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This Document Contains Chapters 21 to 25 Chapter 21—Personal Property and Bailments TRUE/FALSE 1. Personal property includes all things of value including real estate. Answer: False 2. The legal concept of property includes rights in the property. Answer: True 3. In common usage today, there is no distinction between real and personal property. Answer: False 4. If a thief sells stolen property to a good-faith buyer, the buyer acquires title to the property. Answer: False 5. An ordinary gift made between two living persons is an inter vivos gift. Answer: True 6. The intent to make a gift requires an intent to transfer title at that time. Answer: True 7. In order for delivery to occur, a gift must actually be handed over to the recipient. Answer: False 8. A custodian who holds money for the benefit of a minor under the Uniform Gifts to Minors Act may choose to use the money to send the minor to summer camp. Answer: True 9. After fully complying with the procedures of the Uniform Gifts to Minors Act, a donor is entitled to take back the donated property at any time before the minor donee reaches the age of 18. Answer: False 10. Most courts consider an engagement ring to be a conditional gift. Answer: True 11. The Uniform Anatomical Gift Act permits persons sixteen (16) years of age or older to make gifts of their bodies or any parts thereof. Answer: False 12. Personal property is lost when an owner does not know where it is located but intends to retain title or ownership to it. Answer: True 13. The finder of lost property is usually entitled to a judicially-determined reward for finding and caring for the property until the rightful owner reclaims it. Answer: False 14. If while trespassing a hunter kills game, the game belongs to that hunter. Answer: False 15. Title to abandoned property may be acquired by the first person who obtains possession and control of it. Answer: True 16. Unclaimed property is often transferred to the government under the concept of escheat. Answer: True 17. A tenancy in common is a form of ownership by two or more persons. Answer: True 18. Joint tenancy and tenancy in common both feature the right of survivorship. Answer: False 19. At common law, a tenancy by entirety or a tenancy by the entireties is created when property is transferred to both husband and wife. Answer: True 20. In states that follow the community property tradition, property acquired after the marriage belongs solely to the party who acquired it. Answer: False 21. The person who turns over the possession of bailed property is the bailor, and the person who accepts possession is the bailee. Answer: True 22. An ordinary bailment can arise without an agreement between the parties. Answer: False 23. Generally, a bailment agreement does not contain all the elements of a contract. Answer: False 24. With regard to a bailment, a valid delivery and acceptance need not require that the bailee be aware that goods have been placed within the bailee’s exclusive possession or control. Answer: False 25. In order for a bailment to be valid, the bailor must be the owner of the subject property. Answer: False 26. Transfer or possession and use of bailed property without compensation is a gratuitous bailment. Answer: True 27. When a person rents space in a locker or building under an agreement that gives the renter the exclusive right to use that space, the placing of goods by the renter in that space creates a bailment. Answer: False 28. A bailee’s duty of care for bailed property depends on the type of bailment. Answer: True 29. A bailee’s lien gives the bailee the right to keep possession of the bailed property until reasonable charges for storage and/or repairs are paid. Answer: True 30. If a bailment is for the sole benefit of the bailee, the bailor has no obligation to inform the bailee of known defects. Answer: False MULTIPLE CHOICE 1. __________ property means land and things embedded in the land. A. Real B. Personal C. Intangible D. Tangible Answer: A 2. To establish a gift, the party claiming to be the donee must prove: A. delivery only. B. intent only. C. intent and a promise to deliver. D. intent and delivery. Answer: D 3. A gift causa mortis is revoked if: A. the donor does not die. B. the donor revokes the gift before dying C. the donee dies before the donor. D. all of the above. Answer: D 4. Tom established a bank account for his daughter Mary under the Uniform Gifts to Minors Act. Tom named himself the custodian. Later, Tom had a serious disagreement with Mary and ordered the bank to transfer the money in that account to a similar account maintained in the same bank for Tom's son Ed. The bank must: A. comply with Tom’s order, because the custodian controls the account. B. refuse Tom’s order, because this would clearly not be for the benefit of Mary. C. comply with Tom’s order, because Uniform Gifts to Minors accounts are not final. D. comply with Tom’s order if Mary is under 18 years of age and refuse the order if she is over 18 years of age. Answer: B 5. If a maintenance employee at a hotel finds a pocketbook with $500 in cash while cleaning an empty guest room, the employee: A. is entitled to keep the property, because the employee has the legal status of a "finder." B. must give the property to the manager of the hotel to be kept for the owner. C. must place an advertisement in a local newspaper, and if the property is not claimed within seven (7) business days, the employee is entitled to keep it. D. can retain possession of the property until the owner establishes ownership. Answer: B 6. A person becomes a(n) __________ at the moment of taking possession of abandoned personal property. A. Bailor B. Bailee C. constructive bailee D. Owner Answer: D 7. Which of the following forms of cotenancy does not have right of survivorship? A. joint tenancy B. tenancy by entirety C. tenancy in common D. community property Answer: C 8. Barry and Eldridge owned Blue acre as tenants in common. Eldridge died. Blue acre is owned: A. solely by Barry because of the survivorship feature. B. jointly by Barry and the state because of escheat. C. by Barry and Eldridge's heirs. D. solely by Eldridge's heirs. Answer: C 9. A third person to whom a joint tenant's interest is transferred becomes a: A. joint tenant. B. cotenant. C. tenant in common. D. tenant by the entirety. Answer: C 10. Sylvia and Morris were married and owned their home as tenants by the entirety. When Morris died, his will said that he left his half of his home to his brother Tim. Sylvia objects to this. The ownership of the home: A. belongs solely to Sylvia by survivorship. B. is now a joint tenancy between Sylvia and Tim. C. is now a tenancy in common between Sylvia and Tim. D. belongs to Sylvia and the state, in equal and divisible shares. Answer: A 11. The legal relation that arises when one person delivers possession of personal property to another under an express or implied agreement to return the property at a later date is called a: A. tenancy agreement. B. bailment. C. rental agreement. D. trust arrangement. Answer: B 12. Bailments may be: A. created orally or through a writing. B. created for either real or personal property. C. created for nonpossessory personal property. D. made only after delivery to the bailor is accomplished. Answer: A 13. A bailee's interest in the bailed property can be characterized as: A. ownership. B. a fractional proprietary interest. C. possession. D. constructive ownership. Answer: C 14. Which of the following is not a classification of ordinary bailments? A. for the sole benefit of the bailor B. for the sole benefit of the bailee C. for the sole benefit of the third party beneficiary D. for the mutual benefit of the bailor and the bailee Answer: C 