Response to the following multiple choice questions:
Part 1: Torts and Crimes
1. Sam went to E-Z Shop to pick up some groceries. Sam was in a bit of a hurry and began walking swiftly down the aisles of the store. Sam forgot about a nagging knee injury that often reemerged when he moved too quickly. Sure enough, as Sam was briskly walking down aisle 9, where a store employee had neglected to clean up a spill, Sam's trick knee went out, and he fell to the floor just before he reached the spill. If E-Z Shop avoids liability in this case, it will probably be because
A. Sam didn't suffer any legally recognizable injury.
B. the store's breach of duty didn't cause Sam's injury.
C. the store didn't breach any duty it owed to Sam.
D. the store didn't owe a duty to Sam.
2. Evan gives Zeke $200 to buy tickets for Evan and his girlfriend to attend a rock concert. Instead, Zeke spends the money to purchase video games. Evan finds out and wants to know if Zeke can be charged with a crime. Zeke has committed
A. robbery.
B. no crime, but can be sued in civil court.
C. embezzlement.
D. larceny.
3. John breaks up with his girlfriend Sally. Sally is very angry, so to get back at John she takes a picture of John and pastes the image onto a photo of a group of terrorists so it creates the appearance that John is a member of a terrorist organization. Sally posts the photo on the Internet. John can sue for which type of invasion of privacy?
A. Exploitation
B. Intrusion
C. Revelation of confidential records
D. Creating a false light
4. Terry was driving a car that collided with Bob's car. Bob suffered $100,000 in damage. Bob was 20 percent at fault and Terry was 80 percent at fault. Which of the following statements is true?
A. Bob will collect $60,000 in a jurisdiction that follows comparative negligence.
B. Bob will collect $80,000 in a jurisdiction that follows contributory negligence.
C. Bob will collect nothing in a jurisdiction the follows comparative negligence.
D. Bob will collect $80,000 in a jurisdiction that follows comparative negligence.
5. Zeke takes his gun to the mall looking for Fred. Zeke spots Fred, points the gun at Fred, and says, "I'm going to kill you." He does. Zeke is charged with homicide. His defense is that he had no motive to kill Fred. The prosecution admits that it can't prove that Zeke had any motive and that in fact Zeke loves Fred. Which of the following statements is true?
A. Zeke will be convicted of homicide.
B. Zeke will be convicted of a lesser degree of homicide due to the prosecution's failure to demonstrate motive.
C. Zeke's state of mind was that of recklessness.
D. Zeke's motive is a necessary element of any crime.
6. Renaldo is driving to church one morning when he discovers that his usual route is blocked due to construction. He takes a different avenue but becomes lost. He stops to ask for directions, and a prostitute approaches him and offers to have sex in exchange for money. Renaldo is offended and says he would never do such a thing. The prostitute persists in her efforts and presents the proposal in an enticing way. Finally, Renaldo agrees, provided she will give him directions on how to get to church. The prostitute reveals that she is a police officer in disguise and arrests Renaldo. Renaldo was
A. not entrapped, as he agreed to give money for sex.
B. entrapped because he couldn't say no.
C. entrapped.
D. not entrapped because the person he asked for directions was dressed like a prostitute.
7. In which of the following situations might an individual or corporation be held strictly liable for any resulting injury?
A. Company A transports explosives. During one transport, the truck carrying the explosives hits another car, and several passengers in the other vehicle suffer injuries.
B. Company B breeds Toy Poodles. One of the poodles wanders over to Ms. Cleaver's house and relieves himself in her perfectly manicured lawn, destroying her prize roses.
C. A customer slips and falls at a local grocery store because an employee failed to mop up some spilled milk.
D. Ed delivers pizzas for Pa's Pizza Delivery. One evening, Ed is in a particularly bad mood and decides he can't take another cheap person not giving him a tip. Charles fails to give Ed his tip. Overcome with rage, Ed attacks Charles, breaking his nose.
8. Robert is president of the United States. Tom, a journalist, publishes in the newspaper statements that Robert has become a cocaine addict. If Robert sues Tom for defamation, Robert must prove that the statements were
A. Robert can't sue Tom due to the First Amendment to the U.S. Constitution.
B. either false or made with actual malice.
C. false.
D. false and made with actual malice.
9. Tom purchases a can of beans at the grocery store, takes them home, and attempts to open them when they suddenly explode, causing an injury to his eye. Tom sues the manufacturer of the beans, Beantime. Which of the following statements is true?
