1. Mark is mentally incompetent and delights   in signing documents. Henry persuades Mark to sign numerous promissory notes   which he negotiates. Must Mark pay these notes if they have been held by   holders in due course? 

A. Mark may not pay these notes since no   one could anticipate this happening.

B. Mark must pay these notes since duress   isn’t involved.

C. Mark must pay these notes since there   is a fraud in the inducement.

D. Mark doesn’t have to pay these notes   since he has a real defen

2. 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. The bank must pay $500 to Sally.

B. Carl must pay $500 to Sally.

C. Fred must pay $500 to Sally.

D. No one is obligated to pay anything to   Sally.

 

  

3.   Electronic _______ is a system in which funds are     electronically transferred from a customer’s checking account, eliminating     the need to process a paper check. 

 

  

 A.       check conversion 

 

 B. fund transfer 

 

 C. check transfer 

 

 D. teller system 

  

4.   Personal defenses can be used against 

 

  

 A. a holder in due           course of a negotiable instrument, but not a holder. 

 

 B. any party with           whom the holder in due course has dealt. 

 

C. a holder, but not a holder in due course of           a negotiable instrument. 

 

 D. natural persons,           but not corporations. 

  

5.   Local business activity             carried on within state boundaries is known as 

 

  

 A. interstate               commerce. 

 

B. intrastate commerce. 

 

 C. local               commerce. 

 

 D. public               commerce. 

  

6.   Lulu orders 20 pairs                 of navy blue pants from Peter for $4,000, with delivery due no                 later than November 15. On November 15, Peter delivers 20 navy                 dresses. Lulu may 

 

  

 A. sue for                   specific performance. 

 

 B. keep the                   goods and seek adjustment. 

 

                   C. sue for breach. 

 

 D. cover                   the sale. 

  

7.                       Jake bought a motorcycle from his neighbor Randy.                     Randy had owned the motorcycle for his personal use for                     about two years. The day after the purchase, Jake is                     seriously injured after the motorcycle suddenly veers off                     of the highway due to a manufacturing defect. Jake brings a                     strict liability action against Randy. Jake will most                     likely lose because the 

 

  

A.                       defendant must normally be engaged in the business of                       selling or otherwise distributing motorcycles. 

 

 B. motorcycle can’t have been                       substantially changed from the time the product was sold                       to the time of the injury. 

 

 C. plaintiff must incur                       physical harm by use of the motorcycle. 

 

 D. product must be in a                       defective condition when the defendant sells it. 

  

8.   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 must pay the check because the bank is a                           holder in due course. 

 

 B. Bob                           must pay the check because Zeke was a holder in due                           course. 

 

 C. Bob                           need not pay the check because it was obtained                           illegally. 

 

 D. Bob                           need not pay the check because the bank is a holder,                           not a holder in due course. 

 

9.     Which of the following statements is true of the FTC’s   Telemarketing Sales Rules? 

 

  

 A. A telemarketer is     allowed to call a consumer without requiring the consumer’s consent. 

 

 B. Calling times are     restricted to anytime during business days and holiday weekends. 

 

 C. Telemarketers are     excused from disclosing the name of the seller, and what they’re selling     before they make their pitch. 

 

D.     Telemarketers must state the total cost of the products or services offered     and that the sale is final or nonrefundable. 

 

10.     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 3 

 

B.     November 1 

 

 C. November 2 

 

 D. November 4 

    

11.   If a person obtains property as a result of       another’s fraud, misrepresentation, mutual mistake, undue influence, or       duress, the person is said to hold only 

 

  

A. voidable rights. 

 

 B. contract rights. 

 

 C. valid rights. 

 

 D. insured rights. 

  

12.   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. Sally is in             breach because Tom is permitted to demand cash. 

 

 C. Sally must pay             cash but is entitled to a reasonable time to come up with the cash.             

 

D. Tom is in breach as the UCC gives him no             right to demand cash. 

  

13.   To accept a draft,               the drawee 

 

  

A. need only sign the draft across the                 face of the instrument. 

 

 B. needs to                 write “accepted” behind the instrument and sign the                 bank’s record. 

 

 C. needs to                 write “accepted” on a separate piece of paper. 

 

 D. need only                 sign on a separate piece of paper affixed to the draft. 

 

 

14.   If a drawee refuses               to pay the instrument, it is said to be 

 

  

 A. delayed. 

 

 B. defaulted.                 

 

 C. detained. 

 

D. dishonored. 

  

15.   Which of the               following is true of destination contracts? 

 

  

 A. Both title                 and risk of loss pass to the buyer when goods are given to the                 carrier. 

 

 B. It                 requires a seller to turn the goods over to a carrier for                 delivery to the buyer. 

 

 C. The seller                 bears no responsibility for seeing that the goods reach their                 destination. 

 

D. Title and risk of loss pass to the                 buyer, once the seller tenders goods at a place as per the                 contract. 

 

16.     A check for which the issuing financial institution is both the drawer   and the drawee is called a _______. 

 

  

 A. teller’s check 

 

 B. certified check 

 

 C. bank draft 

 

D.     traveler’s check 

  

17.   Under the doctrine of _______, the principal       consideration is the safety of a product, not the conduct of the       manufacturer or supplier of the goods. 

 

  

A. strict liability 

 

 B. public interest 

 

 C. public policy 

 

 D. negligence 

  

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 can’t successfully assert the defense of fraud in the             inducement to avoid paying $3,000 to Sally. 

 

 B. Harold must             pay Sally, but only to the extent of the value of the plasma TV             that Tom bought from Sally. 

 

 C. Harold can             successfully assert the defense of fraud in the inducement to avoid             paying $3,000 to Sally. 

 

 D. Harold has a             real defense that can be asserted against Sally. 

  

19.   Congress passed the               _______ which requires lenders to disclose the finance charge and               the annual percentage rate. 

 

  

 A. Fair                 Credit Reporting Act 

 

 B. Equal                 Credit Opportunity Act 

 

                 C. Truth-in-Lending Act 

 

 D. Fair Debt                 Collection Practices Act 

 

 

20.   Even though Spice               gives her four-year-old car to Homeless Helpers Charity, she 

 

  

 A. need not                 provide an odometer statement, since the car is less than 15                 years old. 

 

 B. must set                 the odometer to zero before resale. 

 

                 C. must provide an odometer statement. 

 

 D. need not                 provide an odometer statement.