15. A bailment is created: A. when a person rents space in a building B. when a person rents a safe deposit box at a bank C. both a. and b. D. neither a. nor b. Answer: B 16. A bailee’s __________ gives the bailee the right to maintain possession of the bailed property until reasonable storage and/or repair charges are paid. A. reversionary interest B. Lien C. remainder interest D. Mortgage Answer: B 17. Joan brought her car into Ace Service Station for a tune-up. After tuning up the car, Ace (the owner of the service station) decided to visit his mother. Ace drove Joan's car. Ace was following all safety precautions when a negligent driver without insurance struck Joan's car. Joan sued Ace for the damages to her car. The probable result is: A. Ace will win, since he was taking reasonable care of the bailed goods. B. Ace will win, since the bailee has the right to use the bailed goods. C. Joan will win, since the harm was sustained during the bailee’s unauthorized use of the property. D. Joan will win, since bailees are absolutely liable for bailed goods in their possession and control. Answer: C 18. Warren brought his television in for repairs. After Warren left the store, gunmen came in to rob the proprietor. As they ran out, Warren's television was knocked over and destroyed. Warren demanded that the proprietor of the store compensate him for the fair market value of the television. The bailee: A. is liable, since the goods were not returned to Warren in proper condition. B. is liable, since the bailee did not prevent the gunmen from damaging the television. C. is not liable, since this was a mutual-benefit bailment. D. is not liable, since the damage was caused by the act of a third party. Answer: D 19. When a bailor sues the bailee for damages to the bailed property, who has the burden of proving fault and that such fault was the proximate cause of the bailor’s loss? A. the person in possession of the property B. the bailor C. the bailee D. the jury Answer: B 20. The bailor must both inform the bailee of known defects and make a reasonable investigation to discover defects in a: A. mutual benefit bailment. B. Bailment for the sole benefit of the bailee. C. both a. and b. D. neither a. nor b. Answer: A CASE 1. Humberto called his friend John and asked him to come over immediately because Humberto had suffered a stroke and might be dying. In their telephone conversation, Humberto advised John that he wanted to give John his gold watch. Immediately after their telephone conversation, Humberto wrote out a will that left his share in Black acre to John. Black acre was the marital home of Humberto and Connie, who owned the home as tenants by the entirety. Humberto died before John arrived at Black acre. John claims the watch and a share in the home. Connie contests both matters. Decide. Answer: John is entitled to neither property. As to the watch, a gift requires intent and delivery. In this case, there was intent but no delivery. The home, being owned by Humberton and his wife Connie as tenants by the entirety, cannot be transferred without her permission. Connie now owns the home solely and absolutely by survivorship. 2. Vacarro gave her son Mark a car on the day Mark left for college. Vacarro told Mark that she expected him to use the car for school purposes and to earn good grades. Mark flunked out of college in his second semester. Vacarro sued to regain title to the car on the ground that the gift was conditional on Mark's earning good grades and remaining in college. Will Vacarro win the case? Answer: No. Judgment will be for Mark. The gift was unconditional. A condition subsequent will not be implied from Vacarro's statement that she expected Mark to use the car for school purposes and to earn good grades. In order for these expectations to rise to the level of valid conditions subsequent, the donor must clearly express that they are specific requirements of the transaction, and that if the conditions are not satisfied, the gift must revert to the donor. 3. Nelson took her computer to ABC Computer for repairs. ABC repaired the computer at a cost of $350 and informed Nelson that her computer was ready. Before Nelson came to pick up her computer, ABC was burglarized and Nelson's computer was taken. ABC had a commonly-used alarm system that was operating properly on the night of the burglary, and all the doors and windows were properly secured. Nelson sued ABC for the cost of the computer. ABC denied any liability and counterclaimed for the $350 in repairs. Who will win? Answer: Judgment will be for ABC for $350. ABC had exercised due care by securing its premises and having a commonly-used, properly-working alarm system. As a result, Nelson, the bailor, must bear the loss of the bailed property (the computer). Additionally, because ABC had performed the requested services(repair of the computer) before the computer was stolen, and because the computer was stolen through no fault of ABC's, ABC is entitled to be paid for its services. Chapter 22—Legal Aspects of Supply Chain Management TRUE/FALSE 1. All bailments are created equally. Answer: False 2. The storage of goods in a warehouse and the shipment of goods by a common carrier are examples of special bailments. Answer: True 3. To be engaged in warehousing, an enterprise must have appropriate storage buildings. Answer: False 4. A warehouser is an insurer of goods. Answer: False 5. The rights and duties of warehousers are regulated by the UCC. Answer: True 6. A public warehouser has a specific lien against the goods stored for reasonable costs incurred from the storage. Answer: True 7. A warehouse receipt is not considered a document of title. Answer: False 8. A warehouse receipt may be either negotiable or non-negotiable. Answer: True 9. A transferee of a non-negotiable warehouse receipt acquires only the title and rights that the transferor had actual authority to transfer. Answer: True 10. A negotiable warehouse receipt states that the goods received will be delivered to the bearer or to the order of any named person. Answer: True 11. A negotiable warehouse receipt that provides for delivery of the goods to the order of Jill Jones may be negotiated by delivery of the document to the purchaser. Answer: False 12. If a warehouse receipt provides for the delivery of the goods “to the bearer,” the receipt may be negotiated by transfer of the document. Answer: True 13. The rights of a holder of a duly negotiated warehouse receipt are extinguished by the warehouser's surrender of goods to the depositor. Answer: False 14. The purchase of a warehouse receipt by due negotiation eliminates all prior claims. Answer: False 15. Field warehousing is the storage of farm crops in the field where they have been grown. Answer: False 16. General contract law determines whether a limitation clause is a part of the contract between the warehouser and the customer. Answer: True 17. A contract carrier holds itself out as willing to furnish transportation for compensation without discrimination to all members of the public who apply. Answer: False 18. Bills of lading for intrastate shipments are governed by the UCC, while those for interstate shipments are regulated by the Federal Bills of Lading Act. Answer: True 19. A bill of lading will be negotiable if its terms are that the goods are to be delivered to "bearer" or to "the order of" a named person. Answer: True 20. The rights of a transferee of a negotiable bill of lading are defeated if the goods have been stopped in transit. Answer: False 21. If a common carrier delivers goods to the wrong person, the carrier is liable for breach of contract and for the tort of conversion. Answer: True 22. A common carrier is liable for all delays in the delivery of goods. Answer: False 23. Contract clauses