Business Law, 8e (Cheeseman)
Chapter 21 Warranties
1) Warranties are the buyer’s or lessee’s assurance that the goods meet certain standards.
2) Only written express warranties are valid.
3) Express warranties must contain the word “express” in writing to be legitimate.
4) Sellers and lessors are not required to make express warranties.
5) An express warranty is created upon description of the goods.
6) A manufacturer is liable for express warranties made by wholesalers and retailers.
7) A retailer is not liable for the express warranties made by manufacturers of goods it sells.
8) A seller’s or lessor’s statement of opinion or commendation of the goods does not create an
express warranty.
9) An affirmation of the value of goods creates an express warranty.
10) Express warranties are always implied by law.
11) An implied warranty requires that the quality of the goods must pass without objection in the
trade.
12) The implied warranty of merchantability warrants that goods must be fit for the ordinary
purposes for which they are used.
13) Implied warranties are expressly stated in the sales or lease contract.
14) The implied warranty of merchantability does not apply to sales or leases by nonmerchants
or casual sales.
15) Under the foreign substance test, if a person were injured by a chicken bone while eating a
chicken salad sandwich, then an implied warranty would be breached.
16) Under the consumer expectation test, if a person were injured by eating a nail in a cherry pie,
then an implied warranty would be breached.
17) Under the foreign substance test, the court asks what a consumer would expect to find or not
find in food or drink that he or she consumes.
18) The implied warranty of fitness for human consumption would apply to vending machines.
19) The foreign food test is used to find breaches in implied warranty of fitness for human
consumption.
20) An implied warranty of fitness for a particular purpose is breached if the goods do not meet
the buyer’s or lessee’s expressed needs.
21) The implied warranty of fitness for a particular purpose applies only to merchants.
22) Implied warranties of quality cannot be disclaimed.
23) An express warranty can only be limited if the warranty disclaimer and the warranty can be
reasonably construed with each other.
24) A disclaimer of the implied warranty of merchantability must specifically mention the term
merchantability for the implied warranty of merchantability to be disclaimed.
25) Disclaimer of the implied warranty of fitness for a particular purpose can be in oral.
26) The disclaimer of the implied warranty of merchantability must be in writing to be valid.
27) An “as is” disclaimer implies that all implied warranties are disclaimed.
28) Written disclaimers must be conspicuously displayed to be valid.
29) The Magnuson-Moss Warranty Act does not govern warranties of industrial transactions.
30) Under the Magnuson-Moss Warranty Act, aggrieved consumers must assert their warranty
breach claims through the informal dispute-resolution procedure before taking legal action.
31) In a limited warranty, the warrantor must guarantee that a defective product will be repaired
or replaced free during the warranty period.
32) The Magnuson-Moss Warranty Act does not require a seller or lessor to make an express
written warranty.
33) Full warranties are implied by law.
34) A person selling stolen property would be breaching the warranty of good title.
35) Persons who transfer goods without proper title breach the warranty of quiet possession.
36) The warranty against infringements protects trademarks and copyright claims.
37) The warranty of no interference warrants that goods sold are free from any third-party
security interests, or encumbrances that are unknown to the buyer.
38) A ________ is a seller’s or lessor’s express or implied assurance to a buyer or lessee that the
goods sold or leased meet certain quality standards.
A) bond
B) caveat emptor
C) warranty
D) collateral
39) What was the doctrine of caveat emptor in sales or lease contracts?
A) It was law balanced risk of loss between seller and buyer.
B) It was a law that stated the risk of loss was completely on the buyer.
C) It was a law that gave more protection to the buyer in a sales contract.
D) It was a law that stipulated the issue of warrants in sale or lease transactions.
40) A warranty that is created when a seller or lessor makes an affirmation that the goods he or
she is selling or leasing meet certain standards of quality, description, performance, or condition
is known as a(n) ________ warranty.
A) implied
B) conditional
C) closed
D) express
41) Which of the following is true about express warranties?
A) A manufacturer is liable for express warranties made by wholesalers.
B) A retailer is liable for the express warranties made by manufacturers of goods it sells.
C) A retailer is not allowed to make warranties on manufacturer goods.
D) A manufacturer is obligated by law to make an express warranty on all its goods.
42) Which of the following would constitute the creation of an express warranty for goods?
A) description of the goods
B) commendation of the goods
C) prior experience with the goods
D) affirmation of the value of the goods
43) A commendation of goods, made by a seller or lessor that does not create an express
warranty is referred to as a(n) ________.
A) statement of opinion
B) implied warranty
C) guarantee
D) caveat emptor
44) Which of the following is true of a statement of opinion?
A) It is a type of guarantee.
B) It is an affirmation of the value of the goods.
C) It is an implied assurance not expressly stated.
