Parol evidence refers to anything (other than the written contract itself) that was said,
done, or written before or as the parties signed the contract.
a. True
b. False
Cameron, editor of the local newspaper, assigned to Jim the writing of a story about
pollution of a nearby stream. Although Jim used reasonable care in gathering and
checking his information, unknown to Jim, the story contained a defamatory statement
about Maureen. Maureen reads the story and sues Jim for libel. Cameron, who read and
published the story:
a. must indemnify Jim for Maureens claim.
b. need not indemnify Jim for Maureens claim because Jim should have checked his
facts more carefully.
c. need not indemnify Jim for Maureens claim because Jim breached his duty to obey
instructions.
d. can recover damages from Jim for any injury to the newspaper resulting from Jims
story.
Which of the following is not an example of a trial court of limited jurisdiction?
a. A probate court.
b. A juvenile court.
c. A small claims court.
d. A general civil division court.
Damages must be estimated with reasonable certainty.
a. True
b. False
Who establishes executive compensation?
a. The board of directors.
b. The shareholders.
c. The officers themselves.
d. An independent CPA firm.
A sales representative at Oxtren, Inc. orally told the purchasing agent at Wety, Inc. that
its industrial saw will cut through metal up to 5 inches thick. Wety purchased the saw.
Which statement is correct concerning the claim that the saw can cut through metal up
to five inches thick?
a. The claim is an express warranty.
b. The claim is an implied warranty of merchantability.
c. The claim is not a warranty because it is not in writing.
d. The claim is not a warranty because it is sales puffery.
Prior to the Industrial Revolution, the primary law of employment was that, absent an
agreement otherwise, a worker was hired for a year at a time.
a. True
b. False
As a general rule, an agent is liable on contracts entered into on behalf of a fully
disclosed principal.
a. True
b. False
Wanderlust gave a security interest in his Conestoga wagon to Iowa Bank who
perfected its security interest by filing a financing statement with the appropriate
officials in Iowa. Five months later, Wanderlust hit the trail again, moving to Montana.
If Iowa Bank wants to continue its perfected interest in the Conestoga wagon, it should:
a. file a continuation statement for another five years in Iowa before Wanderlust moves
on.
b. re-perfect by filing a financing statement in the appropriate place in Montana,
according to Montana law, within four months of Wanderlust’s entering Montana.
c. repossess the Conestoga wagon.
d. file a continuation statement for another four months in Iowa before Wanderlust
moves on.
Misleading commercial speech may be outlawed altogether without violating the
Constitution.
a. True
b. False
The U.S. Attorney General brought a Sherman Act lawsuit against competitors in the
widget market. The Attorney General alleged that these companies agreed to charge $20
for widgets. Which of the following defenses may apply?
a. That the $20 price was fair.
b. That the $20 price was lower than the price before the agreement.
c. That the businesses did not agree to charge $20 for widgets.
d. That the competitors would have gone out of business without the agreement.
Bailey Co. and Spryt Bros. enter into a contract for the manufacture and sale of 400
lawn chairs. If both parties agree that a modification is necessary:
a. the surest way to modify the contract is to liquidate it.
b. they may not do so without court supervision.
c. an agreement to rescind the contract will terminate the contractual rights of Bailey
Co. and Spryt Bros. if neither of them had completed their obligations.
d. courts will generally not enforce a cancellation and modification of a contract unless
one party received inadequate consideration under the original contract.
Cheryl enters into a contract with Gabe. In this contract, Cheryl asks Gabe to pay the
money he owes her from the contract to her friend Leah because Leah is having
financial troubles. Leah is:
a. a third party creditor beneficiary.
b. a third party donee beneficiary.
c. a third party incidental beneficiary.
d. the promisee in the contract.
Bry, Inc. and Gangl Co. entered into an oral agreement for the sale of 3,000 sweaters.
Both parties performed as required under the contract. Bry delivered the sweaters and
Gangl accepted and paid for them. Since the contract is fully executed, it makes no
difference that it was oral.
a. True
b. False
Contract prohibitions against assignments are invalid as a matter of public policy.
a. True
b. False
There are three parties on a promise instrument: the maker, the drawee, and the payee.
a. True
b. False
John hired Tim to sell his house. Which statement is correct?
a. John is Tim’s principal.
b. Tim, but not John, can terminate the agency.
c. This illustrates a power coupled with an interest.
d. All the above are correct.
