Test Bank for Managers and the Legal Environment: Strategies for Business, 9th Edition, Cons

Test Bank for Managers and the Legal Environment:

Strategies for Business, 9th Edition, Constance E.
Bagley, ISBN-10: 1337555088, ISBN-13:
9781337555081

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Name: Class: Date:

Ch 08 - Sales, Licensing, and E-Commerce

True / False

1. The Uniform Computer Information Transactions Act is a federal law.

a. True
b. False
ANSWER: False

2. Many states have applied Article 2 of the UCC to software licenses either directly or by analogy.
a. True
b. False
ANSWER: True

3. The UCC treats fixtures as goods.

a. True
b. False
ANSWER: False

4. The UCC permits a contract to be enforced if the parties intended a binding contract, even though important terms may
have been left open for later agreement.
a. True
b. False
ANSWER: True

5. The UCC specifically defines an acceptance as "a written confirmation assenting to offered or agreed upon terms."
a. True
b. False
ANSWER: False

6. The UCC has adopted the "mirror image" rule.

a. True
b. False
ANSWER: False

7. Under the UCC, goods that are reasonably fit for the general purposes for which they are sold and that are properly
packaged and labeled are considered to meet the implied warranty of merchantability.
a. True
b. False
ANSWER: True

8. A contract for the sale of land is governed by Article 2 of the UCC.

a. True
b. False
ANSWER: False

9. Under the UCC, the buyer may reject any or all of the goods if the goods fail to conform to the contract.
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a. True
b. False
ANSWER: True

10. The UCC regulates sales of goods by merchants but not by nonmerchants.
a. True
b. False
ANSWER: False

11. The main issue in CASE 8.1, Option Wireless, Ltd. v. OpenPeak, Inc. (2012), involved the so-called "knockout rule."
a. True
b. False
ANSWER: True

12. “Good faith” is defined in section 1-201(b)(20) as “a definite and seasonable expression of acceptance or a written
confirmation which is sent within a reasonable time [and] operates as an acceptance even though it states terms additional
to or different from those offered or agreed upon.”
a. True
b. False
ANSWER: False

13. Efforts to create a comprehensive uniform state law for software licensing have been largely unsuccessful.
a. True
b. False
ANSWER: True

14. Procedural unconscionability is easier to prove in a commercial setting than when an individual consumer is involved.
a. True
b. False
ANSWER: False

15. Under the UCC doctrine of commercial impracticability as applied by the UCC, a failure to perform is a breach except
when performance is made impractical by an event unforeseen by the contract.
a. True
b. False
ANSWER: True

16. A proposal by a sales representative that is subject to approval by the home office is not an offer.
a. True
b. False
ANSWER: True

17. As defined by the UCC, "good faith" involves the observance of objective reasonable commercial standards of fair
dealing but there is no requirement as to honesty in fact.
a. True
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b. False
ANSWER: False

18. The Uniform Electronic Transactions Act, where enacted, applies to intrastate transactions, whereas the E-Sign Act
governs only transactions in interstate and foreign commerce.
a. True
b. False
ANSWER: True

19. Most courts require that a plaintiff prove reliance on an express warranty in order to recover damages.
a. True
b. False
ANSWER: True

20. The implied warranty of fitness for a particular purpose may apply to merchants and nonmerchants alike.
a. True
b. False
ANSWER: True

21. A product liability action brought in tort generally permits recovery of economic damages suffered by a purchaser of
an inferior or defective product, whereas a breach of warranty action would not allow such a claim.
a. True
b. False
ANSWER: False

Multiple Choice

22. To which of the following does Article 2 of the UCC apply?

a. The sale of goods
b. The rendering of services
c. The sale of land
d. Both the sale of goods and the rendering of services
ANSWER: a

23. _____ are items of personal property attached to real property that cannot be removed without substantial damage.
a. Connectors
b. Relaters
c. Entanglements
d. Fixtures
ANSWER: d

24. Unless the parties opt out of its provision, the _____ will apply to most international sales of goods.
a. UCITA
b. UCC, Article 2
c. CISG
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d. TRUSTe
ANSWER: c