that limit a common carrier's liability are void as contrary to public policy. Answer: False 24. A common carrier transporting goods under a COD shipment is liable if it takes a check in payment and the check bounces. Answer: True 25. A factor is a consignee. Answer: True 26. A sale by a factor can pass title to goods from the consignor to the purchaser. Answer: True 27. A person who attends a banquet given at a hotel is considered a guest for purposes of determining the liability of the hotelkeeper. Answer: False 28. With respect to property expressly entrusted to a hotelkeeper’s care, the hotelkeeper has a bailee’s liability. Answer: True 29. In most states, statutes limit or provide a method of limiting the common law liability of a hotelkeeper. Answer: True 30. As a general rule, a hotelkeeper has a lien on the property of boarders or lodgers. Answer: False MULTIPLE CHOICE 1. A warehouser that holds itself out to serve the public generally without discrimination is called a(n): A. public warehouser. B. general warehouser. C. non-discriminatory warehouser. D. ordinary warehouser. Answer: A 2. The common law rights and duties of a warehouser, in the absence of modifying statutes, are for the most part those of a bailee in: A. a bailment for the sole benefit of the bailee. B. an ordinary mutual-benefit bailment. C. a bailment for the sole benefit of the bailor. D. none of the above. Answer: B 3. Which is not a true statement about a warehouser? A. A warehouser is a bailee. B. A warehouser may issue a negotiable or non-negotiable receipt. C. A warehouser is an insurer of the goods. D. A warehouser is liable for damaged goods if damage is caused by the warehouser's negligence. Answer: C 4. The rights of a holder of a warehouse receipt depend on whether the receipt is: A. negotiable. B. rescissory. C. notarized as a document of title. D. notarized as a bill of lading. Answer: A 5. A purchaser of a non-negotiable warehouse receipt: A. receives no implied warranties. B. may acquire rights superior to those of the transferor. C. acquires only the title and the rights the transferor had authority to transfer. D. may be considered to have the rights of a holder in due course. Answer: C 6. Jeff purchased in good faith a warehouse receipt for 1,000 pairs of running shoes without notice of any defense to it, for value, and in the regular course of his business. Unknown to Jeff, the goods had been stolen from Jane and delivered to the warehouse that issued the receipt purchased by Jeff. Which of the following statements is true? A. Jeff holds a duly negotiated document of title and is not subject to Jane's title. B. Jane is entitled to the goods and will prevail over Jeff. C. Jeff is not a holder of a duly negotiated document. D. Jane cannot recover the goods but can sue the warehouse for conversion. Answer: B 7. The major purpose of field warehousing is to: A. create warehouse receipts that the owner can pledge as security for loans. B. create additional space in the firm's own warehouse. C. allow warehousers an opportunity to service common carriers. D. transfer title to buyers without requiring them to pick up merchandise at the plant's location. Answer: A 8. When a carrier accepts goods for land shipment, it ordinarily issues to the shipper a(n): A. bill of lading. B. intent to transport memorandum. C. warehouse receipt. D. trust receipt. Answer: A 9. A carrier owned and operated by the shipper is: A. a common carrier. B. a contract carrier. C. a private carrier. D. a consignor. Answer: C 10. A bill of lading that consigns the goods "to bearer" is called a: A. non-negotiable bill of lading. B. straight bill of lading. C. negotiable bill of lading. D. common bill of lading. Answer: C 11. A transferor makes certain implied warranties to the transferee when a bill of lading is transferred. These warranties are: A. that the bill of lading is genuine. B. that the transfer is rightful. C. that the transferor has no knowledge of any defects. D. all of the above. Answer: D 12. A common carrier of goods has the right to: A. make reasonable and necessary rules for the conduct of its business. B. charge a rate that enables a fair return. C. charge demurrage. D. all of the above. Answer: D 13. What is not included in a common carrier's lien on goods that it transports? A. consequential damages B. demurrage C. costs of preserving the goods D. costs of a sale to enforce the lien Answer: A 14. A common carrier must: A. receive and carry proper and lawful goods of all persons who offer them for shipment. B. furnish adequate facilities. C. follow the instructions of the shipper. D. all of the above. Answer: D 15. When goods are delivered to a common carrier for immediate shipment and while they are in transit, who is normally liable for any loss or damage to the goods? A. the shipper B. the consignee C. the carrier D. the individual designated as responsible in the bill of lading Answer: C 16. A common carrier transporting goods under a COD shipment may: A. make delivery without first obtaining payment. B. not make delivery without first receiving payment. C. accept a check as payment and have no liability. D. not avoid liability without a signed release. Answer: B 17. When consigned goods are sold by a factor: A. title passes when the consignor approves the sale. B. title passes even if the goods have been stolen, provided the factor is ignorant of this fact. C. the sale passes the title of the owner to the buyer. D. strict compliance with the Federal Factors Act is required to pass title. Answer: C 18. The legal definition of a guest of a hotel requires that the person: A. live at least five miles from the hotel. B. is a guest of a registered occupant of the hotel. C. is a transient. D. stay at the hotel for at least 24 hours. Answer: C 19. The relationship of guest and hotelkeeper ends when the guest: A. pays his or her bill. B. advises the hotelkeeper of his or her departure. C. leaves or ceases to be a transient. D. has stayed for 30 days and becomes a boarder. Answer: C 20. A hotelkeeper's lien on the baggage of a guest is terminated when: A. the guest checks out of the hotel. B. the guest pays the hotel bill in full. C. the hotelkeeper posts a notice to limit liability. D. all of the above. Answer: B CASE 1. The Willett Seed Company stored its goods with the Augusta Warehouse Company and received a negotiable warehouse receipt. The Willett Seed Company then borrowed money from the Georgia Railroad Bank and pledged the warehouse receipt as security. The seed company defaulted, and the bank demanded the goods from the warehouse. The warehouse stated that it already had delivered the goods to the seed company on the strength of that company's promise that it would surrender the receipt shortly thereafter. The bank sued the warehouse for the value of the goods. Will the bank win? Answer: Yes, judgment will be for the bank. When a negotiable warehouse receipt is issued for goods, the warehouser is liable to the holder of the receipt if the warehouser delivers the goods to anyone else. The bank, as pledgee, was the holder of the receipt, and it could demand the goods and sue for failure to deliver them. 2. Hal was a merchant who deposited 2,000 barrels of olive oil in a public warehouse operated by Welcome Warehouse. Hal was issued a warehouse receipt for the 2,000 barrels that by its terms was deliverable "to bearer." Hal had engaged in many other transactions with Welcome and was in arrears for quite a bit of money to Welcome. Hal duly negotiated the warehouse receipt to Esmeralda Enterprises in payment of cash. Hal's financial affairs continued to deteriorate and Welcome never was paid the debt. When Esmeralda's agent requested the oil and offered to remit the warehouse receipt, Welcome refused to release the oil, claiming a lien on the oil for Hal's debt. Esmeralda sued. Decide the case. Answer: The holder of a negotiable warehouse receipt acquires the direct obligation of the issuer to deliver the goods according to the terms of the warehouse receipt. Esmeralda is unaffected by Hal’s debt to Welcome. 