A. The grocery store where Tom bought the beans is negligent, but Tom can't sue Beantime because they weren't negligent.
B. Beantime will be strictly liable if the beans exploded because they were stored improperly at the grocery store.
C. Beantime will be strictly liable if the beans were unreasonably dangerous when they left Beantime's factory.
D. Beantime won't be liable for Tom's injuries because Beantime doesn't own the grocery store where Tom bought the beans.
10. Robert goes to the liquor store, pulls out what appears to be a gun, and says, "Give me all your money, or I'll kill you." The clerk gives Robert all the money in the register. As Robert leaves the liquor store, he spots a policeman across the street and begins to run. At that moment, the clerk comes out of the store and shouts to the policeman that he's just been robbed. The policeman tackles Robert and discovers that Robert's gun was actually just a water pistol. Which of the following statements is true?
A. Robert isn't guilty of robbery because he didn't use force to accomplish the theft.
B. Robert is guilty of robbery because he committed theft.
C. Robert is guilty of robbery because he used the threat of force to commit a theft.
D. Robert isn't guilty of robbery because the gun wasn't capable of causing harm.
11. Tom commits a crime and is charged with a misdemeanor. Tom's wife Sally asks what can be the sentence if Tom is convicted. Which of the following statements is true?
A. If Tom is convicted, he will get no more than a year in jail.
B. If Tom is convicted, he must get a minimum of one year in jail.
C. If Tom is convicted, he can't be given jail time, only a fine.
D. If Tom is convicted, he can get from zero to five years' incarceration.
12. Sally tells all of her neighbors that the meat in the meat department at Greg's Grocery is spoiled. This causes Greg to lose business and thereby suffer monetary loss. An appropriate remedy for Greg against Sally is an action for
A. invasion of privacy.
B. fraudulent misrepresentation if the statements are false.
C. invasion of privacy if the statements are false.
D. disparagement if the statements are false.
13. Sally goes through Edith's purse when Edith leaves the room. Edith returns and catches her in the act. Edith can sue for which type of invasion of privacy?
A. Exploitation
B. Revelation of confidential records
C. Intrusion
D. Creating a false light
14. Tom suffers from epilepsy. During an attack, his arm spasms, striking Zeke and causing serious injury. Tom is charged with battery. His defense will be
A. self-defense.
B. his state of mind was merely reckless, not intentional.
C. his action was involuntary.
D. Tom has no defense.
15. Nicole drives a truck for Timely Trucking, Inc. One day, while making a delivery for her company, Nicole negligently runs over a small child. Which of the following statements is true?
A. Nicole alone will be liable for the damages.
B. Timely Trucking will be liable for damages under the doctrine of respondeat superior.
C. Timely Trucking will be liable for damages under the doctrine of dangerous instrumentality.
D. Timely Trucking will be liable for damages unless at the time of the accident Nicole was acting within the scope of her duties as an employee for Timely Trucking.
16. Tom tells Bob that Charlie has venereal disease. Charlie can't sue Tom for defamation if
A. the statement is false.
B. Bob didn't think badly of Charlie after Tom's statement.
C. the statement is true.
D. Bob didn't tell others what Tom told him.
17. Tom breaks into Sally's house with the intention of stealing her jewelry, which is a felony. Unfortunately for Tom, when he breaks into the house, he finds a policeman waiting in Sally's bedroom toarrest him. Tom is charged with burglary. Which of the following statements is true?
A. Tom can't be guilty of burglary because he was arrested before he stole anything.
B. Tom has the defense of entrapment because the police were waiting for him.
C. Tom can be charged only with attempted burglary because he didn't steal anything.
D. Tom has committed burglary.
18. The _______ Act is designed to deal with the problem of unsolicited commercial email.
A. Economic Espionage
B. Computer Fraud and Abuse
C. CAN SPAM
D. Cyber-Command
19. Sally and Ethel have a falling out. Sally, to cause distress to Ethel and her husband Elmer, posts on the Internet that Elmer is having an affair with a college student, even though Sally knows that what she is saying isn't true. Which of the following statements is true?
