Business Law Ch 12 – Flashcards
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Warranties of title do not arise in most sales contracts.
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False
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A warranty against infringement is a promise by the seller that the product is free from any patent, trademark, or copyright claims of a third person.
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True
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A seller does not have to use words such as "warrant" to make an express warranty.
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True
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Only a statement made after a contract is entered into can be an express warranty.
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False
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Puffery creates an express warranty.
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False
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Goods must be of the highest quality possible to be merchantable.
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False
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An implied warranty of merchantability does not arise in every lease by a merchant who deals in goods of the kind leased.
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False
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Implied warranties can arise from a "course of dealing."
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True
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Under the doctrine of strict liability, people are liable for the results of their acts only if their intentions are malicious.
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False
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Strict liability depends on privity of contract between an injured party and a seller.
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False
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To succeed in a strict product liability suit, an injured plaintiff must show that a product's defect was the proximate cause of the injury.
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True
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An action in strict product liability requires that the product not be in a defective condition when the defendant sells it.
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False
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Sellers or lessors are liable only for products that are reasonably dangerous.
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False
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A design defect is not the sort of product defect that will support the imposition of liability on a strict product liability basis.
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False
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Recovery in a product liability case may be limited when it can be shown that the plaintiff misused the product.
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True
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Suppliers are generally required to expect reasonably foreseeable misuses of their products.
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True
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Courts in many jurisdictions consider the negligent actions of both the plaintiff and the defendant when apportioning liability in a product liability action.
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True
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The dangers associated with using sharp knives are so commonly known that manufacturers need not warn users of those dangers
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True
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Vague generalities constitute deceptive advertising.
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False
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Advertising will not be deemed deceptive so long as it appears to be based on factual evidence, even if it is not.
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False
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Bait-and-switch advertising occurs when an ad appears to be based on factual evidence but in fact is not reasonably supported by evidence.
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False
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Obvious exaggerations constitute deceptive advertising.
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False
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All ads?both online and offline?must be truthful.
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True
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Counteradvertising requires a company to advertise the products of its competitor to counter its own false claims.
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False
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Labels must use words that are easily understood by the ordinary marketing executive.
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True
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Food labels are not required to provide standard nutrition facts.
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False
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Labels on vegetables and fruits are not required to indicate where the food originated.
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False
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Merchants must ship orders within the time promised in their ads.
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True
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Merchants must issue a refund within a specified period of time when a consumer cancels an order.
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True
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Manufacturers are required to report on any products intended for sale if the products have proved to be hazardous.
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True
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The key federal statute regulating the credit and credit-card industries is basically a disclosure law.
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True
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A credit-cardholder is liable for all unauthorized charges made before the creditor is notified that the card has been lost.
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False
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A credit-card company is not required to provide advance notice to consumers before changing credit-card terms.
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False
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Major credit reporting agencies must provide consumers with free copies of their own credit reports every twelve months.
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True
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A collection agency must include a validation notice whenever it initially contacts a debtor for payment of a debt.
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True
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Jean buys a bike from Mike's Bike Shop. She wants to make sure that there is a warranty of title. Jean
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does not need to do anything because warranties of title arise automatically in most sales contracts.
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Krissa, a horse breeder, shows Maggie, a customer looking for a new stallion for her breeding program, a stallion and tells her that the stallion is very fertile and can easily breed twenty mares per year. Krissa's statement is
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an express warranty.
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Fancy's Feedlot orders one hundred sacks of cattle feed from Bovine Feeders, Inc. Each bag has the words "Twenty percent protein" printed on the front. This is
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an express warranty.
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Sari buys a new sport utility vehicle (SUV) from Terrific Cars & Trucks, Inc. The most important factor in determining whether an express warranty is created is whether
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Terrific's promise becomes part of the basis of the bargain.
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Ocean Vessels, Inc., and Pacific Harbor Company enter into a contract for a sale of a boat. Ocean is a merchant who deals in goods of the kind sold. The goods are defective. Under the UCC, the implied warranty of merchantability is breached
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puffery.
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Sigrud buys spiked mountain-climbing shoes from Rockridge Gear store. The spikes come out of the shoes when Sigrud is on the side of a mountain, causing her to be injured in a fall. Rockridge breached
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an implied warranty of fitness for a particular purpose.
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Fred goes to Carla, a knowledgeable dog breeder, and tells her that he wants to get a dog that will be good with small children. Carla sells Fred a dog. When Fred takes the dog home, it bites both his small children and causes them serious injuries. Fred can sue Carla for breach of
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an implied warranty of fitness for a particular purpose.
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Regional Wood Products Company and Sylvia enter into a contract for a sale of lumber. Regional knows the purpose for which Sylvia will use the goods. Under the UCC, an implied warranty of fitness of a particular purpose arises
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if the seller is a merchant who deals in goods of the kind sold.