3. Bob Brown entered the Hotel Lux to attend a conference being held within the hotel. Sam Smith arrived to attend the same conference, registered at the front desk, and obtained a room. Sally Jones also intended to participate in the conference and was in essence living at the hotel at the time. What relationship exists between the hotel and each of these individuals? What can be said of the hotel's obligations to each individual under these circumstances? Answer: A hotelkeeper is in the business of providing living accommodations to transient persons called guests. The hotelkeeper has a bailee's liability regarding property that may be entrusted into the hotelkeeper's care. At common law, the hotelkeeper was an insurer of any other property that a guest might bring into the hotel. The common law now is subject to state liability limitations. Bob Brown entered the hotel to attend a conference and therefore is not a guest. There is no relationship between the hotel and Brown. Sam Smith is a guest, for he is a transient utilizing the services of the hotel proper. The guest relationship was created at the time of registration. Sally Jones is not a guest but is rather a boarder or lodger because of her semi-permanent residence at the hotel. A lodger is owed a duty of an ordinary bailee of personal property under a mutual-benefit bailment. Chapter 23—Nature and Form of Sales TRUE/FALSE 1. A sale of goods is defined under UCC Article 2 as transfer of title to intangible property for a price. Answer: False 2. UCC Article 2 applies not only to contracts for the sale of familiar items of personal property, such as automobiles or chairs, but also to the transfer of commodities, such as oil, gasoline, milk, and grain. Answer: True 3. Goods physically existing and owned by a seller at the time of a transaction are called existing goods. Answer: True 4. A bailment is a special form of sale in which possession is transferred to a bailee. Answer: False 5. A gift is a free transfer of the title to property. Answer: True 6. A contract that has elements of both goods and services is always classified as a contract for the sale of goods. Answer: False 7. If a contract calls for both rendering services and supplying materials to be used in performing the services, the contract is classified according to its dominant element. Answer: True 8. A firm offer is effective only if the merchant receives consideration to keep the offer open. Answer: False 9. Sales law includes special rules that apply to merchants. Answer: True 10. An offer to buy or sell goods may be accepted in any manner that is reasonable under the circumstances. Answer: True 11. When a term of an acceptance conflicts with a term of an offer but it is clear that the parties intended to be bound by a contract, the UCC still recognizes the formation of a contract, and the conflicting terms cancel each other and are ignored. Answer: True 12. The UCC permits a court to refuse to enforce a sales contract that it finds to be unconscionable. Answer: True 13. A contract for the sale of goods is not enforceable unless the contract clearly expresses the price. Answer: False 14. An output or requirement contract is not enforceable unless the parties include an estimate of prospective amounts. Answer: False 15. A contract of indefinite duration may be terminated by notice from either party to the other party. Answer: True 16. Any modification of a sales contract must be supported by some form of consideration. Answer: False 17. The parol evidence rule does not apply to the sale of goods. Answer: False 18. The term “course of dealing” refers to the language and customs of an industry. Answer: False 19. Defenses raised in a suit based on a sales contract differ greatly from defenses used in regard to any other type of contract. Answer: False 20. A merchant is about to transfer his entire inventory as part of an annual clearance action. This transfer is called a bulk transfer. Answer: False 21. The provisions of Article 6 concerning bulk transfers are designed to protect creditors. Answer: True 22. To satisfy the statute of frauds, the writing must be signed and must include the price of the goods. Answer: False 23. With regard to transactions between merchants, failure to repudiate a confirming letter within ten (10) days after receipt binds the non-signing merchant, just as if he had signed the letter or a contract. Answer: True 24. A writing that is offered to satisfy the statute of frauds must have been written for that purpose. Answer: False 25. When the price of the goods is $500 or more, a writing signed by the defendant is required in all cases. Answer: False 26. An oral contract to sell custom-made goods to a buyer is binding if the goods are not suitable for sale to anyone else in the ordinary course of the seller's business, and the seller has made a substantial beginning in manufacturing or procuring the goods. Answer: True 27. When an oral contract is made to sell a 75-inch LED LCD TV for $6,800, payment and acceptance of part of the purchase price avoids the bar of the statute of frauds. Answer: True 28. Consumer protection statutes may require a writing that is more detailed than the writing required by the statute of frauds provision of the Uniform Commercial Code. Answer: True 29. A bill of sale can be used as proof of an otherwise oral agreement. Answer: True 30. The CISG governs all contracts between parties in the countries that have ratified it. Answer: False MULTIPLE CHOICE 1. Article 2 of the Uniform Commercial Code applies to the sale of: A. corporate stocks. B. U.S. Treasury bonds. C. goods. D. insurance policies. Answer: C 2. All goods other than those existing and owned by a seller at the time of a transaction are called: A. existing goods. B. tangible goods. C. future goods. D. intangible goods. Answer: C 3. Which of the following is not a sale of goods? A. a bailment B. an option to purchase C. a gift D. all of the above Answer: D 4. A transfer of possession, but not title, is called: A. a bailment. B. an option to purchase. C. a gift D. all of the above. Answer: A 5. A contract involving both services and goods is classified as a contract for the sale of goods if: A. the services are to be performed upon the goods. B. the services cannot be performed unless the goods are supplied. C. no charge is made for the services. D. the sale of goods is the dominant aspect of the transaction. Answer: D 6. A merchant cannot revoke a firm offer to buy or sell goods if the merchant has: A. promised to keep the offer open. B. declared in the presence of two or more reputable witnesses that the offer will be kept open. C. received consideration to keep the offer open. D. stated in a signed letter that the offer would not be revoked for a specified period of time. Answer: D 7. Additional terms in acceptance of an offer for non-merchants: A. automatically result in rejection of the offer. B. forms a contract based on the original offer C. forms a contract that includes the additional terms. D. none of the above. Answer: B 8. Under Article 2 of the UCC, in a situation where it is clear that the parties intended a contract, but a term in the acceptance conflicts with a term in the offer: A. there is no contract. B. the acceptance is viewed entirely as a counteroffer. C. there is a contract for the terms of the offer and acceptance that are consistent, but the conflicting terms cancel out. D. there is a contract, and the conflicting term