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Q:
A trade name or assumed name can serve as a valid signature.
Q:
To be negotiable, an instrument must be portable.
Q:
An instrument is nonnegotiable unless the word "negotiable" is printed on it.
Q:
A certificate of deposit represents a loan by its owner to a bank.
Q:
A cashier's check drawn by a bank on itself is an instrument in which the bank is both the drawer and the drawee.
Q:
A draft is an unconditional written order that involves three parties.
Q:
A promissory note that states it is payable within ninety days represents an extension of credit by the holder to the debtor.
Q:
On a sheet of paper, Elle writes, without her signature, "I acknowledge that I owe Frank $600, payable out of the proceeds of the sale of my car, a 1995 Honda Civic, which I promise to advertise "˜For Sale" next week. Payment is to be made on or before six months from today." What type of instrument is this? Is it negotiable? If not, why not?
Q:
The accounting department of Delta Sales Company receives an instrument that states, "March 16, 200 Thirty days after date, I promise to pay to the order of cash, $700 (seven hundred and 00/100 dollars), in Denver, Colorado, with interest at the rate of 7% (seven percent) per year. This instrument is secured by a contract for the sale of a computer. Due April 15, 200 [Signed] Edward Jones." What type of instrument is this? Is it negotiable? If not, why not?
Q:
On May 1, Doug signs a check that is payable to the order of Excel Credit Card Corporation and that is dated July 1. This check is
a. negotiable.
b. nonnegotiable, because it is payable to Excel Credit Card Corporation.
c. nonnegotiable, because it is postdated.
d. nonnegotiable, because it is signed by Doug.
Q:
Bill signs a check payable to the order of City Bank, filling in the blanks for the amount with the figures "$100" and "One thousand and 00/100 dollars." This check is payable in the amount of
a. $0.
b. $100.
c. $1,000.
d. $1,100.
Q:
Ann signs a promissory note payable to Bob on which Ann conspicuously notes that it is "not negotiable" and gives the note to Bob. This instrument is
a. negotiable.
b. nonnegotiable, because it includes the notation "not negotiable."
c. nonnegotiable, because it is a promissory note.
d. nonnegotiable, because it was given to Bob.
Q:
Ida executes an instrument in favor of Joy that states, "The holder of this note at the date of maturity, July 1, 2007, can extend the time of payment indefinitely, if the holder so desires." After July 1, 2007, this instrument is
a. a bearer instrument.
b. a demand instrument.
c. a nonnegotiable instrument.
d. an order instrument.
Q:
Pam signs an instrument payable to the order of Quick Credit, Inc., that allows a holder to demand payment of the entire amount due, with interest, if Pam fails to make a payment. This instrument is
a. negotiable.
b. nonnegotiable, because a holder can move up the payment date.
c. nonnegotiable, because moving up the payment date is conditional.
d. nonnegotiable, because the exact payment date cannot be determined from the face of the instrument.
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:
Kelly signs an instrument in favor of Leo that states it is "subject to a certain agreement between Kelly and Mona." This instrument is
a. negotiable.
b. nonnegotiable, because it is made subject to a separate agreement.
c. nonnegotiable, because it refers to a separate agreement.
d. nonnegotiable, because Kelly and Mona are not the same persons.
Q:
On behalf of Digital Supplies Company, Ed signs an instrument in which he promises to deliver 1,000 feet of cable to First Transactions, Inc., on March 1. This instrument is
a. negotiable.
b. nonnegotiable, because cable is not a medium of exchange authorized or adopted by a government as currency.
c. nonnegotiable, because it does not indicate a specific type of cable.
d. nonnegotiable, because it does not recite any consideration.
Q:
Jack signs an instrument that states it is being executed "in accord with a contract for the sale of three magic beans dated June 1." This instrument is
a. negotiable.
b. nonnegotiable, because banks cannot easily process commodities.
c. nonnegotiable, because it includes the specific date of a contract.
d. nonnegotiable, because it refers to an express contract.
Q:
Ben, the owner of Construction Contractors, Inc., signs an instrument that includes the phrase "as per contract." This instrument is
a. negotiable.
b. nonnegotiable, because information about the contract must be obtained from another source.
c. nonnegotiable, because it states an express condition to payment.
d. nonnegotiable, because the terms of the contract are not clear.
Q:
Karen writes on a piece of paper, "I owe you $600," signs it, and gives it to Lou. This instrument is
a. negotiable.
b. nonnegotiable, because it does not include an express promise to pay.
c. nonnegotiable, because it does not recite any consideration.
d. nonnegotiable, because it does not state any conditions to payment.
