CPA Exam 2

When the express terms of a contract and the past course of dealings are in conflict, the express terms will prevail

true

Under the UCC, when parties of a sales contract omit a price term, the contract is void because there is no "meeting of the minds"

False

the implied warranty of merchantability focuses on whether the goods are fit for a particular purpose

false

under the ucc, the implied warranty of merchantability applies to the sale of food or drink

true

under the ucc, some of the benefits of warranties extend to persons who did not themselves purchase the particular defective goods

true

article 2 of the ucc does not apply to the sale of real estate

true

goods may be delivered in installments, even if not stated so in the contract

false

by accepting goods, the buyer forfeits remedies against the seller for any nonconformities in the goods

false

the partie's agreement on the amount of damages to be paid if one of them breaches their contract will not be enforced if the amount named is unreasonable

true

if a seller fails to deliver goods, the buyer is required to cover

false

an agency can never be oral

false

the legal effect of the agent's action on behalf of the principal is usually the same as if the principal had done the act

true

a person has the capacity to act as an agent only if he/she has the legal capacity to contract

false

when the principal is undisclosed, the third party who deals with the agent believes the agent is acting personally and accordingly expect the agent to be a party to the contract

true

if a third person pays a debt to the principal's agent that he owed the principal, the debt is discharged, even if the agent pockets the money and does not turn it over to the principal

true

generally, notice to the agent is notice to the principal if it relates to the business of the agency

true

in a general partnership, each of the partners is an owner and has a right to share in the profits of the business

true

a corporation will be dissolved upon the death or insolvency of a shareholder

false

a partner withdrawing from an existing partnership remains liable for all partnership obligations that existed at the time of her withdrawal

true

under the code, the question of who bears the risk of loss of goods in transit is resolved by determining who has title to the goods

false

a person may have the liability of a partner even though no partnership exists

true

if the service element is predominant in a contract, the ucc is partially applicable

false

most franchise contracts are "contracts of adhesion"

true

Angela went to "Hairs R Us" to have her hair colored flame red and to get a permanent wave. Unfrotunately, the hair color contained a chemical that reacted to the permanent wave solution resulting in Angela's hair turning a bright green and falling out. Under these circumstances, would a court likely apply Code provisions in determining the rights and responsibilities of the parties?

Code provisions would not apply because Angela entered into a contract which was predominantly a service contract

a seller who has voidable title

can pass good title to a good faith purchaser for value

privity of contract

is the relationship between the parties in a contract

to be successful under the theory of strict liability, the plaintiff must show all of the following except:

d. the product is priced higher than it's market's counterparts

if there is no agreement between the parties for delivery to happen in installments, then all the goods

must be delivered to the buyer in a single delivery

under the ucc, a lawsuit for breach of a sales contract must be filed

within four years after the breach occurs

under the ucc, which of the following remedies is available to both a buyer and a seller

damages in the amount of the difference between the contract price and the market price of goods

a duty imposed on the agent by the common law generally includes the

duty of loyalty

the test of an agent's implied authority is

the justifiable belief of the agent

an agent possesses implied authority when

the agent is required to safeguard the property interests of the principal due to an emergency

apparent authority may exist

when the conduct of the principal causes a third person reasonably to believe that another has the authority to act for the principal

the warranty of fitness for a particular purpose applies only to merchants

false

which of the following statements about agency relationships is true

an agency results from any indication of consent by the principal that the agent may act on the principal's behalf and under her control

if a partner assigns his/her partnership interest to a creditor, the creditor is entitled to

receive that partner's share of the profits

in terms of the RUPA, when a partner dies, the surviving partners:

are entitled to compensation for winding up the partnership business

the formation of a general partnership requires

no express agreement

under the ucc, some benefits of warranties extend to persons who did not themselves purchase the particular defective goods

true

when the express terms of a contract and the past course of dealings are in conflict, the express terms will prevail

true

the perfect tender rule states that the buyer must tender payment at the time of delivery before receiving the goods

false

if a liquidated damages clause is not enforceable because it is unconscionable, the injured party is barred from recovering actual damages

false

a principal may transact, through an agent, any business the principal lawfully could do in person

true

agents may use the formulas, processes, and mechanisms they have acquired while employed by their principal

