Chapter 20
Warranties and Product Liability
N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows.
N A question new to this edition of the Test Bank.
+ A question modified from the previous edition of the Test Bank,
= A question included in the previous edition of the Test Bank.
TRUE/FALSE QUESTIONS
1. In sales law, a warranty is an assurance by one party of the existence of a fact
on which the other party can rely.
2. A lien is an encumbrance on a property to satisfy or protect a claim for payment
of a debt.
3. A warranty of good title means that a seller warrants that he or she has valid
title to the goods and that transfer of the title is rightful.
4. In sales law, there is only one type of warranty of title.
5. Warranties of title do not arise in most sales contracts.
6. Promises of fact made during the bargaining process are express warranties.
7. A warranty against infringement is a promise by the seller that the product is
8. A seller does not have to use words such as “warrant” to make an express
warranty.
9. Only a statement made after a contract is entered into can be an express
warranty.
10. An implied warranty of merchantability does not arise in every lease by a
merchant who deals in goods of the kind leased.
11. An expression of opinion will usually create a warranty.
12. If a seller is an expert and gives an opinion as an expert, then he or she usually
creates an express warranty.
13. Puffery creates an express warranty.
14. Goods must be of the highest quality possible to be merchantable.
15. A product is unmerchantable if an accident could arise in connection with the
goods.
16. Merchants are not required to warrant that the goods they sell are fit for their
ordinary purpose.
17. Implied warranties can arise from a “course of dealing.”
18. Express warranties cannot be disclaimed in contracts.
19. General descriptions take precedence over inconsistent samples.
4 UNIT THREE: COMMERCIAL TRANSACTIONS
20. For consumer goods costing more than $25, a written warranty must be labeled
“full” or “limited.”
21. A seller does not have to provide a written warranty for consumer goods.
22. In sales law, product liability is assurance by one party of the existence of a
fact on which the other party can rely.
23. A manufacturer’s duty of care extends to the inspection and testing of products
bought to incorporate in the final product.
24. A failure to exercise reasonable care is negligence.
25. Under the doctrine of strict liability, people are liable for the results of their acts
only if their intentions are malicious.
26. Strict liability depends on privity of contract between an injured party and a
seller.
27. 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.
28. 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.
29. An action in strict product liability requires that the product not be in a defective
condition when the defendant sells it.
30. Sellers or lessors are liable only for products that are reasonably dangerous.
31. A design defect is not the sort of product defect that will support the imposition
of liability on a strict product liability basis.
32. Recovery in a product liability case may be limited when it can be shown that
the plaintiff misused the product.
33. Suppliers are generally required to expect reasonably foreseeable misuses of
their products.
34. Courts in many jurisdictions will consider the negligent actions of both the plaintiff
and the defendant when apportioning liability in a product liability action.
35. The dangers associated with using sharp knives are so commonly known that
manufacturers need not warn users of those dangers
MULTIPLE CHOICE QUESTIONS
1. William steals a valuable collection of baseball cards from Phillip. William then
sells the cards to Darrel, who does not know that the cards are stolen. Phillip
discovers that Darrel has the cards. Which of the following best describes the
rights and liabilities of the parties involved?
a. Darrel has the right to keep the cards if he compensates Phillip
monetarily.
b. Phillip has the right to reclaim the cards from Darrel, but is liable to
Darrel for damages.
c. Phillip has the right to reclaim the cards from Darrel and William is liable
to Darrel for damages.
d. Darrel has the right to keep the cards without compensating William.
2. Jean buys a bike from Mike’s Bike Shop. She wants to make sure that there is
a warranty of title. Jean
a. does not need to do anything because warranties of title arise
automatically in most sales contracts.
b. must request a written warranty of title.
c. must request an oral warranty of title.
d. must request both a written and an oral warranty of title.
3. 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.