Q:
Ron signs an instrument using an "R" with a circle around it. With this mark for a signature, the instrument is
a. negotiable.
b. nonnegotiable, because an initial does not state the signer's name.
c. nonnegotiable, because an initial is not a signature.
d. nonnegotiable, because a simple initial implies a lack of binding intent.
Q:
Rita owes $6,000 in unpaid taxes. In the sand of Seaside Beach, she executes an instrument for that amount that otherwise meets the requirements for negotiability. This instrument is likely
a. negotiable.
b. nonnegotiable, because an instrument must be on paper.
c. nonnegotiable, because sand is not sufficiently permanent.
d. nonnegotiable, because the government does not appreciate it.
Q:
Finest Business Company issues an instrument in favor of General Supplies, Inc. For the instrument to be negotiable, it need not
a. be an unconditional promise or order to pay.
b. be payable on demand or at a specific time.
c. be signed by Diner's Restaurant.
d. recite the consideration given in exchange for a promise to pay.
Q:
Fact Pattern 24-1
Eagle Corporation borrows $10 million from First Bank to build Grande Suites, an office complex. Eagle guarantees the payment of the loan with its "notes." Eagle owns a certificate of deposit (CD) for $1 million, which is promised to pay Grande Suites' employee medical claims. Before the loan is paid, Eagle files for bankruptcy, and the CD is returned. First Bank asks the court for the CD.
Refer to Fact Pattern 24-1. Under the decision in Case 24.2, In re Premier Interval Resorts, Inc., the court will most likely award the CD to
a. Eagle because Grande Suites' employees may have medical claims.
b. Eagle because under UCC Article 3, a CD is not a note.
c. First Bank because the loan is not yet paid.
d. First Bank because UCC Article 3 treats a CD as a note.
Q:
Fact Pattern 24-1
Eagle Corporation borrows $10 million from First Bank to build Grande Suites, an office complex. Eagle guarantees the payment of the loan with its "notes." Eagle owns a certificate of deposit (CD) for $1 million, which is promised to pay Grande Suites' employee medical claims. Before the loan is paid, Eagle files for bankruptcy, and the CD is returned. First Bank asks the court for the CD.
Refer to Fact Pattern 24-1. Suppose that the loan guaranty is limited to "negotiable instruments that relate to a business now or later conducted on the land." In this circumstance, under the reasoning in Case 24.2, In re Premier Interval Resorts, Inc., the court will most likely award the CD to
a. Eagle because Eagle has filed for bankruptcy.
b. Eagle because the CD relates to medical claims, not "the land."
c. First Bank because the CD relates to Grande Suites, which is a business "on the land."
d. First Bank because the loan is not yet paid.
Q:
Dick buys a computer by executing a promissory note in favor of Excel Computers, Inc., is secured by Dick's stock in Fine Oil Company. The note is
a. a certificate of deposit.
b. a collateral note.
c. an installment note.
d. a stock certificate.
Q:
Dave writes a check for $100 payable to Eve on his account at First State Bank. The bank is
a. the bearer.
b. the drawee.
c. the drawer.
d. the holder.
Q:
Alpha Company issues a trade acceptance with itself and Beta Company as parties. A trade acceptance is
a. a draft.
b. an order to accept delivery of money.
c. a promise to accept delivery of goods.
d. a promise to deliver goods.
Q:
To obtain office supplies for All-Care Medical Clinic, Britney executes a draft in favor of Chris. A draft is
a. a conditional promise to pay money.
b. an unconditional written order to pay money.
c. a qualified promise to set aside a sum of money.
d. a restricted promise to deliver goods at a future date.
Q:
A notation on a check that it is "nonnegotiable" is sufficient to render it nonnegotiable.
Q:
An undated instrument cannot be negotiable.
Q:
An instrument payable to the order of a specified person is negotiable.
Q:
A promissory note is negotiable even if it does not state that it is payable on demand or at a definite time.
Q:
A holder is any person in possession of a negotiable instrument payable to bearer or to an identifiable person who is the person in possession.
Q:
An instrument that promises to pay "in gold" can be negotiable.
Q:
Stating on an instrument that it is "as per contract" renders it nonnegotiable.
Q:
An instrument that states simply "I.O.U." is negotiable.
Q:
To be negotiable, an instrument must include an unconditional promise to pay.
Q:
To be negotiable, the terms of a promise or order must be included on the face of the instrument.