false

the agent does not have to inform the principal of knowledge the agent gains in the course of her responsibilities

false

generally, notice to the agent is notice to the principal if it relates to the business agency

true

when the agent colludes with a third party to withhold knowledge or money from the principal, the principal will be liable

false

if a third person pays a debt to the principal's agent that he owed the principal, the debt is discharged even if the agent pockets the money and does not turn it over to the principal

true

people who are involved in a nonprofit association are considered partners

false

the promoter's liablity on pre-incorporation contracts terminates when a novation is signed

true

the corporation is viewed as the alter ego of the shareholder-manager when the shareholders mix their personal dealings and corporate transactions as if all were personal

true

which of the following is governed by article 2 of the ucc?

sue contracted to sell 500 pairs of shoes to a department store

which of the following describes an action where liability of a seller is based on the theory that the manufacturer failed to use reasonable care to avoid foreseeable injurty to the ultimate user or consumer?

negligence

under the ucc, a lawsuit for breach of a sales contract must be filed

within four years after the breach occurs

ratification releases

the agent from liability

which form of business organization most limits personal liability for its investors

corporation

a partnership is a

voluntary and consensual association involving two or more persons

the partner's rights in partnership property, as tenants in partnership, entitle them to

take possession of any item of partnership property for partnership purposes only

massachusetts coursts require that parties expressly create a ________ before a corporation can be held liable for preincorporation contracts

novation

before a corporation comes into existence

it cannot ratify a contract made by the promoter

article 2 of the ucc applies to transactions involving real and personal property

false

anyone who entrusts goods to a merchant who regularly deals in such good gives that merchant that power to give good title to a buyer in the ordinary course of business

true

under the ucc some of the benefits of warranties extend to persons who did not themselves purchase the particular defective goods

true

when the express terms of a contract and the past course of dealings are in conflict, the express terms will prevails

true

under the ucc, the duties of either the buyer or the seller generally may be delegated to someone else

true

sellers must generally cure any nonconforming goods before the deadline date in the contract

true (perfect tender rule: one single delivery, on or before the delivery date, conforming goods)

when a buyer breaches a contract, a seller does not have a duty to mitigate damages

false

if the goods are in the buyer's possession when the buyer breaches the contract, the seller may recover the purchase price

true

an agency relationship results from any indication of consent by the principal that the agent may act on on the principal's behalf under her control

true

an agent may deposit funds of the principal in her personal account

false

an agent does not possess the implied authority to do whatever is reasonably necessary to accomplish the objectives of the agency

false

a creditor of a partner can attach any property owed by the partnership

false

the promoter's liability on pre-incorporation contracts terminates when a novation is signed

true

the corporation is viewed as the alter ego of the shareholder-manager when shareholders mix their personal dealings and corporate transactions as if all were personal

true

when a contract merely requires the seller to ship the goods, title passes to the buyer when

the seller delivers the goods to the carrier

the creation of an express warranty depends on

the seller's statement becoming part of the bargain

if there is no agreement between the parties for delivery happen in installments, then all the goods

must be delivered to the buyer in a single delivery

this occurs when a buyer, after having reasonable opportunity to inspect the goods, either that he will take them or fails to reject them

acceptance

the objective of providing remedies for breach of a sales contract is to

put the injured person in the same position as if the contract had been performed

whenever the agent's duties to the principal conflict with the agent's own interests

the agent must disclose such fact to the principal or be in violation of the duty of loyalty

test of an agent's implied authority is

the justifiable belief of the agent

a principal's liability under respondeat superior often is called

vicarious liability

after retiring from jones & co. a partnership founded by Megan, Jim Jones and other partners, megan grew tired of staying at home and started visiting the firm's place of business. the other partners would introduce her to prospective customers as "my partner, ms.jones" or "our partner, ms.jones". megan did not bother to correct anybody about this. she was introduced in this manner to tiffany, a new customer. relying on the idea that megan was a partner, tiffany entered into a contract with Jones and coo. if jones and co does not fulfill its obligations, can megan be held liable?

under the estoppel theory, Megan is liable just as if she were an actual partner

massachusetts courts require that the parties expressly create a _______ before a corporation can be held liable for preincorporation contracts

novation