5. John, an automobile dealer, entered a contract
with Lisa in which Lisa agreed to
purchase a 1995 Chevrolet automobile 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
upon 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. win, because the implied warranty of merchantability was violated.
B. win, because the implied warranty of fitness for a particular purpose was violated.
C. lose, because no warranties were violated.
D. lose, because express warranties displace inconsistent implied warranties.
6. Jack and Barbara enter a contract in which Barbara agrees to deliver premium video
games to Jack in exchange for $2,500. Barbara has the goods shipped to Jack, and
Jack accepts the goods. However, the next day, Jack determines that the video games
aren’t premium video games at all, but are merely 10-year-old video games that
Barbara has recycled. Jack then notifies Barbara that he revokes his acceptance. Just
two hours after Jack notifies Barbara of this fact, the video games are struck by lightning
and destroyed. The most likely result will be that
A. Jack bears the risk of loss, because he accepted the shipment.
B. Jack bears the risk of loss, because the buyer always bears the risk of loss.
C. Barbara bears the risk of loss, because Jack revoked his acceptance.
D. Barbara bears the risk of loss, because the seller always bears the risk of loss.
8. Carrie owed Charlotte $20,000. Carrie offered Charlotte a promissory note (a negotiable
instrument) worth $200,000 upon 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. Charlotte didn’t take the instrument in good faith.
C. Charlotte should have known the instrument was stolen.
D. the instrument was stolen from Samantha.
12. Leroy writes a $50 check made payable to “Cash,” and gives the check to Laurie.
Which one of the following best describes what has happened?
A. Transfer by assignment
B. Taking for value
C. Transfer by negotiation
D. Transfer to a holder in due course
14. 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 one 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 if she is given timely notice of the dishonor.
C. Brenda is secondarily liable regardless of any notice of dishonor.
D. Brenda is primarily liable regardless of any notice of dishonor.