect. c. Eventide is unable to cover for the goods. d. the goods have not been identified to the contract.

Q: Jason contracts with Golf Carts Unlimited, Inc. to buy five golf carts. The contract lists the five carts as GC001, GC002, GC003, GC004, GC005. Identification a. requires that Jason verify his identity to take possession of the carts. b. has taken place. c. cannot take place until the contract is reviewed by a court. d. will take place only when Jason pays for the golf carts.

Q: Cozy City lies on the shore of a bay that empties into the Atlantic Ocean. Downcycler Waste Company picks up garbage and trash from local busi­nesses. Further inland, Eschew Corporation collects radioactive waste from the local utility's nuclear power plant. On the other side of the bay, Fort Cozy Military Base stores chemical warfare supplies for disposal. Can Downcycler, Eschew, or Fort Cozy dump their waste in the ocean?

Q: Phil and Kelsey enter into a contract for a sale of Harmonica, a dog. Phil pays the price, but Kelsey does not deliver. Phil can use specific performance as a remedy if a. Kelsey is lawfully withholding delivery of Harmonica. b. Phil cannot effectively cure the defect. c. Harmonica is unique. d. Harmonica has not been identified to the contract.

Q: Gail enters into a contract with Hi-Price Appliances, Inc. In a suit be­tween the parties over payment under the contract, Gail claims that a certain clause is unconscionable. If the court agrees, it may a. enforce, limit, or refuse to enforce the contract or the disputed clause. b. enforce the contract without the disputed clause only. c. limit the application of the disputed clause only. d. refuse to enforce the entire contract only.

Q: Remote Disposal Company operates a hazardous waste storage facility. Concerned that there may be a release of chemicals from the site, Remote sells the property to Serene Developers, Inc. If there is a release, Remote is most likely a. liable. b. not liable because the site was sold before the release. c. not liable because Remote was concerned about the release. d. not liable because Remote no longer operates the facility.

Q: Fresh Produce, Inc., and Great Grocery Stores dispute the interpretation of an ambiguous phrase in their contract. In a suit between the parties to con­strue the contract, a court may accept evidence of a. consistent additional terms only. b. consistent additional terms and contradictory terms only. c. contradictory terms only. d. anything extrinsic to the contract.

Q: Cheesy Pizza Company contracts to sell 1,000 cases of frozen pizzas to Roller Rinks, Inc., but refuses to deliver. Due to a spice shortage, Roller Rinks cannot obtain pizza elsewhere. Roller Rinks's right to recover the goods from Cheesy is the right of a. cover. b. cure. c. replevin. d. specific performance.

Q: Industry Processes Corporation generates solid waste considered hazardous. Industry labels and packages properly all waste to be transported to a disposal site. Under the Resource Conservation and Recovery Act, this is most likely a. not a violation. b. a violation because Industry generates solid waste. c. a violation because the waste is transported off-site. d. a violation because the waste is considered hazardous.

Q: Rita, the manager of the State University (SU) soccer team, orally agrees to lease a certain number of specially made SU banners from Top Banners, Inc. This lease is enforceable only if Top has made a substan­tial start on making the banners and a. Rita agreed to the lease on behalf of the SU soccer team. b. SU does not have other, similar banners available. c. the banners are not suitable for others in the course of Top's business. d. the soccer season has not ended and SU goes to the finals.

Q: Arkansas enacts pesticide-labeling requirements that are different from federal pesticide law, but that do not permit anything that federal law prohibits. BugOut Corporation, a pesticide maker, files a suit against the state to block the new rules. The court is most likely to rule that a. the federal law and state regulations are mutually compatible. b. the federal law and state regulations cancel each other out. c. the federal law preempts the state regulations. d. the state regulations preempt the federal law.

Q: Raul agrees to ship to Ben one hundred ceil­ing fans for $5,000. Raul ini­tials his notes of the deal, which in­clude the terms, and files the notes in his office. Ben initials his own notes of the deal, which include the terms, and files the notes in his office. Raul fails to ship the fans. Against Raul, as a contract, the deal is a. enforceable, because under the UCC a contract need not written. b. enforceable, because Raul's initialed notes are a sufficient writing. c. enforceable, because Ben's initialed notes are a sufficient writing. d. not enforceable.

Q: Hi-Tech Company contracts to sell fiber optic cable to Internet Services, Inc. Hi-Tech may bring an action to recover the purchase price and inci­dental damages if Internet a. accepts the cable and pays for it. b. accepts the cable but does not pay for it. c. rejects the cable. d. revokes acceptance of the cable.