4. Big Screen Video Corporation sells high-definition television sets. Under most
circumstances, Big Screen Video will be presumed to have warranted that its
title to the TVs is
a. the same as each brand’s name.
b. none of the choices—a warranty of title is not presumed.
c. good and valid.
d. the best that money can buy.
5. Barry buys a bulldozer from Big Sandbox Equipment Company. Barry is
unaware that there is a lien against the bulldozer when he buys it. Under the
UCC, if the creditor reposes the bulldozer, Barry
a. can recover from Big Sandbox Equipment for breach of warranty.
b. can do nothing.
c. can file criminal charges against Big Sandbox Equipment.
d. can recover damages from the creditor.
6. Krissa, a horse breeder, shows Maggie, a customer looking for a new stallion
for her breeding program, a stallion and tells her that the stallion is very fertile
and can easily breed twenty mares per year. Krissa’s statement is
a. an express warranty.
b. an implied warranty.
c. a warranty of title.
d. puffery.
7. Fancy’s Feedlot orders one hundred sacks of cattle feed from Bovine Feeders,
Inc. Each bag has the words “Twenty percent protein” printed on the front. This
is
a. an express warranty.
b. an implied warranty.
c. a warranty of title.
d. puffery.
8. Sari buys a new sport utility vehicle (SUV) from Terrific Cars & Trucks, Inc. The
most important factor in determining whether an express warranty is created is
whether
a. Sari expresses to Terrific what she wants warranted.
b. Sari’s desire for the SUV becomes part of her motivation to deal.
c. Terrific expresses to Sari what it expects of its customers.
d. Terrific’s promise becomes part of the basis of the bargain.
9. John is an art dealer with special expertise in modern art. Rachel comes to
John’s gallery to purchase a modern art painting as an investment. John shows
her several paintings that he says are high quality and will increase in value in
the next ten years. John’s statement is
a. an express warranty.
b. an implied warranty.
c. an opinion.
d. puffery.
10. Dependable Appliances, Inc., and Elaine enter into a contract for a sale of
kitchen appliances. Dependable, a merchant who deals in goods of the kind
sold, notes that its goods come with an implied warranty of merchantability.
Under the UCC, this means that the goods are reasonably
a. fit for the buyer’s particular purpose.
b. fit for the ordinary purpose for which such goods are used.
c. suitable for resale at an acceptable price.
d. the best quality that money can buy.
11. Olga, a salesperson for Pre–owned Cars & Trucks, Inc., tells Quincy, “This is
the best car I’ve ever seen.” This statement is
a. an express warranty.
b. an implied warranty.
c. a warranty of title.
d. puffery.
12. Trucks & Trailers, Inc. (T&T), and United Delivery Service enter into a contract
for a lease of trucks. T&T is a merchant who deals in goods of the kind leased.
Under the UCC, an implied warranty of merchantability arises
a. automatically in lease contracts.
b. only if the lessee asks for it.
c. only if the lessor does not expressly disclaim it.
d. only in conjunction with sales contracts, not lease contracts.
13. Good Tire Company and Hiway Auto Service enter into a contract for a sale of
tires. Good Tire is a merchant who deals in goods of the kind sold. Under the
UCC, an implied warranty of merchantability arises
a. automatically in sales contracts.
b. only if the buyer asks for it.
c. only if the seller does not expressly disclaim it.
d. only in conjunction with lease contracts, not sales contracts.
14. Ocean Vessels, Inc., and Pacific Harbor Company enter into a contract for a
sale of a boat. Ocean is a merchant who deals in goods of the kind sold. The
goods are defective. Under the UCC, the implied warranty of merchantability is
breached
a. only if Ocean did not know about and could not have discovered the
defect.
b. only if Ocean did not know about the defect.
c. only if Ocean knew about or could have discovered the defect.
d. regardless of what Ocean knew or could have discovered.
15. Sigrud buys spiked mountain-climbing shoes from Rockridge Gear store. The
spikes come out of the shoes when Sigrud is on the side of a mountain, caus–
ing her to be injured in a fall. Rockridge breached
a. an express warranty.
b. an implied warranty of fitness for a particular purpose.
c. an implied warranty of merchantability.
d. a warranty of title.