in the offer is part of the contract. Answer: C 9. As a general rule, courts will __________ in recovering money or property transferred under an illegal agreement. A. assist a commercial buyer B. assist a non-commercial buyer C. assist an institutional buyer D. not aid either party Answer: D 10. If a contract for the sale of goods does not state the price to be paid, the: A. contract is void because it is too indefinite to be enforced. B. buyer is required to pay a reasonable price for the goods. C. buyer can pay whatever price the buyer in good faith believes is a proper price. D. seller can rightfully charge whatever price the seller in good faith believes is a proper price. Answer: B 11. An agreement to periodically deliver home-heating oil to a residential customer that does not indicate the duration of the contract A. is enforceable for a reasonable period of time. B. lasts for one delivery only. C. is not a legally-enforceable contract. D. constitutes a bulk transfer. Answer: A 12. An agreement to modify a contract for the sale of goods: A. is only binding if supported by consideration. B. has to be voluntary in order to be enforceable. C. is only binding if the original contract is invalid. D. all of the above. Answer: B 13. __________ represents a pattern of performance between the parties to a contract. A. Course of dealing B. Usage of trade C. Course of trade D. Usage of dealing Answer: A 14. A sales contract must be evidenced by a writing if the sales price of goods is equal to or more than: A. $100. B. $1,000. C. $500. D. $5,000. Answer: D 15. Which term is not required in a writing in order to satisfy the statute of frauds? A. language indicating that a sale or contract to sell has been made B. the price of the goods C. the quantity of goods involved in the transaction D. the signature of the defendant Answer: B 16. Which of the following can satisfy the statute of frauds writing requirement? A. bills of sale B. Letters C. Telegrams D. all of the above Answer: D 17. A sales agreement that does not satisfy the statute of frauds is: A. a quasi contract. B. criminal. C. unenforceable. D. unlawful. Answer: C 18. Which of the following situations create(s) an exception to the statute of frauds writing requirement? A. non-re-sellable goods B. receipt and acceptance C. Payment D. all of the above Answer: D 19. The CISG: A. governs all contracts between parties in countries that have ratified it. B. applies only to goods bought for personal, family or household uses. C. applies to contracts in which the predominant part of the obligation is the supply of labor or other services. D. none of the above. Answer: D 20. Consumer leases: A. must always be evidenced by a writing. B. are always three- party transactions. C. require the lessor to make all usual warranties made by a seller in a sale of goods.. D. all of the above. Answer: C CASE 1. Janet Durham orally agreed to purchase certain computer hardware priced at $10,000 from Ted Stallings. The sale of the hardware also included a one-time setup service visit priced at $100. The total contract price amounted to $10,100. The computer hardware was delivered and set up, and Durham paid $10,100. Afterwards, Durham discovered that she could obtain the same goods and services from another seller for a total contract price of $9,100. She now seeks rescission of the contract, based on the fact that more than $500 in goods were involved in the sales transaction, that the contract between her and Stallings was subject to the statute of frauds as a result, and that the oral agreement between them was therefore unenforceable. Durham wants to return the computer hardware to Stallings, and receive reimbursement of $10,000 (She is willing to waive her claim to reimbursement for the $100 setup service visit.) Evaluate Durham’s legal position in this matter. Answer: A contract for services is not governed by the UCC, but when services are not the predominant part of a sale of goods contract, the contract will be classified as within the control of the UCC. Because the predominant component of this contract involved the sale of hardware (goods), the UCC applies. As a general rule, whenever the sales price of goods is $5,000 or more, the sales contract must be in writing to be enforceable. An exception to the statute of frauds writing requirement exists, however, when the goods have been delivered by the seller and received and accepted by the buyer. The sales contract between Durham and Stallings is within this exception to the statute of frauds. Another exception to the statute of frauds writing requirement is if the buyer has made full payment. Since Janet has already tendered full payment, she cannot successfully argue for rescission of the contract based on a violation of the statute of frauds writing requirement. Perhaps Janet has made a bad bargain in this case, but bad bargains are enforceable nonetheless. 2. Newlog, which had developed a new process for making artificial logs, entered into an oral contract with Specialty Manufacturing. The contract provided that Specialty would manufacture a special part that Newlog needed to make its artificial log machinery. The contract provided that Specialty would make the part to Newlog's specifications. Newlog orally agreed to pay $5,000 for the part. Specialty made the part to Newlog's specifications, but Newlog refused to pay, claiming that the oral contract was unenforceable because of the statute of frauds. Is Newlog correct? Answer: No. Judgment will be for Specialty. The nonresellable goods exception to the UCC statute of frauds applies because the part was specially-made for Newlog, and the part was not suitable for sale to anyone else in the course of Specialty's business and could otherwise only be sold as scrap. Thus, because Specialty had already made the part, the oral contract is enforceable, and Specialty can recover the full contract price. 3. Gonzalez Manufacturing negotiated by telephone to purchase approximately $7,000 worth of digital video recorders from Video Imports. The final details were worked out by telephone calls on April 2nd. On April 4th, Video sent Gonzalez a confirmation of their telephone agreement, which included pertinent details. Meanwhile, on April 3rd, Gonzalez was offered a better deal than Video's and accepted it. Upon arrival of the confirmation on April 6th, Gonzalez ignored it and did nothing further until May 1st, the date before Video was to deliver. On May 1st, Gonzalez informed Video that their contract was an unenforceable oral contract and that delivery would not be accepted. When attempts to amicably settle the matter failed, Video sued Gonzalez for breach of contract. Decide. Answer: Ordinarily, a sales contract of $5,000 or more requires written proof signed by the party disputing the contract; however, in a transaction between merchants, the failure to repudiate a confirmatory letter within ten (10) days of receipt binds the non-signer just as if the non-signer had actually signed the letter or a contract. The agreement between the two parties is, therefore, enforceable. Chapter 24—Title and Risk of Loss TRUE/FALSE 1. Supply chain management refers to the management issues of risk and title as goods flow through commerce. Answer: True 2. A seller's insurable interest in goods always terminates with the passage of the title to the buyer. Answer: False 3. Goods are called identified goods when they have been selected as the goods called for by a sales contract. Answer: True 4. When a person picks out a specific necktie and purchases it, the transaction involves identified goods. Answer: True 5. Future goods can be identified before they are manufactured. Answer: False 6. Fungible goods are always homogeneous. Answer: True 7. Once goods in a