A. Sally has a claim for intentional infliction of emotional distress.
B. Ethel has a claim for defamation against Sally.
C. Sally has a claim for defamation against Ethel.
D. Elmer has a claim for defamation against Sally.
20. Zeke approaches Allen and says, "I know you're an invader from outer space planning to take over the world-you must be stopped!" Then Zeke punches Allen in the nose. Zeke is charged with misdemeanor assault. Which of the following statements is true?
A. Zeke is guilty, regardless of his state of mind, as insanity is a defense only to felonies.
B. Zeke isn't guilty by reason of insanity under the M'Naughten rule if Zeke was suffering from a mental disease.
C. Zeke isn't guilty by reason of insanity under the irresistible impulse test because he failed to resist the urge to punch Allen.
D. Zeke isn't guilty by reason of insanity because it's insane to believe that there's life in outer space.
Part 2: Negotiable Instruments
1. Brenda wrote a check to Kelli for $50 to be drawn from her account at Beverly Bank. Beverly Bank refused to cash the check. Which of the following correctly states Brenda's liability in this situation?
A. Brenda is secondarily liable if she is given timely notice of the dishonor.
B. Brenda is primarily liable regardless of any notice of dishonor.
C. Brenda is secondarily liable regardless of any notice of dishonor.
D. Brenda is primarily liable if she is given timely notice of the dishonor.
2. Carrie owed Charlotte $20,000. Carrie offered Charlotte a promissory note (a negotiable instrument) worth $20,000 on maturity, which occurred in six months, as payment for the debt. Carrie had actually stolen the promissory note from her friend Samantha. Charlotte probably won't qualify as a holder in due course because
A. Charlotte didn't give value for the instrument.
B. the instrument was stolen from Samantha.
C. Charlotte should have known the instrument was stolen.
D. Charlotte didn't take the instrument in good faith.
3. Zeke writes a check payable to "Peter Jones or Sally Jones." Sally indorses the check, but Peter is out of town. Which of the following statements is true?
A. Sally can deposit the check, but it will be honored only to the extent of half the amount.
B. Sally can deposit the check, and it will be honored.
C. Sally will need to wait until Peter gets back into town and can sign the check before depositing it.
D. The check need not be honored because it's not properly indorsed.
4. Leroy writes a $50 check made payable to "Cash" and gives the check to Laurie. Which of the following best describes what has happened?
A. Transfer by assignment
B. Taking for value
C. Transfer to a holder in due course
D. Transfer by negotiation
5. Jayla and Jamal enter an agreement in which Jamal agrees to pay Jayla $500 over the next three months for a new stereo. Jamal calls Jayla on the phone and promises to pay her the entire $500 no later than 90 days from that date. This agreement fails to constitute a negotiable instrument, because negotiable instruments must
A. be in writing.
B. state a fixed amount of money.
C. state an unconditional promise or order to pay.
D. be payable on demand or at a definite time.
6. Janice gives Chandler a promissory note made out in her favor, signed by Joey for $1,000. When the note comes due, Joey asserts a personal defense to avoid liability on the note. Chandler isn't a holder in due course and thus doesn't benefit from the protections afforded a holder in due course, because Chandler
A. didn't take the note in good faith.
B. should have known a defense existed to the note.
C. didn't take the note for value.
D. should have known the note would be dishonored.
7. 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. Carl must pay $500 to Sally.
B. The bank must pay $500 to Sally.
C. No one is obligated to pay anything to Sally.
D. Fred must pay $500 to Sally.
8. Robbie, in response to an advertisement in a magazine, orders computer equipment by mail from someone named Zeke Jones for $2,500. Under the terms of the order, a bill will be sent for the equipment within 30 days. One day while Robbie is in the office, someone enters and identifies himself as Zeke Jones, shows Robbie a bill and demands payment for the computer equipment. Robbie writes a check to this person for $2,500. Unbeknownst to Robbie, the person is Jake Smith, an impostor. Smith indorses the check "Zeke Jones" and gives it to Sally in exchange for a used car. Sally deposits the check in her account at Big Bank. Then the real Zeke Jones approaches Robbie, demanding payment, and Robbie realizes that he was tricked. Which of the following statements is true?
A. The indorsement by Jake Smith was effective.
B. The indorsement by Jake Smith was ineffective.
C. Robbie won't bear the loss because he was deceived.
D. Sally will bear the loss in this case.
9. 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 need not pay the check because it was obtained illegally.