16. Fred goes to Carla, a knowledgeable dog breeder, and tells her that he wants
to get a dog that will be good with small children. Carla sells Fred a dog. When
Fred takes the dog home, it bites both his small children and causes them
serious injuries. Fred can sue Carla for breach of
a. an express warranty.
b. an implied warranty of fitness for a particular purpose.
c. an implied warranty of merchantability.
d. a warranty of title.
17. Regional Wood Products Company and Sylvia enter into a contract for a sale of
lumber. Regional knows the purpose for which Sylvia will use the goods. Under
the UCC, an implied warranty of fitness of a particular purpose arises
12 UNIT THREE: COMMERCIAL TRANSACTIONS
a. if the buyer is relying on the seller to select suitable goods.
b. if the buyer asks for it.
c. if the seller is a merchant who deals in goods of the kind sold.
d. in conjunction with lease contracts, not sales contracts.
18. Regal Autos, Inc., sells cars to consumers. To avoid liability for oral express
warranties, each sales agreement should note that a car is sold
a. as is.
b. in perfect condition.
c. subject to warranties included in the written contract only.
d. with no known defects.
19. Sweet Candy, Inc., and Tasty Treats stores enter into a contract for a sale of
confections. Sweet, a merchant who deals in goods of the kind sold, makes
express warranties in connection with the sale. Under the UCC, at the time a
contract is formed, an express warranty can be disclaimed or modified
a. by clear, conspicuous language called to the buyer’s attention.
b. by implied affirmations of fact relating to the goods.
c. in any way that the seller sees fit for the ordinary purpose.
d. in no way.
20. Robert is selling his used lawnmower. He wants to disclaim any implied
warranties. Robert
a. cannot disclaim implied warranties.
b. should include a written disclaimer that the lawnmower is being sold
“as is.”
c. should orally disclose all known faults of the lawnmower.
d. should include a written warranty of title.
21. Mountain Bikes, Inc. (MBI), and Nero enter into a contract for a sale of a
mountain bike. MBI, a merchant who deals in goods of the kind sold, makes
implied and express warranties in connection with the sale. The Magnuson–
Moss Warranty Act attempts to prevent deception in warranties by
a. displacing the UCC as the primary source of warranty rules.
b. making warranties easier to understand.
c. prohibiting disclaimers of warranties.
d. requiring sellers to give written warranties for consumer goods.
22. ValuRich Tools, Inc., sells tools, tool parts, and related supplies under “full”
warranties. Under the Magnuson-Moss Warranty Act, this means that ValuRich
must provide
a. a choice between a refund or replacement if a product cannot be fixed
and repair or replacement of defective parts.
b. neither a choice of a refund or replacement, or repair of defective parts.
c. only a choice of a refund or replacement if a product cannot be fixed.
d. only repair or replacement of defective parts.
23. Jack’s Pet Houses, Inc. sells shelters for animals under “limited” warranties.
Under the Magnuson-Moss Warranty Act, this means that the warranties on
shelters from Jack’s Pet Houses
a. do not meet one of the requirements of a full warranty.
b. are only good for one year.
c. are illegal.
d. are oral.
24. GR8 Skates Company makes and sells a pair of skates to Hugh. GR8 fails to
exercise “due care” to make the skates safe, and Hugh is injured as a result.
GR8 is most likely liable for
a. assumption of risk.
b. knowledgeable use.
c. negligence.
d. product misuse.
25. Ceramic Tile Company designs and makes floor tiles. In a product liability suit
based on negligence, Ceramic could be liable for violating its duty of care with
respect to
a. neither the design nor the making of the tiles.
b. the design and the making of the tiles.
c. the design of the tiles only.
d. the making of the tiles only.