contract have been identified the buyer holds an insurable interest in them. Answer: True 8. Title to goods can be transferred without the actual delivery of the goods involved. Answer: True 9. A document of title is not sufficient for a creditor to take an interest in goods. Answer: False 10. Someone who finds and resells stolen property passes on a good title to a good faith purchaser. Answer: False 11. A buyer with a voidable title cannot pass on valid title to a subsequent good faith purchaser. Answer: False 12. A bailee can pass good title to a good-faith purchaser, even when the sale was not authorized by the owner and the bailee has no title to the goods but is in the business of selling those particular types of goods. Answer: True 13. If a contract contains a delivery term of FOB place of shipment, the seller’s obligation under the contract is to deliver the goods to a carrier for shipment. Answer: True 14. Under a CF contract, the seller must get the goods to a carrier and buy an insurance policy in the buyer’s name to cover the goods while in transit. Answer: False 15. COD is a shipping term that requires the buyer to pay in order to gain physical possession of the goods. Answer: False 16. In an FOB shipment contract title to the goods pass to the buyer when goods are delivered to the carrier. Answer: True 17. In a non-shipment contract risk of loss passes to the buyer when the merchant seller makes the goods available to said buyer. Answer: False 18. If a seller under a shipment contract sends nonconforming goods, the risk of loss in transit is on the buyer. Answer: False 19. In a sale on approval, the buyer’s approval must be demonstrated by express words. Answer: False 20. If a buyer purchases goods on approval, the buyer's creditors cannot reach such goods until there is an approval. Answer: True 21. A sale or return is a completed sale with an option for the buyer to return the goods. Answer: True 22. In a sale or return transaction, until the actual return of the goods is made, title and risk of loss remain with the buyer. Answer: True 23. A consignment sale is treated as a sale or return under UCC Article 2. Answer: True 24. In a self-service store a sale cannot occur until the goods are paid for. Answer: False 25. “Without reserve” auctions give the auctioneer the right to withdraw the goods from the sale process if the bids are not high enough. Answer: False MULTIPLE CHOICE 1. When particular goods have been selected by either the buyer or the seller, or both, as being the goods called for by the sales contract, the goods are said to be A. identified. B. actualized. C. realized. D. materialized. Answer: A 2. Goods that are not yet in existence or are not yet owned by the seller are __________ goods. A. fungible B. nonexistent C. future D. contingent Answer: C 3. __________ goods are goods that, when mixed together, are indistinguishable. A. Tangible B. Intangible C. Heterogeneous D. Fungible Answer: D 4. If an owner has acted in a way that misleads others, the owner may be __________ from asserting ownership. A. estopped B. voided C. breached D. identified Answer: B 5. If a contract contains a delivery term of __________, the seller’s responsibility is to get the goods to the buyer. A. FOB place of shipment B. FOB place of destination C. CIF place of shipment D. CIF place of destination Answer: B 6. In the case of a non-shipment contract, risk of loss passes to the buyer upon actual receipt of goods: A. only if the seller is a merchant B. only if the seller is a nonmerchant C. only if the buyer has already paid for them D. in all non-shipment contracts Answer: A 7. Title passes to the buyer at delivery: A. in all situations B. when goods are shipped FOB place of destination C. when goods are shipped FOB shipment D. never Answer: B 8. If shipped goods are damaged or destroyed after risk of loss passes: A. the contract is avoided B. the seller has breached the contract C. the buyer has the option to accept or not accept the goods D. it is the buyer’s loss Answer: D 9. In a __________, no sale takes place (meaning there is no transfer of title) until the buyer accepts the goods. A. conditional sale B. contingency sale C. sale or return D. sale on approval Answer: D 10. A __________ is a completed sale with an option for the buyer to return the goods. A. conditional sale B. contingency sale C. sale or return D. sale on approval Answer: C 11. The expense and the risk of return in a sale or return situation is on the: A. seller. B. buyer. C. lienholder. D. secured creditor. Answer: B 12. In a consignment, the dealer-consignee is often referred to as a(n): A. remainder. B. factor. C. quotient. D. exponent. Answer: B 13. A consignment sale is treated as a(n) __________ under UCC Article 2, and the dealer-consignee has full authority to sell the goods for the consignor and can pass title to the goods. A. ordinary sale B. final sale C. sale on approval D. sale or return Answer: D 14. Most courts hold that when a customer takes an item from the shelf in a self-service store, there is: A. no sale. B. a sale. C. a contract to sell. D. a conditional sale. Answer: A 15. __________ reserve auctions are those that give the auctioneer the right to withdraw the goods from the sale process if the bids are not high enough. A. Qualified B. Restricted C. With D. Without Answer: C 16. __________ reserve auctions are those in which the goods must be sold regardless of whether the auctioneer is satisfied with the levels of the bids. A. With B. Without C. Unqualified D. Unrestricted Answer: B 17. When goods are sold at an auction in separate lots, the title to each lot passes: A. when the winning bidder tenders payment for the lot. B. when the lot is received by the winning bidder. C. only when all lots have been sold. D. when the auctioneer announces that the lot in question has been sold to the bidder. Answer: D CASE 1. Anderson Clock Company is in the business of selling and repairing clocks. Jay purchased a grandfather clock from them. Laurie had left the clock at Anderson’s for a cleaning and calibration. When Laurie found out the clock had been sold, she contacted Jay and demanded he return it. Must Jay comply with Laurie’s demand? What other options does she have? Answer: No. When Laurie left the clock at Anderson’s she created a bailment. Because Anderson is in the business of selling clocks, Anderson passed title to Jay as a good-faith purchaser. Laurie has a cause of action against Anderson for conversion. If Anderson sold the clock knowing it belonged to Laurie, some states could consider the sale a crime such as larceny. All legal proceedings will involve Anderson, Laurie and possibly the government. However, Jay has good title to the clock and is the rightful owner. 2. Bob Corporation entered into a contract to sell parts to Zeck. The contract provided that the goods would be shipped "FOB Bob's warehouse." Bob shipped parts to Zeck that were stolen from the carrier. When Zeck checked the invoice, Zeck discovered that Bob had sent Model #20B instead of Model #20A, which the contract required. Whose loss? Why? Answer: When the seller breaches the contract by sending the incorrect goods or goods that do not conform to the contract, the risk of loss is on the seller notwithstanding the fact that the goods were sent to the buyer under a shipment contract. The essence of this is that the seller does not pass the risk to the buyer until the seller properly performs. 