Q:
Rubber stamp signatures can be legally binding signatures.
Q:
An instrument does not have to be signed by its maker or drawer to be negotiable.
Q:
The writing evidencing a negotiable instrument must be reproduced on high-quality, letter- or legal-size paper.
Q:
For an instrument to be negotiable, it must be in writing.
Q:
A notation on an instrument that it is "negotiable" is sufficient to render it negotiable.
Q:
CDs generally acknowledge the holder's deposit and only implicitly suggest a promise to repay.
Q:
A promissory note cannot be a negotiable instrument.
Q:
A check is a draft.
Q:
On a trade acceptance, the drawee is also the payee.
Q:
A negotiable instrument serves as a substitute for cash.
Q:
Bob is shopping in Carl's Hardware Store when a nail gun being used 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?
Q:
General Construction Company (GCC) tells Industrial Supplies, Inc., that it needs an adhesive to do a particular job. Industrial provides a five-gallon bucket of a certain brand. When it does not perform to GCC's specifications, GCC sues Industrial, which claims, "We didn"t expressly promise anything." What should GCC argue?
Q:
Air Corps, Inc., manufactures aviation guidance systems. Barb is injured in a crash caused by a defective Air Corps product. A statute restricts the time within which Barb may file a product liability suit against Air Corps regardless of when she was injured. This is a statute of
a. limitations.
b. preemption.
c. repose.
d. suspension.
Q:
Gina, 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. Under the reasoning of the court in Case 23.3, Pelman v. McDonald's Corp., Gina's suit is most likely to
a. fail, because salt and sugar are not unhealthy ingredients in food.
b. fail, because the danger is open and obvious to a reasonable consumer.
c. succeed, because the danger is open and obvious to any consumer.
d. succeed, because the food's contents obviously caused Gina's obesity.
Q:
Flo buys a Go! battery that, if used in a Hi-Digital music player, which can be powered only by an IntraChemico battery, may cause the player to explode. Flo is not aware of the danger, Go!'s instructions do not warn of it, and Go! batteries are the same shape as IntraChemico batteries. Flo puts the Go! battery in a Hi-Digital player, which explodes, injuring Flo. Go!'s seller is most likely
a. liable, because Flo's misuse was not the use for which the Go! battery was designed.
b. liable, because Flo's misuse was reasonably foreseeable.
c. not liable, because Flo's misuse was not the use for which the Go! battery was designed.
d. not liable, because Flo's misuse was reasonably foreseeable.
Q:
A Central Railroad train's brakes 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 Eagle, Inc., the brakes' manufacturer. Eagle can raise the defense of
a. a component-part manufacturer.
b. assumption of risk.
c. consumer participation.
d. product misuse.
Q:
Country Style, Inc., makes landscaping tools. Under the Restatement (Third) of Torts: Products Liability, Country could be liable for a warning defect if there is a foreseeable risk of harm posed by a product 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 above.
Q:
Cellular Products Corporation (CPC) makes cell phones. Dina files a product liability suit against CPC, alleging a design defect. Under the Restatement (Third) of Torts: Products Liability, in deciding whether to hold CPC 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 Stuff, Inc., makes snowboards, which it sells to Deep Freeze Sports Store (DFS). DFS sells Cold 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 Stuff only.
b. Cold Stuff or DFS.
c. DFS only.
d. no one.
Q:
Pools Galore, Inc., makes aboveground swimming pools, which it sells to Quality Home Stores. Quality Home sells the pools to consumers, including Ron, who lets Sara use his pool. Sara is injured while using the pool. In a product liability suit based on strict liability, Sara may recover from
a. Pools Galore or Quality Home only.
b. Pools Galore only.
c. Ron only.
d. Ron or Quality Home only.
Q:
In-house Products Company makes microwave ovens. Joy discovers that her In-house oven is defective and sues the maker for product liability based on strict liability. To win, Joy must show that
a. In-house sold the oven to Joy.
b. Joy knew and appreciated the risk caused by the defect.
c. Joy suffered an injury caused by the defect.
d. the "defect" was a commonly known danger.
Q:
Alpha Computer Corporation makes hard drives. Beth discovers that her Alpha drive is defective and sues the maker for product liability based on misrepresentation. To win, Beth must show that
a. Alpha sold the drive to Beth.
b. Beth knew and appreciated the risk caused by the defect.
c. Beth suffered an injury caused by the defect.
d. the "defect" was a commonly known danger.