26. Forest & Field Company makes and leases a backhoe to Zac. Due to a defect
attributable to Forest & Field’s negligence, Zac is injured in an accident in
which his neighbor Aaron is also hurt. In a product liability suit based on
negligence, Forest & Field may be liable to
a. Aaron only.
b. no one.
c. Zac and Aaron.
d. Zac only.
27. Garden Tool Company makes hedge trimmers. Troy is injured while using a
Garden Tool trimmer and sues the company for product liability based on neg–
ligence. To win, Troy must show that
a. Garden Tool did not use due care with respect to the trimmer.
b. Garden Tool misrepresented a material fact regarding the trimmer.
c. Troy was experienced in the use of trimmers.
d. Troy was in privity of contract with Garden Tool.
28. Paltry Assembly Company makes espresso machines and sells one to Vim
through a misrepresentation on the label on which Vim relies and that results in
an injury to Vim. Paltry is most likely liable for
a. a commonly known danger.
b. fraud.
c. privity.
d. puffery.
29. Cold Stuf, Inc., makes snowboards, which it sells to Deep Freeze Sports Store
(DFS). DFS sells Cold Stuf 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 Stuf only.
b. Cold Stuf or DFS.
c. DFS only.
d. no one.
30. Fun Toyz Corporation makes skateboards, which it sells to consumers,
including Holly and Ira. Due to a defect, Holly is injured while using her new
board. Ira’s board has the same defect, but he is not injured. In a product
liability suit based on strict product liability, Fun Toyz may be liable to
a. Holly and Ira.
b. Holly only.
c. Ira only.
d. no one.
31. Goldtone Corporation makes cell phones. Haji files a product liability suit
against Goldtone, alleging a design defect. In deciding whether to hold
Goldtone liable, the court may consider an alternative design’s
a. popularity among industrial designers.
b. attractiveness to consumers.
c. aesthetics.
d. effect on the product.
32. SurgeStop Company makes electrical cords and other connectors for electronic
devices. Rollo files a product liability suit against SurgeStop, alleging a warning
defect. In deciding whether to hold SurgeStop liable, the court may consider
a. consumers’ general lack of desire to read the product’s warnings.
b. the plaintiff’s specific lack of desire to read the product warnings.
c. the obvious risks of other products.
d. the obvious risks of this product.
33. Toyoda Company buys gas pedals and other parts from suppliers and puts
them in its vehicles without changing their composition. If the pedals or other
parts are defective, strictly liable for any damage caused by the defects are
a. neither Toyoda nor the suppliers.
b. Toyoda and the suppliers.
c. the suppliers only.
d. Toyoda only.
34. The brakes on a River Valley Railroad train 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 Stops–it, Inc., the brakes’
manufacturer. Stops-it can raise the defense of
a. a component-part manufacturer.
b. assumption of risk.
c. consumer participation.
d. product misuse.
35. Dwayne, an electrician, files a suit against Electro Mechanix, Inc., alleging that its
circuit breakers are unreasonably dangerous due to the possibility of electrical
shock. Dwayne’s suit is most likely to
a. fail, because Dwayne assumes the risk if he uses an Electro product.
b. fail, because Dwayne is a knowledgeable user.
c. succeed, because the danger is open and obvious.
d. succeed, because Electro’s products are not safe for all uses.
ESSAY QUESTIONS
1. Cutter Company makes and sells table saws, which are designed to be safe if
used properly. Erin buys a Cutter saw and lends it to her neighbor Frank. To
reach a toolbox on a high shelf in his garage, Frank props the saw at an angle
against a cabinet and climbs onto the saw. Frank loses his footing, slips off the
saw, falls on the blade, and is injured. He files a product liability suit against
Cutter, on the ground of negligence. On what basis could the maker prevail?
2. Bob is shopping in Carl’s Hardware Store when a nail gun in use by Dan, one
of Carl’s employees, fires without warning and hits Bob in the leg. Carl checks
CHAPTER 20: WARRANTIES AND PRODUCT LIABILITY 19
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 and why?