25. To which of the following does the term "battle of the forms" refer?
a. The situation in which one of the parties wishes to use a preprinted form, but the other party wishes to engage
in direct negotiation
b. The situation in which the parties entered into a formal contract, but the contract has been misplaced by both
parties, resulting in uncertainty regarding the exact terms of the original contract
c. The situation in which parties have neglected to bargain over items and then exchange standard printed forms,
resulting in confusion regarding the terms of the contract
d. The situation in which a party wishes to claim unconscionability based upon another party's use of a preprinted
form
ANSWER: c

26. According to the UCC, if no amount of time is specifically stated, a firm offer provided by a merchant must be kept
open for a reasonable period of time, up to
a. one year.
b. six months.
c. three months.
d. sixty days.
ANSWER: c

27. If parties to a contract dispute a missing term, the court could simply fill in the missing term using the _____
provisions of the UCC.
a. Gap-Filler
b. Conditional Acceptance
c. Battle of the Forms
d. Knockout Rule
ANSWER: a

28. Under the Convention on Contracts for the International Sale of Goods (CISG), an offer becomes effective when
a. the offeror sends it.
b. it reaches the offeree.
c. the offeree reads it.
d. the offeree replies.
ANSWER: b

29. Under the UCC, the _____ term(s) must be in a writing order to satisfy the statute of frauds.
a. price
b. quantity
c. identity of the parties
d. time and place for delivery
ANSWER: b

30. Unless specified otherwise, UCC section 2-509 places the risk of loss on the party controlling the goods at the time
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loss occurs, because that party is better able to take precautions to protect the goods and to insure against loss. As a result,
a party:
a. may bear the risk of loss even if it does not hold title to the goods at the time of loss.
b. is protected from risk of loss if it does not hold title to the goods.
c. may not be at risk of loss until in physical possession of the goods.
d. cannot avoid risk of loss from the moment an offer is made.
ANSWER: a

31. Under the UCC, a firm offer only applies to

a. merchants.
b. merchants and nonmerchants.
c. nonmerchants.
d. option contracts.
ANSWER: a

32. Which of the following is governed by Article 2 of the UCC?

a. A contract for sale of a commercial building
b. A contract for sale of office supplies
c. An employment contract
d. A life insurance contract
ANSWER: b

33. UCC Section 2-319 expressly authorizes the buyer and seller to allocate the __________ between them as they see fit.
a. damages
b. specific performance
c. modification
d. risk of loss
ANSWER: d

34. If a sales contract requires the seller to ship the goods by carrier and specifies the destination, the risk of loss passes to
the buyer when the
a. goods are properly delivered to the carrier.
b. carrier tenders the goods to the buyer at the specified destination.
c. contract is finalized.
d. seller pays for the goods.
ANSWER: b

35. When the seller provides the buyer with a document enabling the pickup of goods held at an independent warehouse,
the risk of loss passes to the buyer when the:
a. goods are picked up by the buyer.
b. contract of sale is signed.
c. buyer receives the document entitling it to pick up the goods.
d. buyer pays for the goods.
ANSWER: c
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36. A contract is __________ when one party is induced to enter a contract without having any meaningful choice.
a. substantively unconscionable
b. procedurally unconscionable
c. procedurally impracticable
d. substantively impracticable
ANSWER: b

37. A contract is __________ if its terms are unduly harsh or oppressive or unreasonably favorable to one side.
a. substantively unconscionable
b. procedurally unconscionable
c. procedurally impracticable
d. substantively impracticable
ANSWER: a

38. Under Section 2-207(2), if only one party is a merchant, an acceptance containing additional terms
a. automatically becomes part of the contract unless the offeror objects within ten days.
b. is considered a proposal for additions to the contract.
c. is a counteroffer.
d. has no effect and the contract is accepted without the new terms.
ANSWER: b