B. Bob must pay the check because the bank is a holder in due course.
C. Bob need not pay the check because the bank is a holder, not a holder in due course.
D. Bob must pay the check because Zeke was a holder in due course.
10. Attorney Smith receives a check from the defendant to settle a case. The check is made payable to Smith. Smith indorses the check, adding the words "without recourse," and gives it to Clara Client. Clara deposits the check but it fails to clear. Which of the following statements is true?
A. Smith will have to pay the check amount to Clara but can sue the defendant for reimbursement.
B. Smith doesn't have to pay the amount of the check to Clara.
C. Clara has no remedy against Smith or the defendant because the check contained the words "without recourse."
D. Smith will have to pay the check amount to Clara.
11. Carl writes a check for $500, payable to the order of Fred. Fred owes Greta $600, so Fred changes the 5 to a 6 and endorses it over it to Greta to pay the debt. Greta deposits the check. Carl's bank, in good faith, honors the check. Then everyone discovers that the check was altered. Which of the following statements istrue?
A. Carl's bank may debit $600 from Carl's account, but Carl can sue Fred for $100.
B. Carl's bank may not debit any amount from Carl's account.
C. Carl's bank may debit $600 from Carl's account.
D. Carl's bank may debit only $500 from Carl's account.
12. Carl writes a check to Fred for $500 dated January 2. Fred forgets to deposit the check until August.When the check arrives at Carl's bank for presentment, Carl's bank
A. must not honor the check.
B. must honor the check.
C. may honor the check.
D. may honor the check if it's acting in good faith.
13. Without authority to do so and unbeknownst to Candy, Amos signed Brook's name to a promissory note to pay Candy $3,000 with 6 percent interest in 90 days in exchange for a used car. Candy negotiated the promissory note to David, who was a holder in due course, who presented the note to Brook forpayment on the due date. Which of the following statements is true?
A. Candy won't have to pay the note because she was a holder in due course.
B. Candy won't have to pay the note because the original signature was unauthorized.
C. Brook will have to pay the note because David was a holder in due course.
D. Brook won't have to pay the note because the signature was unauthorized.
14. Ella owed Mark $500. Since Ella didn't have the money to pay Mark, she asked Mark if he would accept a negotiable instrument, such as a promissory note, as payment for the debt. Mark indicated he would accept a negotiable instrument as payment. Ella wrote out a promissory note in which she agreed to pay Mark $550 in 60 days if she failed to pay him the $500 in cash within the next 30 days. Ella's promissory note isn't negotiable because negotiable instruments must
A. be payable at a definite time.
B. be payable to order or to bearer.
C. give an unconditional promise or order to pay.
D. state a fixed amount of money.
15. Carl writes a $500 check payable to Bob and Bob endorses the check in blank and gives it to Sally. Sally is now a/an
A. maker.
B. endorser.
C. bearer.
D. drawee.
16. Luke makes a check for $5,000 payable to Greg. Greg writes his name on the back of the check. This is an example of
A. blank indorsement.
B. qualified indorsement.
C. special indorsement.
D. indorsement in full.
17. Tom sold 100 cases of tomato soup to Louie for $1,500. Louie gave Tom a promissory note, which stated "I promise to pay to the order of Tom the sum of $1,500 three months from date, together with 5% interest." Tom negotiated the note, making it payable to Sally, in exchange for Sally's trampoline. Later, Louie discovers that the tomato soup was spoiled and is worthless. When Sally presents the note to Louie for payment, Louie refuses. Which of the following statements is true?
A. Louie doesn't have to pay Sally but would have to pay Tom if Tom presented the note.
B. Louie has to pay Sally because she is a holder in due course.
C. Louie has to pay Sally, but she is a holder.
D. Louie doesn't have to pay Sally because the tomato soup was spoiled.
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 has a real defense that can be asserted against Sally.
B. Harold can successfully assert the defense of fraud in the inducement to avoid paying $3,000 to Sally.
C. Harold must pay Sally, but only to the extent of the value of the plasma TV that Tom bought from Sally.
D. Harold can't successfully assert the defense of fraud in the inducement to avoid paying $3,000 to Sally.
19. Carl writes a check for $500, payable to the order of Fred. Fred owes Greta $600, so Fred changes the 5 to a 6 and endorses it over it to Greta to pay the debt. Which of the following statements is true?