Q: Hi-Yield Agriculture, Inc., makes a pesticide with a risk to people of developing cancer from exposure of one in a million. This substance must be a. disposed of before anyone develops cancer. b. registered before it is sold. c. taken off the market and placed in temporary storage. d. used only in a way that avoids exposure to people.

Q: Equipment Rental Corporation and Floodlights, Inc., are parties to an oral agreement for a lease of goods with payments in excess of $10,000. They may satisfy the Statute of Frauds by a. mutually agreeing not to commit fraud. b. restating the terms in a phone call. c. setting out the terms in an e-mail. d. shaking hands on the deal.

Q: Garden Field Farms and Haute Gourmet Restaurant, Inc., enter into a con­tract for a sale of lettuce before Haute Gourmet declares bankruptcy. Garden Field can stop delivery of the goods in transit a. only if the quantity is at least a carload. b. only if the quantity is at least a planeload. c. only if the quantity is at least a truckload. d. regardless of the quantity.

Q: ChemoCorp, Inc., makes and sells pesticides. If a substance is identified as harmful and the harm is imminent, the Environmental Protection Agency, among other things, can a. conduct an inspection of ChemoCorp's plant. b. declare the substance to be unregulated and allow its production. c. ignore the risk if the benefit outweighs the harm. d. order the substance to be sold in an adulterated form.

Q: Text Publishers, Inc., contracts for a sale of textbooks to University Bookstores, Inc. Vital Shipping Corporation, the carrier, transports the books to Warehouse Storage Company. Text's right to stop delivery is lost when University's rights to the goods are acknowledged by a. the appropriate government agency only. b. Vital Shipping only. c. Vital Shipping or Warehouse Storage. d. Warehouse Storage only.

Q: On May 1, City Auto & Truck Sales agrees to sell a car to Dino. Five days later, Dino refuses delivery and cancels the contract. City is enti­tled to a. force Dino to accept the car. b. recover any damages from Dino but not resell the car. c. resell the car and recover any damages from Dino. d. resell the car but not recover any damages from Dino.

Q: Jackson owns an antiques store. He sells a grand piano to Fred for $5,000, a old jukebox to Sam for $499, an antebellum chest of drawers to Josephine for $659 and a gold ring to Wendy for $999. Which of Jackson's sales must be in writing to be enforceable? a. The grand piano only b. The grand piano and the gold ring only c. The grand piano, the chest of drawers and the gold ring only d. The grand piano, the chest of drawers, the jukebox and the gold ring

Q: Fruitful Garden Company makes and sells pesticides. For the pesticides to remain on the market, the acceptable level of risk to people of developing cancer from ex­posure to the products is a. one in a hundred. b. one in a million. c. one in a thousand. d. zero.

Q: Under the Marine Protection, Research, and Sanctuaries Act (the Ocean Dumping Act), Bayside Chemical Company may dump its chemical waste into the ocean a. after obtaining a permit. b. before obtaining a permit. c. without a permit. d. not at all.

Q: Quinn enters into a series of agreements with Reba involving a sale of a Suite Dreams Motel, including the land, building, furnishings, shares of stock in Suite Dreams Company, and a contract with Trudy to create an ad campaign. Reba suspects that Quinn may be misrepresenting the facts. The UCC Statute of Frauds governs a. the sale of any of the property evidenced by a writing. b. the entire deal, including the marketer's services. c. the sale of the furnishings priced at $500 or more. d. the sale of the land and the building.

Q: Trend-Rite Clothiers, Inc., sells t-shirts to Brand Name Stores, Inc., under an existing con­tract. When textile costs increase, Brand agrees to a price increase, but later wants to cancel the con­tract. Brand may a. cancel the contract immediately. b. cancel the contract only after accepting a final shipment. c. cancel the contract only on reasonable notice. d. not cancel the contract.

Q: Double D Ranch and Esau enter into a contract on August 1 for the sale of 200 cattle. Esau cancels the con­tract ten days later. Double D is unable to sell the cattle to another buyer. Double D is enti­tled to a. force Esau to accept the cattle and recover the contract price. b. keep the cattle and recover the contract price from Esau. c. keep the cattle only. d. recover the contract price from Esau but must destroy the cattle.

Q: Metro City operates its own municipal public drinking water system. With regard to pollutants, this system is primarily subject to a. the migratory bird rule. b. the Oil Pollution Act. c. the Rivers and Harbors Appropriations Act. d. the Safe Drinking Water Act.