Exam 500321RR Sales

1. Mark is mentally   incompetent and delights in signing documents. Henry persuades Mark to sign   numerous promissory notes which he negotiates. Must Mark pay these notes if   they have been held by holders in due course? 

A. Mark may not pay   these notes since no one could anticipate this happening.

B. Mark must pay   these notes since duress isn’t involved.

C. Mark must pay   these notes since there is a fraud in the inducement.

D. Mark doesn’t have   to pay these notes since he has a real defen

2. Carl writes a check   for $500, payable to Fred. Fred indorses it over to Sally in exchange for a   television set. Sally deposits the check, only to discover that Carl stopped   payment on the check. Which of the following statements is true? 

A. The bank must pay   $500 to Sally.

B. Carl must pay $500   to Sally.

C. Fred must pay $500   to Sally.

D. No one is   obligated to pay anything to Sally.

 

  

3.       Electronic _______ is a system in which funds are electronically     transferred from a customer’s checking account, eliminating the need to     process a paper check. 

 

  

 A. check       conversion 

 

B. fund transfer 

 

C. check transfer 

 

D. teller system 

  

4.   Personal defenses can be used against 

 

  

A. a holder           in due course of a negotiable instrument, but not a holder. 

 

B. any party           with whom the holder in due course has dealt. 

 

C. a holder, but not a holder in due course of           a negotiable instrument. 

 

D. natural           persons, but not corporations. 

  

5.   Local business activity             carried on within state boundaries is known as 

 

  

A. interstate commerce. 

 

B. intrastate commerce. 

 

C. local commerce. 

 

D. public commerce. 

  

6.                   Lulu orders 20 pairs of navy blue pants from Peter for $4,000,                 with delivery due no later than November 15. On November 15,                 Peter delivers 20 navy dresses. Lulu may 

 

  

A. sue for specific                   performance. 

 

B. keep the goods and seek                   adjustment. 

 

 C. sue for breach. 

 

D. cover the sale. 

  

7.   Jake bought a motorcycle from his                     neighbor Randy. Randy had owned the motorcycle for his                     personal use for about two years. The day after the                     purchase, Jake is seriously injured after the motorcycle                     suddenly veers off of the highway due to a manufacturing                     defect. Jake brings a strict liability action against                     Randy. Jake will most likely lose because the 

 

  

A.                       defendant must normally be engaged in the business of                       selling or otherwise distributing motorcycles. 

 

B. motorcycle can’t have                       been substantially changed from the time the product was                       sold to the time of the injury. 

 

C. plaintiff must incur                       physical harm by use of the motorcycle. 

 

D. product must be in a                       defective condition when the defendant sells it. 

  

8.   Zeke pulls out a knife and                         tells Bob to write him a check for $500. Bob does so.                         Zeke takes the check to his bank, properly endorses it,                         and receives $500 in cash. Bob stops payment on the                         check. Which of the following statements is true?

 

  

                           A. Bob must pay the check because the bank is a                           holder in due course. 

 

B.                           Bob must pay the check because Zeke was a holder                           in due course. 

 

C.                           Bob need not pay the check because it was                           obtained illegally. 

 

D.                           Bob need not pay the check because the bank is a                           holder, not a holder in due course. 

 

9.   Which of the following statements is true of   the FTC’s Telemarketing Sales Rules? 

 

  

A. A telemarketer     is allowed to call a consumer without requiring the consumer’s consent. 

 

B. Calling times     are restricted to anytime during business days and holiday weekends. 

 

C. Telemarketers     are excused from disclosing the name of the seller, and what they’re     selling before they make their pitch. 

 

D. Telemarketers must state the total cost of the     products or services offered and that the sale is final or nonrefundable.     

 

10.   Dennis contracts with Racketware, Inc., a company   in France, to purchase 5,000 tennis rackets. The rackets will be shipped by   airplane to a warehouse in New Jersey. Dennis and Racketware enter into a   contract on November 1, and the contract identified the rackets being   purchased. The airplane containing the rackets leaves France on November 2.   The documents necessary to claim the rackets are received by Dennis in the   mail on November 3. Dennis claimed the goods at the warehouse on November 4.   Dennis acquired an insurable interest in the rackets on what date? 