D) It is the explicit description of the goods.
45) In legal terms, Jasper’s words to Sam would be considered as ________.
A) an express warranty
B) an implied warranty of merchantability
C) a statement of opinion
D) an oral contract
46) Sam decided to buy the painting for $15,000 on the condition that if he found that the
painting was worth less than $15,000, Jasper would have to take the painting back and refund
Sam. Which of the following warranties did this sales contract have?
A) an implied warranty of merchantability
B) an express warranty
C) a statement of opinion
D) an implied warranty of fitness
47) Damages that are generally equal to the difference between the value of the goods as
warranted and the actual value of the goods accepted at the time and place of acceptance is
known as ________.
A) punitive damages
B) incidental damages
C) compensatory damages
D) future damages
48) Where there has been a breach of warranty, the buyer or lessee may sue the seller or lessor to
recover ________ damages.
A) compensatory
B) future
C) punitive
D) liquidated
49) Unless properly disclosed, a warranty that is implied that sold or leased goods are fit for the
ordinary purpose for which they are sold or leased, as well as other assurances is known as
________.
A) implied volatility
B) implied cause of action
C) implied assertion
D) implied warranty of merchantability
50) That “goods must be fit for the ordinary purposes for which they are used,” would be an
example for a(n) ________.
A) implied warranty
B) explicit warranty
C) statement of opinion
D) stamp of approval
51) Which of the following would constitute an implied warranty?
A) affirmation of the facts of the goods
B) description of the goods
C) model or sample of the goods
D) adequate packaging and labeling of the goods
52) In a shipment of containers of widgets, which of the following would be considered an
implied warranty?
A) that the seller of the widgets has given an oral approval of the widgets in the containers
B) that the description of the uses of widgets is mentioned in the contract
C) that the widgets are of an even kind, quality, and quantity within each unit
D) that a sample of the widget was given to the buyer for inspection
53) A(n) ________ is a warranty that applies to food or drink consumed on or off the premises of
restaurants, grocery stores, fast-food outlets, and vending machines.
A) statement of opinion
B) express warranty
C) stamp of approval
D) implied warranty of fitness for human consumption
54) A test to determine merchantability based on unfamiliar objects found in food is known as
the ________.
A) foreign substance test
B) consumer expectation test
C) contamination test
D) contagion test
55) Which of the following is a similarity between the foreign substance food test and the
consumer expectation test?
A) They are both used to determine a buyer’s knowledge of a particular food product.
B) They are both used to determine a buyer’s interest in a particular food product.
C) They are both part of the implied warranty of fitness for human consumption.
D) They are both part of the express warranty an eatery provides.
56) The ________ is a test to determine merchantability of food products based on what the
average buyer is supposed to find in particular food products.
A) foreign substance food test
B) contagion test
C) contamination test
D) consumer expectation test
57) Which of the following is true of how an implied warranty of merchantability is created?
A) It is made by the buyer or lessee.
B) It is implied by law if the seller or lessor is a nonmerchant.
C) It is implied by law if the seller or lessor is a merchant.
D) It has to be explicitly expressed in the contract.
58) A(n) ________ is a warranty that arises where a seller or lessor warrants that the goods will
meet the buyer’s or lessee’s expressed needs.
A) disclaimer of the implied warranty of merchantability
B) implied warranty of fitness for a particular purpose
C) implied warranty of fitness for human consumption
D) warranty of good title
59) Mark goes to Tony’s Lumber Yard to buy some lumber to build a new roof for his cabin.
Mark tells Tony, the lumber yard owner, to provide him an exact type of wood that can resist the
wood decay caused due to the damp environment around the cabin. Mark buys the lumber after
Tony assures him that the wood is exactly Mark is looking for. But the dampness affects the
wood and it caves in. What warranty has Tony explicitly breached by not providing Mark the
lumber he needed?
A) express warranty
B) statement of opinion
C) implied warranty of fitness for human consumption
D) implied warranty of fitness for a particular purpose
60) A statement that negates express and implied warranties is known as a ________.
A) warranty disclaimer
B) limited warranty
C) warranty infringement
D) warranty of no interference
61) Which of the following is true for display of warranty disclaimers as ruled by the court?
A) It can be implied as an understanding between the buyer and seller.
B) It should be conspicuous and noticeable.
C) It need only be present in the contract.
D) It must be published in the local newspaper before actually being displayed..
62) When is a warranty disclaimer considered by courts to be conspicuous?
A) when the seller implies the disclaimer
B) when a reasonable person is able to notice it
C) when it is present in the contract
D) when it is expressed and approved by both seller and buyer
63) What of the following is true of an “as is” disclaimer?
A) It disclaims all implied warranties.
B) It disclaims all express warranties.