Q:
Able Tool Company makes hedge trimmers. Brad is injured while using an Able trimmer and sues the company for product liability based on negligence. To win, Brad must show that
a. Able did not use due care with respect to the trimmer.
b. Able misrepresented a material fact regarding the trimmer.
c. Brad was experienced in the use of trimmers.
d. Brad was in privity of contract with Able.
Q:
Great Goods, Inc., sells fifty MP3 players to Happy Stores, Inc. To avoid liability for most implied warranties, Great Goods should state in writing that the players are sold
a. as is.
b. by a merchant.
c. in perfect condition.
d. with no known defects.
Q:
Tina wants to sell her sport utility vehicle (SUV). To avoid liability for any implied warranties, the sales agreement should note that the SUV is sold
a. as is.
b. by a nonmerchant.
c. in perfect condition.
d. with no known defects.
Q:
Fact Pattern 23-1
Alpha, Inc., a computer maker, provides a limited warranty on its computers in a contract that includes an "informal dispute settlement procedure" clause. Ben buys an Alpha computer, which soon malfunctions. After several unsuccessful repair attempts, Ben files a suit against Alpha, seeking damages under the Magnuson-Moss Warranty Act.
Refer to Fact Pattern 23-1. Suppose that the dispute-resolution clause in Alpha's contract calls for binding arbitration. A court is most likely to order
a. Alpha to give Ben a new computer.
b. Ben to accept the situation because of the limited warranty.
c. the case to proceed immediately to trial.
d. the parties to arbitrate the dispute.
Q:
Fact Pattern 23-1
Alpha, Inc., a computer maker, provides a limited warranty on its computers in a contract that includes an "informal dispute settlement procedure" clause. Ben buys an Alpha computer, which soon malfunctions. After several unsuccessful repair attempts, Ben files a suit against Alpha, seeking damages under the Magnuson-Moss Warranty Act.
Refer to Fact Pattern 23-1. The court is most likely to order
a. Alpha to give Ben a new computer.
b. Ben to accept the situation because of the limited warranty.
c. the case to proceed immediately to trial.
d. the parties to attempt to informally resolve the dispute.
Q:
Sea Products, Inc., makes and sells navigation equipment, through independent salespersons, to retailers for resale to consumers. The Magnuson-Moss Warranty Act covers
a. implied warranties, oral statements, and written promises or affirmations of fact.
b. only a manufacturer's implied warranties.
c. only a salesperson's oral statements.
d. only a seller's written promises or affirmations of fact.
Q:
Yard Work, Inc., sells consumer lawn care equipment. Yard Work's sales contracts include express warranties. According to the Magnuson-Moss Warranty Act, Yard Work can also disclaim
a. all implied warranties.
b. no implied warranties.
c. the implied warranty of fitness only.
d. the implied warranty of merchantability only.
Q:
AAA Appliance salespersons tell potential customers that AAA products are "excellent." This is
a. an express warranty.
b. an implied warranty.
c. a warranty of title.
d. puffing.
Q:
Pat, a salesperson for Quality Textiles, Inc., shows Rosa, a fabric buyer for Style Clothing Company, samples of cloth, stating that any shipment will match the samples. This statement is
a. an express warranty.
b. an implied warranty.
c. a warranty of title.
d. puffing.
Q:
Olivia visits Perfectly Fine Cars, an auto dealer, and says she wants a car that gets at least thirty miles to the gallon. Quinn, a salesperson, recommends a Roadster, which he says gets "at least forty miles to the gallon." This is
a. an express warranty.
b. an implied warranty of merchantability.
c. an implied warranty of fitness for a particular purpose.
d. a warranty of title.
Q:
A statute of repose may limit the time within which a plaintiff can file a product liability suit.
Q:
Assumption of risk is a defense that may be raised in a product liability suit.
Q:
Only the manufacturer of a defective product can be strictly liable for an injury or damage caused by the product.
Q:
To succeed in a product liability suit based on strict liability, a plaintiff does not need to prove why or in what manner a product became defective.
Q:
A manufacturer is strictly liable when a product it sells, knowing it will be used without inspection for defects, has a defect that injures someone.
Q:
There is no liability for a manufacturer who innocently misrepresents the character or quality of goods.
Q:
The basis for applying strict liability is a manufacturer's failure to exercise reasonable care.
Q:
A plaintiff cannot succeed in a suit for negligence against a manufacturer unless the plaintiff bought the defective good from the manufacturer.
Q:
Privity of contract between the plaintiff and the defendant is required to bring a product liability suit based on any theory.