A. Greta is a holder in due course because she isn't the one who altered the instrument.
B. Greta is a holder in due course unless she knew Fred altered the instrument.
C. Greta isn't a holder in due course because the instrument has been altered.
D. Greta isn't a holder in due course because she didn't take for value.
20. Rick leaves his checkbook on the table, and Zeke steals a couple of checks. Zeke forges Rick's signature on the checks and cashes them. Rick doesn't examine his bank statements and doesn't notice the forgeries. Rick discovers the forgeries 60 days later, notifies the bank, and demands they reimburse him for the loss. Which of the following statements is true?
A. Rick is entitled to reimbursement because the signatures were forged.
B. Rick isn't entitled to reimbursement because he failed to notify the bank of the forgery within 30 days after receiving his bankstatement.
C. Rick is entitled to reimbursement because he notified the bank promptly after he discovered the forgery.
D. Rick isn't entitled to reimbursement because he could have prevented the forgery by guarding his checkbook more carefully.
Part 3: Sales and Consumer Protection
1. Sam bought a new suit. The first time Sam took the suit to the cleaners, it disintegrated through no fault of the cleaners. What theory is best for recovering the price of the suit from the seller?
A. Breach of warranty of title
B. Contributory negligence
C. Breach of implied warranty of merchantability
D. Unfair trade practices
2. Which of the following constitutes acceptance of goods delivered pursuant to a sales contract?
A. Taking physical possession of the goods
B. Signify that the goods are conforming
C. Performing acts that are consistent with the ownership
D. Rejecting the goods
3. X Company manufactures bicycles. X Company shipped a group of bicycles to Y Sporting Goods in a small town. Johnny purchased one of the bicycles manufactured by X Company from the Sporting Goods store. While he was riding the bicycle the day after purchasing it, the front wheel fell off, and Johnny fell and broke his arm. The cause of the accident was a defect that existed when X Company shipped it to Y
Sporting Goods. Will Johnny be successful if he files a lawsuit alleging strict liability?
A. No, the product must be unreasonably dangerous to the user or consumer because of its defective condition.
B. No, the goods must not have been substantially changed from the time the product was sold to the time the injury was sustained.
C. No, the defendant must normally be engaged in the business of selling or distributing the product.
D. Yes, each of the requirements for an action in strict liability is met.
4. Dacia is working out the terms of a contract to purchase Reed's paintings. Reed submits an offer in writing, which states that Dacia may have the first option to purchase each of his paintings within 30 days after completion, at $1,000 per painting. Dacia submits an offer in writing that indicates her acceptance, but stipulates that if she is unsatisfied with a painting after purchase, she may return the painting for a full refund within 10 days of delivery. Reed makes no objection. Dacia and Reed are considered merchants under the UCC. What is the result of these events?
A. A contract is formed, and Dacia's additional terms become part of the contract if they don't materially alter the contract.
B. No contract is formed, and Dacia's offer is treated as a rejection of Reed's offer.
C. No contract is formed, and Dacia's offer is a counteroffer.
D. A contract is formed, and Dacia's additional terms don't become part of the contract.
5. Lulu orders 20 pairs of navy blue pants from Peter for $4,000, with delivery due on November 15. On November 6, Peter delivers 20 pairs of sky blue pants. Lulu phones Peter and tells him he is in breach because the pants are the wrong color. Which of the following statements is true?
A. Peter is in breach, and Lulu may cancel the contract.
B. Peter has the right to be paid for the pants that were delivered under the doctrine of substantial compliance.
C. Peter has the right to cure the breach by delivering 20 pairs of navy blue pants on or before November 15.
D. Peter is in breach, and the contract is automatically cancelled.
6. Tom wants to change the oil in his automobile, and to do so, he needs to purchase an oil filter. He goes to the auto supply store and tells the clerk that he needs to change the oil in his vehicle and wants an appropriate oil filter for his make and model of vehicle. The clerk recommends oil filter XYZ-2. Tom purchases the oil filter, takes it home, and puts it on his vehicle. The oil filter isn't suited for the vehicle
and, as a result, the vehicle is damaged. Tom can sue successfully based on breach of