C) It is a type of implied warranty.
D) It cannot be replaced by another warranty.
64) What type of transaction is covered under the Magnuson-Moss Warranty Act?
A) consumer transactions
B) commercial transactions
C) industrial transactions
D) governmental transactions
65) The ________ is a federal statute, passed in 1975, that regulates written warranties on
consumer products.
A) Purchaser’s Act
B) Industry Loss Warranty Act
C) Magnuson-Moss Warranty Act
D) Consumer Warranty Act
66) A warranty which guarantees that a defective product will be repaired or replaced free during
the warranty period is known as a(n) ________.
A) implied warranty
B) full warranty
C) disclaimer warranty
D) limited warranty
67) A full warranty is an example of a(n) ________.
A) express warranty
B) disclaimer warranty
C) implied warranty of fitness for a particular purpose
D) implied warranty of fitness for human consumption
68) Which of the following is true of the Magnuson-Moss Warranty Act?
A) It requires all warrantors to make express written warranties.
B) It obligates all warrantors to make disclaimer warranties for their products.
C) It authorizes warrantors to establish an informal dispute-resolution procedure.
D) Implied warranties are voidable under this Act.
69) Kirsten just bought a car that had a one-year warranty stating that it covered cost of parts, but
not labor. It also stated that the automobile warranty only covered the powertrain part of the
automobile, and no other part. What kind of warranty did Kirsten’s car have?
A) full warranty
B) limited warranty
C) disclaimer warranty
D) implied warranty of fitness for a particular purpose
70) A warranty in which the seller warrants that he or she has valid title to the goods he or she is
selling and that the transfer of title is rightful is known as ________.
A) warranty of no security interests
B) warranty of no interference
C) warranty of good title
D) warranty against infringements
71) Monty, a career criminal, steals a diamond from Prime Cut Jewelers. He then sells it to
gemstone jeweler, Adamas. Adamas Jewelers are unaware of the stolen nature of the diamond. If
Prime Cut discovers that the diamond is with Adamas, and reclaims the diamond, what warranty
breach can Adamas declare to recover from Monty?
A) warranty against infringements
B) warranty of no security interests
C) warranty of no interference
D) warranty of good title
72) A ________ is a warranty in which sellers of goods warrant that the goods they sell are
delivered free from any third-party security interests, liens, or encumbrances that are unknown to
the buyer.
A) warranty of good title
B) warranty of quiet possession
C) warranty against infringements
D) warranty of no security interests
73) Which warranty breach can Mona assert to recover from Eliza?
A) warranty of no security interests
B) warranty against infringements
C) warranty of good title
D) warranty of no interference
74) What kind of warranty did TinCar Autos provide Eliza?
A) limited warranty
B) full warranty
C) warranty of good title
D) warranty of no interference
75) An automatic warranty provided by a seller or lessor who is a merchant who regularly deals
in goods of the kind sold or leased which warrants that the goods are delivered free of any third-
party patent, trademark, or copyright claim is known as ________.
A) warranty of no security interests
B) warranty against infringements
C) warranty of good title
D) warranty of no interference
Skill: Legal Concepts
76) StoryBoard Creatives approached Logos Studios with a script for a movie. Logos Studios
liked it, and bought the rights for the script from StoryBoard. Subsequently, Mr. Derrida, a
former employee of StoryBoard claimed that he had the copyright to that script. Mr. Derrida
proved his copyright in court. He then notified Logos Studios that they could not start production
on the script without his permission, and adequate payment of fees. Logos Studios then rescinded
the contract with StoryBoard based on the breach of ________.
A) warranty of no security interests
B) warranty against infringements
C) warranty of no interference
D) warranty of good title
77) A ________ is a warranty in which the lessor warrants that no person holds a claim or an
interest in the goods that arose from an act or omission of the lessor that will interfere with the
lessee’s enjoyment of his or her leasehold interest.
A) warranty against infringements
B) warranty of good title
C) warranty of quiet possession
D) warranty of no security interests
78) Joe’s Alternative Realty leased a piece of real estate to WideEye Builders. Whilst still on
lease, Joe’s Alternative Realty gave that same piece of real estate as security interest to procure a
loan from Cloudnine Bank. The real estate, which was collateral, was eventually repossessed by
the bank from WideEye Builders, after Joe’s Alternative Realty defaulted on their loan payment.
What warranty had Joe’s Alternative Realty breached with WideEye?
A) warranty against infringements
B) warranty of good title
C) warranty of no interference
D) warranty of no security interests
79) Give an account of express warranties.
80) What are the damages recoverable for a breach of warranty?
81) Explain the implied warranty of fitness for a particular purpose.
82) Given an account of the different types of warranty disclaimers.
83) What is the difference between a full warranty and a limited warranty?