39. Which of the following is an example of a statement made by a salesperson that would be considered "puffing"?
a. This car will get 35 miles per gallon.
b. This is a genuine diamond ring.
c. This is an original work of art.
d. This copier is the best in the business.
ANSWER: d

40. Which of the following is true regarding the UCC's Statute of Frauds?
a. The writing involved must be typed, not handwritten.
b. The writing must be signed by the party to be charged, not necessarily by all parties.
c. Any warranties must be included in the writing in order to be enforceable.
d. The UCC's requirements regarding a writing are strict and place significant burdens on the parties in regard to
adequately including all terms of the agreement in the writing.
ANSWER: b

41. Which of the following is NOT a type of warranty under the UCC?
a. Express
b. Fitness for a particular purpose
c. Merchantability
d. Specific performance
ANSWER: d

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42. For which of the following would an electronic signature be invalid under both UETA and E-Sign?
a. Contracts relating to matters of family law
b. Notices of recall
c. Contracts for foreign commerce
d. Documents accompanying the transport of hazardous materials
ANSWER: a

43. Which of the following is true regarding the UETA in relation to the E-Sign Act?
a. Because the UETA is a federal law, whereas the E-Sign Act is a creature of state law, the UETA preempts the
E-Sign Act in many ways.
b. The UETA and also the E-Sign Act exclude wills from their coverage.
c. Both the UETA and the E-Sign Act include within their broad scope provisions that divorces may be entered
into and recorded electronically.
d. The UETA allows electronic signatures whereas the E-Sign Act disallows such signatures.
ANSWER: b

44. Under 2-711 of the UCC, a buyer has a remedy called "cover." What is cover and when can it be used?
a. Cover applies when conforming goods are rejected by the buyer, giving the buyer the right to cancel the
contract and buy better goods elsewhere with reimbursement for any extra costs.
b. Cover applies when nonconforming goods are delivered to the buyer, giving the buyer the right to cancel the
contract and buy the goods elsewhere with reimbursement for any extra costs.
c. Cover is a seller's right and does not apply to the buyer.
d. Cover allows a buyer to cancel the contract for shipments delayed more than 30 days and recover direct
damages from the seller.
ANSWER: b

45. In CASE 8.2, MacNeil Automotive Products, Ltd. v. Cannon Automotive, Ltd. (2010), MacNeil subcontracted with
Canon Automotive to provide floor mats on automobiles. MacNeil claimed the mats were defective and breached the
express warranty. What was the main question before the court?
a. Did the sales talk constitute an implied warranty for fitness of purpose?
b. Did the sales talk constitute an implied warranty of merchantability?
c. Was the sales talk puffery or an express warranty?
d. Did the sales talk properly disclaim all express warranties?
ANSWER: c

46. Browse-wrap agreement appears on a website and:

a. does not need to be conspicuous to be enforceable.
b. does not require the user to take any action to express consent to the agreement.
c. prevents use of any software until the license agreement is clicked.
d. acts as an application for licensed use of the software.
ANSWER: b

47. __________ do not relieve a contracting party from their responsibilities under the UCC doctrine of commercial
impracticability.
a. Wars
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b. Market fluctuations
c. Embargoes
d. Market fluctuations and embargoes
ANSWER: b

48. In highly concentrated industries with few competitors, all the sellers may offer the same unfair contracts on a “take-
it-or-leave-it” basis, known as an adhesion contract and an example of:
a. procedural unconscionability.
b. substantive unconscionability.
c. failure of underlying conditions.
d. express warranty.
ANSWER: a

49. Which of the following will NOT create an express warranty under the UCC?
a. Making a statement or promise relating to the goods.
b. Expressing an opinion about the quality of the goods.
c. Providing a description of the goods.
d. Stating any fact regarding the quality of the goods.
ANSWER: b

50. With a shrink-wrap license, the user will:

a. not find the licensing terms in a conspicuous place.
b. agree to the terms of the license by clicking on an icon.
c. find the license terms on the outside of a box containing software.
d. not need to take any action to express consent to the agreement.
ANSWER: c