A. express warranty.
B. implied warranty of fitness for a particular purpose.
C. implied warranty of merchantability.
D. implied warranty of title.
7. Lulu orders 20 pairs of navy blue pants from Peter for $4,000, with delivery due no later than November 15. On November 6, Peter delivers the goods to a common carrier for shipment. Two minutes later, Lulu phones to say that she won't be able to pay for the goods because she has gone out of business. Peter may
A. sue for the price of the goods.
B. recover damages from the goods.
C. stop delivery of the goods.
D. resell the goods.
8. Zeke orally agrees to sell six television sets to Molly for $4,000. Zeke then changes his mind and tells Molly the deal is off. Molly sues, claiming breach of contract to sell six television sets for $4,000. Zeke testifies about an oral agreement to sell five television sets to Molly for $4,000. The most likely result is that
A. the court will enforce an agreement to sell six television sets for $4,000.
B. the court will enforce an agreement to sell five television sets for $4,000.
C. there's no enforceable agreement because oral agreements aren't enforceable if the parties disagree about the terms.
D. there's no enforceable agreement; it wasn't in writing.
9. 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. Tom is in breach as the UCC gives him no right to demand cash.
C. Sally must pay cash but is entitled to a reasonable time to come up with the cash.
D. Sally is in breach because Tom is permitted to demand cash.
10. Terra drops off her diamond ring at Jewel's Jewelry shop to have it cleaned. By mistake, the ring ends up in a display counter and is sold by Jewel to Lulu for $9,000. Terra learns what has happened wants Lulu to give her the ring back. Lulu wants to keep it because she likes it. Which of the following statements is true?
A. Lulu may keep the ring and owes Terra nothing because Lulu is the true owner.
B. Lulu may keep the ring if she pays Terra $9,000.
C. Lulu may keep the ring if she pays Terra the fair value of the ring.
D. Lulu must give the ring to Terra because she is the true owner.
11. John, an automobile dealer, entered a contract with Lisa in which Lisa agreed to purchase a 1995 Chevrolet automobile as is from John for $2,000. John expressly told Lisa that the motor in the automobile was bad, along with the clutch and brakes. Further, John told Lisa that she would probably need to have the automobile repaired immediately on leaving the dealership. Lisa purchased the automobile despite its problems. However, Lisa became disgruntled because the costs of the repairs were more than she expected. She filed suit against John for breach of warranty. The most likely result will be that Lisa will
A. lose because no warranties were violated.
B. win because the implied warranty of merchantability was violated.
C. win because the implied warranty of fitness for a particular purpose was violated.
D. lose because the UCC doesn't apply to sale of automobiles
12. Jake orders a sound system from a catalogue. The catalogue description says that the sound system has a remote control. When the computer arrives, Jake discovers there's no remote control for this sound system. Jake may sue for breach of
A. warranty of fitness for a particular purpose.
B. express warranty.
C. warranty of merchantability.
D. implied warranty.
13. Carl goes to a store to buy a television. At the store, there's a television playing. Carl thinks the picture and sound on that television is good, so he buys the same model. He takes it home, plugs it in, and finds that the picture and sound, while reasonably good, aren't as good as what he saw in the store. He sues for breach of warranty. If he wins, it will be because
A. there's a breach of warranty of merchantability.
B. there's a failure of consideration.
C. the demonstration of the model constituted a warranty that proved false.
D. there's a breach of warranty of fitness for a particular purpose.
14. Lulu orders 20 pairs of navy blue pants from Peter for $4,000, with delivery due no later than November 15. On November 6, Peter phones to say that he won't deliver the pants because he has gone out of business.
A. Peter isn't in breach because going out of business makes it impossible for Peter to perform.
B. Lulu can declare Peter in breach on November 15 if Peter hasn't delivered the pants.
C. Lulu can declare Peter in breach on November 6.
D. Peter will be in breach only if Lulu is unable to find an alternate supplier who can deliver by November 15.
15. Tom contracts to sell goods to Velia. The contract isn't C.O.D. and doesn't provide for payment against
a document of title. Tom delivers the goods. Which of the following statements is true?