3. Anne Robertson obtained telescopes from the See-Well Optics Company at dealer prices on the pretense of being a dealer in optical equipment. See-Well later determined that Robertson was not, had never been, and did not plan to be a dealer in optics. By the time these facts emerged, Robertson had succeeded in selling the telescopes to several individuals located throughout the country. These buyers had responded to advertisements placed by Robertson, who again had represented herself as a dealer in optical equipment. The buyers had purchased the telescopes in good faith at prices consistent with comparable equipment. See-Well located these buyers and demanded that the telescopes be returned as property obtained through fraud. Do the buyers of these telescopes have to return their purchases? Answer: No. Because the purchasers gave value and purchased in good faith, they have a valid title even though the telescopes were the subject of fraudulent action by Robertson. If See-Well had uncovered the fraud prior to Robertson's sale of the goods, the firm could have voided her title and demanded the return of the goods. At this point, See-Well must content itself with seeking action against Robertson for fraud. Chapter 25—Product Liability: Warranties and Torts TRUE/FALSE 1. Negligence and fraud are easy to prove in a mass production world. Answer: False 2. The requirement of privity of contract to allow recovery in a sales contract has been widely rejected. Answer: True 3. The right to sue for damages sustained from a defective product is reserved exclusively to the buyer of such goods. Answer: False 4. Plaintiffs suing for damages caused by a defective product are limited to taking action only against the manufacturer(s) of such goods. Answer: False 5. A warranty may be express or implied. Answer: True 6. An express warranty is basically any statement of fact or promise made about the goods that becomes part of the basis of the bargain. Answer: True 7. It is necessary to the creation of an express warranty that the seller use formal words such as “warrant” or “guarantee.” Answer: False 8. An express warranty can be disclaimed even if it was a critical part of the bargain to the buyer. Answer: False 9. An express warranty can be made orally or in writing. Answer: True 10. An express warranty arises when goods are purchased based on a catalog illustration. Answer: True 11. Ordinarily, a seller's opinion about the good(s) cannot be treated as a warranty. Answer: True 12. A seller who makes a written express warranty for consumer goods costing more than $50 must conform to FTC regulations. Answer: False 13. No law requires a seller to make an express warranty. Answer: True 14. A full warranty allows the seller to require the buyer to assume the shipping cost of returning the good(s) for repair. Answer: False 15. Any warranty that does not provide the complete protection of a full warranty is called a warranty in breach. Answer: False 16. A seller cannot be held liable for the breach of an express warranty if the seller honestly believed that the warranted statement was true. Answer: False 17. An implied warranty arises automatically from the fact a sale has been made. Answer: True 18. Whenever a sale of goods is made, certain warranties are implied unless they are expressly excluded. Answer: True 19. When a buyer makes a purchase without relying on the seller's skill and judgment, no warranty of fitness for a particular purpose exists. Answer: True 20. A merchant has greater potential warranty liability than does a casual seller. Answer: True 21. Unless otherwise agreed, every merchant seller warrants that goods are sold free of any rightful claim by any third party. Answer: True 22. The scope of warranties remains the same regardless of whether the seller is a merchant or a casual seller. Answer: False 23. If a merchant sells a lawn mower that will not cut any type of grass, there is a breach of the warranty of merchantability. Answer: False 24. Manufacturers who prepare goods to the buyer's specifications are under exceptionally stringent warranty obligations for fitness for a particular use. Answer: False 25. In applying the “foreign substance/natural substance” liability test in the sale of food or drink, courts hold that there is liability if the seller does not deliver to the buyer goods of the character that the buyer reasonably expected. Answer: False 26. The warranties of both merchantability and fitness for a particular purpose exist under the Convention on Contracts for the International Sale of Goods (CISG). Answer: True 27. If there is a written contract, a disclaimer of the implied warranty of merchantability must be conspicuous. Answer: True 28. An exclusion of warranties made in the manner specified by the Uniform Commercial Code is not unconscionable. Answer: True 29. An auto manufacturer is excused from liability if it can be shown the defect was in a component part purchased from a manufacturer. Answer: True 30. An action for negligence rests upon common law tort principles. Answer: True 31. The theories of product liability are mutually exclusive. Answer: False MULTIPLE CHOICE 1. Which of the following is not a product liability theory that protects buyers and allows them to recover for injury and economic loss? A. express warranty B. implied warranty C. strict tort liability D. assumption of the risk Answer: D 2. Only the parties to a sales contract could sue each other under the traditional concept of: A. exclusivity of contract. B. privity of contract. C. privacy of contract. D. priority of contract. Answer: B 3. The defendant in a defective product suit may be: A. the seller. B. the manufacturer. C. the manufacturer of a component part. D. all of the above. Answer: D 4. Which of the following statements made by the seller does not likely constitute an express warranty? A. "This looks beautiful on you." B. "This is 100 percent wool." C. "This motor generates 100 horsepower." D. "This is a 3.2 liter rotary engine." Answer: A 5. Under what type of warranty is the seller obligated to fix or replace a defective product within a reasonable time at no cost to the buyer? A. full B. express C. limited D. implied Answer: A 6. The federal regulation of express warranties: A. applies only to limited warranties. B. applies to a seller who makes a written express warranty for a consumer product costing more than $10. C. requires all express warranties to be full warranties. D. requires an implied warranty to be designated as either full or limited. Answer: B 7. A warranty is limited if: A. only the original buyer is covered by the warranty. B. the buyer must pay any cost for repair or replacement of a defective product. C. it covers only part of the product purchased. D. all of the above. Answer: D 8. If an express warranty is breached: A. the warrantor is not liable if due care was exercised in the manufacture or handling of the product B. the seller has no warranty obligation if the buyer had the opportunity to inspect the goods before purchasing them. C. the warrantor is not liable if (s)he honestly believed that the warranty was true. D. the warrantor is always liable. Answer: D 9. In most instances, the mere fact that a sale was made gives rise to a(n): A. express warranty. B. limited warranty. C. implied warranty. D. full warranty. Answer: C 10. By the mere act of selling, a warranty is made that the: A. goods are the finest available. B. seller's title is good and the transfer is rightful. C. price is the lowest available. D. all of the above. Answer: B 11. Which of the following implied warranties is created when the buyer relies on the seller to pick out the goods that the buyer requires to meet a stated need? A. conformity to description B. Merchantability C. fitness for a particular purpose D. conformity to a sample or model Answer: C 12. The warranty of merchantability guarantees that the: A. party in question is a merchant. B. product is fit for the ordinary purposes for which it is sold. C. product will remain fit for its normal use for the applicable statute of limitations