51. The courts that have considered click-wrap licenses have generally found that the licenses are
a. enforceable.
b. enforceable only for software costing $100 or less.
c. enforceable only for software costing $100 or less and that is designed for business, not consumer use.
d. unenforceable.
ANSWER: a

52. Chris sold Whitney a home containing a wood stove which could not be removed from the home without causing
substantial damage. Shortly after the sale, Whitney sustained significant smoke damage due to a malfunction of the stove.
Whitney told Chris of the intention to sue under the UCC. Chris told Whitney that was not possible. Which of the
following is true?
a. Chris is correct because the stove would likely be a fixture not covered by the UCC.
b. Whitney is correct because the stove would likely be a fixture covered by the UCC.
c. Whitney is correct because the stove would not be considered a fixture and would, therefore, be covered by the
UCC.
d. Whitney is correct because the sale of the home would be covered under the UCC along with anything else
sold with the home.

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ANSWER: a

53. Rylen develops a new type of software and asks you how to go about making money through distribution of it. Rylen
has been told to sell the software as opposed to issuing licenses for its use. What should you tell Rylen?
a. By selling, rather than by licensing, a software vendor can avoid the doctrine of first sale, which allows a
lawful owner to sell or otherwise dispose of the copy.
b. By licensing, rather than by selling, a software vendor can avoid the doctrine of first sale, which allows a
lawful owner to sell or otherwise dispose of the copy.
c. Selling is the only reasonable alternative because computer programs are not copyrightable.
d. Licensing is the only reasonable alternative because computer programs are not copyrightable.
ANSWER: b

54. In a state that had adopted the Uniform Electronic Transactions Act, Kiera and Ben entered into a contract whereby
Ben would clean Kiera's house once a week for eighteen months for $75 per week. The transaction was done
electronically, and both Kiera and Ben signed through the use of an electronic signature. Unfortunately, problems resulted
when Ben failed to show up as scheduled. Ben told Kiera that the contract was not good because his signature was made
electronically. Kiera told him that he was wrong and that he needs to get up to date with the modern age. Which of the
following is correct regarding the dispute?
a. Ben is correct because electronic signatures are not recognized as valid under any circumstances.
b. Ben is correct only if Kiera's name was typed as opposed to being shown in handwriting-style (cursive) form.
c. Kiera is correct that the signature is sufficient only if she can show that she and Ben had previously engaged in
electronic transactions.
d. Kiera is correct that her electronic signature is sufficient.
ANSWER: d

55. Panya sold Jody a used car for $1,000. Their contract provided that the engine in the car was in good shape, a true
statement as far as Panya knew. Unfortunately, the day after Jody purchased the car, it broke down and was discovered to
have significant engine problems. Jody wanted a refund. Panya said Jody was not entitled to a refund because Panya did
not lie and had not known anything was wrong with the car. Which of the following is true?
a. Jody is entitled to a refund because of a breach of an express warranty.
b. Jody is entitled to a refund because of a breach of the implied warranty of fitness for a particular purpose.
c. Jody is entitled to a refund only by obtaining evidence that Panya lied.
d. Jody is not entitled to a refund under any circumstances because the vehicle was used.
ANSWER: a

56. Rene owns a small restaurant that sells hamburgers as one of its main attractions and puts up a sign that says "Best
Burgers in the County." Marion does an exhaustive investigation of all restaurants in the county and asks friends to do the
same. They all determine that actually a restaurant run by their friend Sam has the best burgers in the county. Marion tells
Rene that unless the sign is removed, Rene could be sued for breach of warranty and false advertising. Rene tells Marion
no one has cause of action. Who is correct?
a. Marion is correct as long as jurors in a lawsuit can be convinced that Sam has the best burgers.
b. Marion is correct only by establishing that Rene was aware that Sam's burgers actually taste better before the
sign was put up.
c. Marion is incorrect because Rene was engaged in "spoofing."
d. Marion is incorrect because Rene was engaged in "puffing."
ANSWER: d
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57. If the contracted goods are unique and fail to be delivered, the buyer can ask a court under 2-716 of the UCC to order:
a. allocation of risk of loss.
b. consequential damages.
c. cover.
d. specific performance.
ANSWER: d