A. Velia must accept the goods but may inspect before paying.
B. Velia has a right to inspect the goods before accepting or paying for the goods.
C. Velia must accept the goods.
D. Velia must pay for the goods but may inspect before accepting.
16. In August, wholesaler Terrence contracts with retailer Elmer to sell Elmer 500 pairs of blue pants for $5,000 in December. Then, in October, the price of pants drops due to a deal Terrence has made with the manufacturer. Terrence, seeking to get more business from Elmer, agrees in writing to drop the price of the pants due in December from $5,000 to $3,500. Then, in November, the deal Terrence made with the manufacturer falls through, and Terrence calls Elmer and tells him the original price of $5,000 will be charged. Elmer sues, seeking damages based on the lower purchase price. The most likely result is
A. Terrence wins because the price modification was made without Elmer's consideration.
B. the court will award damages based on an average of the two prices.
C. Elmer wins because the modification was effective.
D. Terrence wins because Elmer originally agreed to $5,000.
17. Lulu orders 20 pairs of navy blue pants from Peter for $4,000. On receipt of 20 pairs of sky blue pants, Lulu begins offering the pants for sale in her store. After a few days, when no one buys the pants, Lulu ships them back to Peter, claiming that the pants aren't the color that was specified in the contract and claiming that Peter needs to ship her conforming goods. Peter claims he doesn't have to do anything and that Lulu owes him $4,000. Which of the following statements is true?
A. Lulu owes Peter nothing because she hasn't accepted the pants until she either pays or signifies that the pants conform to the requirements of the contract.
B. Peter must ship to Lulu 20 pairs of navy blue pants.
C. Lulu owes Peter $4,000 because she accepted the pants.
D. Lulu owes Peter $4,000 because the pants approximate what was required under the contract.
18. Bob enters into a contract to sell a furnace to Carl and also agrees to install it. Bob and Carl have a dispute over the contract. The contract will be governed by
A. UCC law because the dominant element of the contract is sale of goods.
B. UCC law because the contract failed to expressly state that the UCC wouldn't govern the transaction.
C. non-UCC law because the contract failed to expressly state whether the UCC would govern the transaction.
D. non-UCC law because it includes the service of installation.
19. Tom contracts with Sarah to sell 500 pairs of pants for $5,000. Tom ships the goods to Sarah via a common carrier. While in transit, the delivery truck drives over a cliff and the pants are destroyed. If the court rules that Sarah bears the loss, which of the following statements must be true?
A. The contract is C.O.D.
B. The contract is a destination contract.
C. The contract is a shipment contract.
D. The contract is F.O.B.
20. 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 2
B. November 4
C. November 3
D. November 1
Part 4: Insurance, Secured Transactions, and Bankruptcy
1. Sally and Carl have received a foreclosure notice. The foreclosure sale is set to take place in seven days. They contact a bankruptcy attorney. The attorney tells them the foreclosure proceedings will be halted, at least temporarily, if they file bankruptcy, due to the
A. federal exemptions.
B. state exemptions.
C. automatic stay.
D. means test.
2. Tom operates a large business, and his business is in financial trouble. Tom wants to continue the business and work out a plan to deal with his business creditors. He should file bankruptcy under Chapter
A. 11.
B. 7.
C. 13.
D. 12.
3. Terry has medical coverage under Medicare. From this fact alone, you can infer it's likely that Terry is
A. age 65 or over.
B. poor.
C. disabled.
D. in a long-term care facility.
4. Carl applies for fire insurance for his house. Before the application is processed, Carl's house burns down. Carl will have coverage if the insurance company
A. makes coverage retroactive.
B. issued a binder.
C. chooses to accept the application.
D. doesn't find out about the fire until after the policy issues.
5. Liza borrows money from First Finance Company for miscellaneous expenses. Liza and First Finance agree that Liza's diamond ring shall serve as collateral for the loan. Two weeks later, Liza takes a loan from Second Finance Company listing the same diamond ring as collateral. Neither First Finance nor Second Finance takes any additional steps. Liza defaults on both loans. Second Finance demands possession of the
diamond ring and Liza gives it to them. Which of the following statements regarding this set of facts is true?
A. Neither finance company possesses a valid security interest in the diamond ring, and neither possesses any remedy due to thefailure to file a financing statement.
B. First Finance Company possesses the priority claim because it loaned the money to Liza before Second Finance.
C. Both First Finance and Second Finance possess equal rights in the diamond ring and must equally divide any proceeds fromthe sale of the ring.
D. Second Finance Company possesses the priority claim because it perfected its security interest first.
6. Carl is in a car accident caused by Frank. Carl was able to collect damages and medical expenses from his own insurance company even though fault had yet to be determined. Carl probably lives in a state that requires __________ insurance.