Which of the following is NOT considered a major life activity for the purpose of
determining if a person has a disability?
a. eating
b. reading
c. sexual activity
d. sleeping
The common law requirement that the seller make a tender of delivery that conforms in
all respects to the contract requirements was retained by drafters of the UCC, although
the Code includes sections that limit the rule’s effect.
a. True
b. False
Amanda buys a vacuum cleaner to use in her home from retailer Andy. Amanda
promises to pay for it in six monthly installment of $50 each. Andy assigns the contract
to Big Finance Co. who paid value and took without notice of any defense. Amanda has
stopped making payments because the vacuum stopped working and Andy refuses to
honor the express warranty he made to her at the time of the sale. Big Finance Co. sues
Amanda for nonpayment. Generally, any defense that Amanda may have against Andy
is good against Big Finance Co.
a. True
b. False
Trein, Inc., a U.S. company entered into an exclusive distributorship agreement with
Posty, Inc., a Zambian company. This means that Trein will only use Posty to distribute
products in Zambia.
a. True
b. False
Meister Bros. shipped 250 radiator belts to fill Braybons order. Quality control
measures had been in place in Meisters factory when the belts were manufactured.
When Braybon received the order one day before it was due, it notified Meister that it
rejected the belts because of a variation from the contract specifications. Meister,
although it believed the original belts met the contract specifications, notified Braybon
that it would supply conforming goods within one week. When the conforming goods
arrive in one week:
a. Braybon must accept them, but does not have to pay the full price because the
contract deadline has passed.
b. Braybon does not have to accept them because Meister Bros. only has one chance to
fill the order correctly.
c. Braybon should accept them because Meister Bros. has a right to cure even after the
contract deadline under these circumstances.
d. Braybon does not have to accept them because Meister Bros. failed to meet its UCC
requirement to deal in good faith.
Corporations have perpetual existence.
a. True
b. False
A merchant seller who would like to exclude the warranty of merchantability can do so
by doing which of the following?
a. The merchant can sell the goods “AsIs.”
b. The merchant can sell the goods “With All Faults.”
c. The merchant can write conspicuously that the warranty of MERCHANTABILITY is
excluded.
d. All of the above.
Ad valorem duty is based on the fair market value of the imported good as of the date it
reaches the United States, not the price actually paid for the good when sold for export
to the United States.
a. True
b. False
Consumer credit reporting agencies are unregulated governmental agencies.
a. True
b. False
Lois is running for political office. She trails the incumbent and decides to start running
a series of “attack ads.” The attack ads are very effective and one week before the
election it appears that she has drawn even with her opponent. Lois admits that the
attack ads were exaggerations and contained some distortions. Which statement is
correct?
a. Lois has engaged in unethical behavior.
b. Lois has engaged in ethical behavior since she has an obligation to her supporters to
run a campaign that will help her get elected.
c. It is not possible to determine whether Lois’s attack ads were ethical or unethical.
d. Assuming Lois’s attack ads were unethical, her conduct is justified and proper if she
gets elected.
Irving is shopping at the local Computers R Us store and agrees to buy a computer for
his home “on the condition of personal satisfaction.” If Irving takes the computer back
to the store stating that he doesn’t like the computer, then the seller must accept the
return of the computer and terminate the contract.
a. True
b. False
Bob, a house builder, contracts with Ollie to build a house on Ollie’s lot. Bob hires Rob
to take his place as the builder on this contract. What has Bob done?
a. Subcontracted Rob.
b. Breached the contract.
c. Delegated his duties.
d. Assigned his rights.
Generally, ethical managers have happier, more satisfying lives.
a. True
b. False
Which of the following is NOT a true statement about fraud?
a. The plaintiff must prove that the defendant has knowledge of the falsity of his or her
statement.
b. It is necessary for the plaintiff to show that he or she has suffered some type of
detriment or injury because of his or her reasonable reliance on the defendant’s false
statement.
c. The defendant made the statement with the intent to induce the plaintiff to enter into
the contract.
d. The plaintiff must show that although the defendant acted in good faith, the statement
was material because the defendant expected the plaintiff to rely on it and enter into the
contract.
The UCC does not apply to a contract for the sale of goods if the value of the goods is
less than $500.
a. True
b. False
Alice works for a large advertising agency where she is hoping to be promoted to a
management position. Alice’s mother and two sisters all died of breast cancer at a young
age. Alices employer knows this, and will not put Alice in a management position
because he fears that she will also develop cancer. This decision is allowed because it is
in the best interest of the company.
a. True
b. False