Essay

58. Between merchants, what is the effect of an acceptance that includes additional terms without expressly making the
contract subject to the offeror's agreeing to those terms?
ANSWER: The additional provisions in the acceptance automatically become part of the contract, unless (1) the offer
expressly limits acceptance to the terms of the offer, (2) the new terms materially alter the original offer, or (3)
the party making the original offer notifies the other party within a reasonable time that it objects to the new
terms. If any one of these exceptions applies, the additional terms serve as proposals requiring the express
consent of the offeror to become part of the contract.

59. Explain the different types of warranties that exist under the UCC.
ANSWER: Express warranties, warranties of merchantability and warranties of fitness for a particular purpose are the
types of warranties under the UCC. An express warranty is an explicit guarantee by the seller that the goods
will have certain qualities. The implied warranty of merchantability guarantees that goods are reasonably fit
for the general purpose for which they are sold and that they are properly packaged and labeled. The implied
warranty of fitness for a particular purpose guarantees that the goods are fit for a particular purpose for which
the seller recommended them beyond the scope of ordinary purposes.

60. Indicate how a seller may disclaim warranties under the UCC.
ANSWER: The seller need not make any express warranties. A seller may disclaim warranties of quality if it follows rules
in the UCC. To be effective, (1) a disclaimer of the implied warranty of merchantability must mention
merchantability and, if in writing, must be conspicuous; and (2) a disclaimer of the implied warranty of fitness
must be in writing and conspicuous. Language to exclude all implied warranties (for example, "AS IS" or
"WITH ALL FAULTS") is also sufficient if it makes plain that there is no implied warranty. Third, the seller
can refrain from professing expertise with respect to the goods and leave the selection to the buyer.

61. Why do vendors today typically prefer to license software rather than sell it outright?
ANSWER: Licenses offer certain advantages to the licensor. A sales agreement generally imposes no continuing
obligations on the purchaser other than an obligation to pay the purchase price. A software license, however,
generally includes a number of continuing obligations, such as limitations on the right to make copies of the
software, limitations on the number of computers on which the program may be installed, prohibitions against
sublicensing, restrictions on the use of the software to provide services to third parties, prohibitions against
modifying the software, and prohibitions against reverse engineering. By licensing, rather than selling, the
software, the vendor can also avoid the doctrine of first sale which provides that the owner of a copy can sell
or otherwise dispose of their copy.

62. What does Section 201 of the UCC provide regarding a Statute of Frauds?
ANSWER: Section 2-201 provides that a contract for the sale of goods of $500 or more is unenforceable unless (1) there
is some writing evidencing the sale of the goods, (2) the writing is signed by the party against whom
enforcement is sought, and (3) the writing specifies the quantity of the goods sold.

63. When is a failure to perform allowed under the UCC’s doctrine of commercial impracticability?
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Ch 08 - Sales, Licensing, and E-Commerce

ANSWER: Section 2-615 states that unless the contract provides otherwise, a failure to perform is not a breach if
performance is made impractical by an event unforeseen by the contract. First, a party must show that there
was a failure of an underlying condition of the contract. Second, a seller seeking discharge must prove that the
contingency that prevents performance was both unforeseen and unforeseeable. Wars and embargoes are
considered unforeseeable; market fluctuations are not. The party must still prove that performance was
impracticable. Increased cost alone is not sufficient reason to excuse performance unless it is a marked
increase.

64. What must be established in order for goods to be considered merchantable under the UCC?
ANSWER: To be merchantable under the UCC, goods must (1) pass without objection in the trade under the contract
description; (2) be fit for the ordinary purposes for which such goods are used; (3) be within the variations
permitted by the agreement and be of even kind, quality, and quantity within each unit and among all units
involved; (4) be adequately contained, packaged, and labeled as the agreement may require; and (5) conform
to the promises or affirmations of fact made on the container or label, if any. Fungible goods, such as grain,
must be of average quality within the contract description.

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