A. uninsured motorist
B. collision
C. no-fault
D. liability
7. Tom is a consumer with regular income who's able to pay more than 25% of his debt over the next three years but probably can't pay it all. If he qualifies, the best chapter in bankruptcy for Tom is Chapter
A. 11.
B. 12.
C. 7.
D. 13.
8. Charlie files Chapter 11 bankruptcy. __________ creditors have the right to vote on the plan.
A. Impaired
B. Secured
C. No
D. All
9. Tom gave a mortgage to Big Bank. Big Bank failed to record the mortgage. Then Tom gave a mortgage to Second Bank. Second Bank recorded the mortgage and didn't know about the mortgage to Big Bank. After Second Bank recorded, Big Bank recorded its mortgage. After both mortgages are recorded, Tom defaults on both debts. Which of the following statements is true?
A. If these are the only two mortgages on the property, they'll share the proceeds pro-rata based on the amount due each.
B. Tom doesn't owe the debt to Big Bank because Big Bank failed to record the mortgage promptly.
C. Second Bank has a first mortgage.
D. Big Bank has a first mortgage.
10. Victor applies for life insurance. On the application, when asked if he had ever been diagnosed with cancer, he falsely said no. Later Victor died, and the insurance company found out about the previous diagnosis of cancer and refused to pay. What were the most likely grounds?
A. Estoppel
B. Misrepresentation
C. Concealment
D. Failure to pay premiums
11. Tom contacts an attorney about filing bankruptcy. The attorney says that Tom will have to pass a means test. This suggests the attorney is planning to file Tom's bankruptcy under Chapter
A. 12.
B. 7.
C. 13.
D. 11.
12. Tom is a family farmer with less than $3 million in debt. He wants to know if there are any chapters in the bankruptcy code specifically geared to debtors such as him. You would recommend to him Chapter
A. 13.
B. 11.
C. 7.
D. 12.
13. Sammy took out a home insurance policy on the home of his neighbor, Ed. Three months later, Ed's home mysteriously burned down. Sammy attempted to collect on the policy he purchased earlier. Which of the following statements regarding this set of facts is true?
A. Sammy can't collect the insurance proceeds because he lacked an insurable interest at the time of the loss.
B. Sammy can't collect the insurance proceeds because he lacked an insurable interest at the time the policy was purchased.
C. Sammy may collect the insurance proceeds because as long as the premium was paid, it's unnecessary that he have an insurable interest at any time.
D. Sammy may collect the insurance proceeds, so long as he wasn't guilty of any wrongdoing regarding the destruction of thehouse.
14. Tom's life insurance has no cash surrender value. It must be
A. straight life.
B. endowment.
C. term life insurance.
D. limited-payment life insurance.
15. Louie and Freda married last year, and their income is low. Both are about to graduate from college,and over the next few years, their incomes should begin to rise steadily. They would like to buy a house now, as Freda is pregnant, but are afraid it will be a couple of years before they have the income for a mortgage payment. What type of mortgage would you recommend to them?
A. Deed of trust
B. Variable-rate mortgage
C. Graduated-payment mortgage
D. Reverse mortgage
16. What type of life insurance would most likely be used to cover the outstanding balance of a home mortgage?
A. Universal life
B. Endowment
C. Decreasing term insurance
D. Straight life
17. Bob is concerned that Social Security retirement income won't be enough to meet his needs. He is looking for a financial product that would provide him with steady retirement income later in life. You would recommend
A. universal life insurance.
B. term life insurance.
C. annuity.
D. straight life insurance.
18. Carl gave Ted a mortgage. Which of the following is most likely collateral for the mortgage?
A. Personal property
B. A vehicle
C. Real property
D. Inventory in a business
19. An intentional withholding of a fact that would be of material importance to the insurer's decision to issue a policy is called a/an
A. estoppel.
B. misrepresentation.
C. adhesion contract.
D. fraudulent concealment.
20. Candy purchase a life insurance policy. Six months later, Candy falls into a severe depression and kills herself. Which of the following statements is true?
A. Life insurance will pay nothing, as there was death by suicide less than two years after purchasing the policy.
B. Life insurance will pay proceeds if there's evidence that Candy suffered from a diagnosed psychological condition that accounts for why she committed suicide.
C. The life insurance will pay double under the double indemnity provision.
D. Life insurance will pay unless the suicide was an assisted suicide and the person assisting was the beneficiary of the policy.