 

  

A. November 3 

 

B. November 1 

 

C. November 2 

 

D. November 4 

    

11.   If a person obtains property as a result of       another’s fraud, misrepresentation, mutual mistake, undue influence, or       duress, the person is said to hold only 

 

  

A. voidable rights. 

 

B. contract         rights. 

 

C. valid         rights. 

 

D. insured         rights. 

  

12.   Tom agrees to sell 500 pairs of pants to           Sally for $5,000. Tom delivers the pants. Sally hands Tom a check.           Tom demands cash and refuses to accept the check. Which of the           following statements is true?

 

  

A. Sally             will be in breach if she doesn’t immediately give Tom $5,000 in             cash. 

 

B. Sally             is in breach because Tom is permitted to demand cash. 

 

C. Sally             must pay cash but is entitled to a reasonable time to come up with             the cash. 

 

D. Tom is in breach as the UCC gives him no             right to demand cash. 

  

13.                 To accept a draft, the drawee

 

  

A. need only sign the draft                 across the face of the instrument. 

 

B. needs to write “accepted” behind the                 instrument and sign the bank’s record. 

 

C. needs to write “accepted” on a separate                 piece of paper. 

 

D. need only sign on a separate piece of paper affixed                 to the draft. 

 

 

14.                 If a drawee refuses to pay the instrument, it is said to be 

 

  

A. delayed. 

 

B. defaulted. 

 

C. detained. 

 

D. dishonored. 

  

15.                 Which of the following is true of destination contracts? 

 

  

A. Both title and risk of loss pass to the buyer when                 goods are given to the carrier. 

 

B. It requires a seller to turn the goods over to a                 carrier for delivery to the buyer. 

 

C. The seller bears no responsibility for seeing that                 the goods reach their destination. 

 

D. Title and risk of loss pass                 to the buyer, once the seller tenders goods at a place as per                 the contract. 

 

16.   A check for which the issuing financial institution   is both the drawer and the drawee is called a _______. 

 

  

A. teller’s check 

 

B. certified check     

 

C. bank draft 

 

D. traveler’s check 

  

17.   Under the doctrine of _______, the principal       consideration is the safety of a product, not the conduct of the       manufacturer or supplier of the goods. 

 

  

A. strict liability 

 

B. public         interest 

 

C. public         policy 

 

D. negligence 

  

18.   Tom falsely tells Harold that the car Tom           is selling has only 30,000 miles on it. In fact, Tom has turned back           the odometer and the true mileage is 150,000. Harold purchases the           car by giving Tom a check for $3,000. Tom endorses the check to Sally           in exchange for a plasma TV. Harold discovers the fraud and stops           payment on the check, so it’s dishonored when Sally deposits it in           her bank account. Sally sues Harold to enforce payment of the check.           Which of the following statements is true?

 

  

 A. Harold can’t successfully assert the             defense of fraud in the inducement to avoid paying $3,000 to Sally. 

 

B. Harold             must pay Sally, but only to the extent of the value of the plasma             TV that Tom bought from Sally. 

 

C. Harold             can successfully assert the defense of fraud in the inducement to             avoid paying $3,000 to Sally. 

 

D. Harold             has a real defense that can be asserted against Sally. 

  

19.                 Congress passed the _______ which requires lenders to disclose               the finance charge and the annual percentage rate. 

 

  

A. Fair Credit Reporting Act 

 

B. Equal Credit Opportunity Act 

 

 C. Truth-in-Lending Act                 

 

D. Fair Debt Collection Practices Act 

 

 

20.                 Even though Spice gives her four-year-old car to Homeless Helpers               Charity, she 

 

  

A. need not provide an odometer statement, since the car                 is less than 15 years old. 

 

B. must set the odometer to zero before resale. 

 

 C. must provide an                 odometer statement. 

 

D. need not provide an odometer statement.