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Regal Autos, Inc., sells cars to consumers. To avoid liability for oral express warranties, each sales agreement should note that a car is sold
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cannot disclaim implied warranties.
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Robert is selling his used lawnmower. He wants to disclaim any implied warranties. Robert
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should include a written disclaimer that the lawnmower is being sold "as is."
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Mountain Bikes, Inc. (MBI), and Nero enter into a contract for a sale of a mountain bike. MBI, a merchant who deals in goods of the kind sold, makes implied and express warranties in connection with the sale. The Magnuson-Moss Warranty Act attempts to prevent deception in warranties by
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making warranties easier to understand.
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Forest ; Field Company makes and leases a backhoe to Zac. Due to a defect attributable to Forest ; Field's negligence, Zac is injured in an accident in which his neighbor Aaron is also hurt. In a product liability suit based on negligence, Forest & Field may be liable to
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Zac and Aaron.
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Paltry Assembly Company makes espresso machines and sells one to Vim through a misrepresentation on the label on which Vim relies and that results in an injury to Vim. Paltry is most likely liable for
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fraud.
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Fun Toyz Corporation makes skateboards, which it sells to consumers, including Holly and Ira. Due to a defect, Holly is injured while using her new board. Ira's board has the same defect, but he is not injured. In a product liability suit based on strict product liability, Fun Toyz may be liable to
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Holly and Ira.
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Goldtone Corporation makes cell phones. Haji files a product liability suit against Goldtone, alleging a design defect. In deciding whether to hold Goldtone liable, the court may consider an alternative design's
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effect on the product.
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SurgeStop Company makes electrical cords and other connectors for electronic devices. Rollo files a product liability suit against SurgeStop, alleging a warning defect. In deciding whether to hold SurgeStop liable, the court may consider
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the obvious risks of this product.
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Dwayne, an electrician, files a suit against Electro Mechanix, Inc., alleging that its circuit breakers are unreasonably dangerous due to the possibility of electrical shock. Dwayne's suit is most likely to
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fail, because Dwayne is a knowledgeable user.
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TruCalling, Inc., sells ringtones for cellphones. The company's ad states, "Our tones aren't phony?they ring true!" The Federal Trade Commission would consider this ad
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none of the choices.
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Precise GPS Company's ad states that its product is "the finest that money can buy." Because of this ad, the Federal Trade Commission is most likely to issue
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a cease-and-desist order.
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Va-Va-Voom Products, Inc., engages in deceptive advertising when it markets its product Weight-No-More as able to help consumers lose weight in their sleep. Va-Va-Voom is ordered to include in all future advertising of Weight-No-More the statement, "This product will not cause anyone to lose weight while sleeping." This is
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a counteradvertising order.
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Bright Brew Coffee, Inc., processes and sells a variety of coffee products. Bright Brew's product packages must include
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the net quantity of the contents.
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Sweet Treats, Inc., wants to market a new snack food. On the product's label, standard nutrition facts are
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required.
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Under federal law, the calorie content of the food on a menu must be posted by Organic Mix, LLC, if Organic Mix is
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a restaurant chain with twenty or more locations.
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Corner Market sells groceries. Delite Food & Drug Store sells groceries and fills prescriptions. The chief responsibility to prevent unsafe food and drugs from being sold rests with
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the Food and Drug Administration.
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Steel Tool Company makes and sells tools. One of the tools is believed to be hazardous. The appropriate government agency may require Steel to
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remove the tool from the market.
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Creditworthy Loan Company extends credit in the ordinary course of its business. Under the Truth-in-Lending Act, Creditworthy must inform potential borrowers of
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Creditworthy's credit terms.
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Tory borrows $10,000 from USA National Bank to remodel a room in her home. This transaction is subject to
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the Truth-in-Lending Act.
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Consumer Finance Corporation (CFC) extends credit to consumers. CFC is subject to the Equal Credit Opportunity Act, which prohibits credit discrimination based on
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education.
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Kirk receives an unsolicited credit card in the mail and tosses it on his desk. Without Kirk's permission, his roommate Leif uses the card to buy a new laptop for $1,800. Kirk is
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not liable for any amount.
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Bodie's application to City Bank for a credit card is denied. Bodie can obtain information on her credit history in a credit agency's files under
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he Fair Credit Reporting Act.
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Quik Collection Agency calls Pat several times a day, and sometimes in the middle of the night, about an overdue bill that Regal Sporting Goods turned over to Quik for collection. This is a violation of
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he Fair Debt Collection Practices Act.
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Dita takes out a student loan from Everloan Bank. When she fails to make the scheduled payments for six months, Everloan advises her of further action that it will take. This violates
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no federal law.
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Kip opens an account at a Lotsa Goodies Store, and buys a digital music player and other items, but makes no payments on the account. To collect the debt, Mako, the manager, contacts Kip's parents. This violates
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no federal law.