period. D. product can be resold by the buyer if the buyer does not want to keep it. Answer: B 13. With used or second hand goods, what is fit for normal use will be: A. a higher standard than with new goods. B. a lower standard than with new goods. C. the same standard as with new goods. D. not applicable since the goods are not new. Answer: B 14. How do the warranty provisions under the CISG compare to the provisions of the UCC? A. In most instances, the standards are the same. B. In all instances, the standards are the same. C. The CISG standards are stricter when compared to the UCC standards. D. The standards are completely different. Answer: A 15. Regarding the sale of food or drink, there is an implied warranty that: A. the food item is of average quality. B. the food item is fit for human consumption. C. that no foreign substances such as a nail or screw will be found. D. all of the above. Answer: D 16. A disclaimer or exclusion of the warranty of merchantability will be invalid if: A. the goods cost $500 or more. B. the defects in the goods are obvious to all buyers. C. it is made at the time of the sale. D. it is not conspicuously set forth in a writing. Answer: D 17. An examination of goods excludes any implied warranty with respect to a defect that: A. is apparent after a reasonable examination is made. B. will not be apparent without chemical analysis. C. will not be apparent until the goods are processed or used in manufacturing. D. is unknown to all parties and is not detectable by reasonable examination. Answer: A 18. The theories of product liability A. are mutually exclusive. B. are not mutually exclusive. C. are set forth exclusively in the UCC. D. are set forth exclusively in the common law. Answer: B 19. Which of the following must be proven by a plaintiff to recover for strict liability in tort? A. negligence of the seller or manufacturer B. recklessness of the seller or manufacturer C. unreasonably dangerous defects in goods that cause harm D. privity of contract between the manufacturer and the buyer Answer: C 20. Strict tort liability is applied: A. independently of the UCC. B. without regard to privity of contract. C. despite negligence on the part of the plaintiff. D. all of the above. Answer: D CASE 1. Arthur was looking for a Father's Day gift for his dad, Tony. Tony was a cigar smoker but Arthur was a nonsmoker. Arthur went to a cigar store and was looking around when the proprietor suggested Arthur try a new imported cigar. The proprietor touted this new cigar as "just like the great Cuban cigars." Arthur was reluctant but did light one of the cigars, which had a pleasant aromatic smell and took about five to six minutes to be consumed. On this basis, Arthur bought a box of the cigars and presented them to his father as a gift. When the father smoked one of the cigars, it gave off an acrid smell and was completely consumed in less than two minutes. When Arthur saw this, he was very upset and asked his father to try another. The same situation was repeated with the acrid odor and the cigar burning down very quickly like a cigarette. After Arthur tried unsuccessfully to return the cigars for a refund, Arthur filed a small claims court action against the store. The case was based on the failure of the purchased cigars to conform to the sample, breach of the implied warranty of merchantability, and the misleading statement "just like the Cuban cigars." Discuss the probable outcome of the case. Answer: Depending on the court’s interpretation, the statement "just like the Cuban cigars" may or may not constitute an express warranty. The question is whether this represents a description of the product, or is merely “sales talk” or “puffery. Clearly, goods sold on the basis of a sample give rise to an express warranty that the goods will approximate, or be similar to, the sample. These cigars clearly did not conform to the sample, and this non-conformity does represent breach of express warranty. If a fair and average quality cigar would not burn down and be consumed so quickly (one to two minutes) in normal use and not give off an acrid odor, the implied warranty of merchantability also may have been breached. The cigars appear not to be fit for ordinary use. 2. Sal was at home going through his normal workout when he bent his barbell bar. Sal is a professional bodybuilder, and this fact is obvious from his appearance. Sal went to his local sporting-goods store and was approached by a clerk wishing to assist him. Sal told the clerk about his problem and the clerk asked Sal to wait while an appropriate bar was located. The clerk presented Sal with a bar that the clerk said "is just what you need for your type of weight requirements." Sal paid for the bar and was returning home when he stopped at a health food restaurant. The drink that he ordered had an unusual taste, but the food establishment refused a refund. Sal became ill from the drink, which, as it turned out, had a toxic substance in it. Sal had to be hospitalized. When Sal was able to work out again, he attached the weights to the new bar and lifted the bar under his chin. The bar snapped in the middle and severely cut Sal. Sal is angry about the drink and the barbell. What are the applicable warranties involved? Does Sal have a cause of action? Answer: The sale of food or drink is a sale of goods. When such a sale is made by a merchant, as is the situation in this case, there is an implied warranty that the drink is fit for human consumption. Because the drink contained a toxic substance, there was a breach of the implied warranty of merchantability, allowing Sal to recover damages. This would be the court’s finding regardless of whether the jurisdiction in which the case is tried applies the “foreign substance/natural substance” liability test or the “reasonable expectations” test. Under an implied warranty of fitness for normal use, there is liability if a product fails when it is being utilized in an ordinary manner. In this case, the barbell did not perform normally. The sporting goods store could argue that Sal placed too much weight on the bar and that this constitutes misuse or assumption of the risk. However, Sal could argue that an implied warranty of fitness for a particular purpose existed. The clerk knew of Sal's purpose. Sal relied on the clerk to pick the appropriate bar. It also was obvious from Sal's appearance that the amount of weight that the bar would have to withstand would be substantial. 3. Thelma purchased a used truck from Hall that had been manufactured by International Harvester. To work on the truck engine, Thelma had to have the cab of the truck raised. When it was so raised, the cab fell unexpectedly and fatally injured Thelma. Suit was brought for her wrongful death against Hall and International Harvester. The suit was based on theories of negligence, strict tort liability, and breach of warranty. The defense was raised that there was no liability because the sale to Thelma had been made “as is” and the truck was a used truck. Were these defenses valid? Answer: The “as is” provision of the contract excludes warranty liability by virtue of UCC Section 2-316. The exclusion does not, however, affect liability for negligence or strict tort. The fact that the truck was a used truck does not exclude liability, because public policy still requires that the product be reasonably safe. The fact that the product was used would constitute a circumstance as to whether a defect was unreasonable, but it would not automatically bar product liability for negligence or strict tort. Test Bank for Business Law: Principles for Today's Commercial Environment David P. Twomey, Marianne M. Jennings 9781133588245, 9781305575158, 9780324786699

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