CPCU 410 Module 4 Test Bank

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1. Article 2 of the Uniform Commercial Code applies to:

A. Documents of title.

B. Contracts for the sale of goods.

C. Negotiable instruments.

D. Contracts for the sale of real estate.

2. The Uniform Commercial Code governs all of the following, EXCEPT:

A. Sales contracts.

B. Negotiable instruments.

C. Leases.

D. Bankruptcy.

3. Which one of the following statements is correct regarding sales contracts?

A. The Uniform Commercial Code is federal law governing all sales contracts.

B. Unlike other contracts, sales contracts can only be bilateral.

C. A “sale or acceptance” is a specialized category of sales contract.

D. A sales contract does not need to state a sales price to be valid.

4. If a contract does not specify the price or provide a method to determine the price, the price becomes the reasonable price:

A. At the time of offer.

B. At the time of acceptance.

C. At the time of delivery.

D. As set by seller.

5. Which one of the following statements is correct regarding warranties relating to a sales contract?

A. An implied warranty of merchantability applies to both merchants and nonmerchants.

B. An implied warranty of fitness for a particular purpose indicates that the seller has appropriate title to the goods being sold.

C. An express warranty can be created through the overt words or actions of the seller.

D. Any description of goods in a contract is an implied warranty that the goods conform to a specific standard.

6. Implied warranties can arise from the parties’ course of dealings or particular trade. If the seller is a merchant, which of the two implied warranties apply?

D. Fitness & Salability.

A. Merchantability & Fitness.

B. Merchantability & Usability.

C. Fitness & Quality.

7. If a seller successfully sues for breach of a sales contract, the seller can recover the difference between the contract and the market price at the time of:

A. The acceptance of the offer.

B. Contract execution.

C. Delivery.

D. The learning of the breach of contract.

8. A purchaser of merchandise can revoke an acceptance of goods under all of the following circumstances, EXCEPT:

A. The purchaser was able to secure a lower purchase price from a different supplier.

B. The purchaser accepted the goods before discovering there was a nonconformity.

C. The purchaser accepted the goods because it would have been difficult to discover a defect.

D. The purchaser assumed the seller would cure a defect, but the seller did not do so.

9. Office Stuff, an office supply store, ordered 500 computer memory sticks from Computer Supplies, Inc for a total purchase price of $1,500. Computer Supplies, Inc. failed to deliver the memory sticks in one month as promised, so Office Stuff was forced to purchase the memory sticks from a local supplier for $2,000. If Office Stuff sues Computer Supplies, Inc, they would be entitled to recover:

A. $0.

B. $500.

C. $1,500.

D. $2,000.

10. Which one of the following represents a provision of the Equal Credit Opportunity Act?

A. Producers of goods who choose to provide a warranty must make certain the warranty conforms to certain standards.

B. Consumer reporting agencies must exercise their responsibilities with impartiality, fairness, and respect for consumers’ rights.

C. A credit cardholder’s liability will be limited to $50 if the card is lost or stolen and used without permission if the theft is reported within a certain period of time.

D. A lender who rejects a credit application must either provide a specific reason or advise the applicant of the right to obtain those reasons.

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11. Under the “lemon provision” in the Magnuson-Moss Warranty Act, if efforts to repair a product fail, a manufacturer must:

A. Issue a notice to the Consumer Product Safety Commission.

B. Issue a full refund or replace the product without charge.

C. Issue a recall for other products manufactured at the same time.

D. Cease production of the product until the issue is resolved.

12. Under the Electronic Fund Transfer Act, if a bank debit card is lost and a purchase is subsequently made, the card owner’s liability is generally limited to:

A. $0, if the loss is reported within seven business days.

B. $50, if the loss is reported within two business days.

C. $100, if the loss is reported within three business days.

D. $200, if the loss is reported within five weeks.

13. Which one of the following represents the statute that allows married individuals to develop credit histories separate from their spouse?

A. Equal Credit Opportunity Act.

B. Bankruptcy Act.

C. Fair Credit Reporting Act.

D. Truth in Lending Act.

14. Which one of the following statements is correct regarding federal bankruptcy laws?

A. Chapter 7 is a liquidation proceeding in which the bankrupt entity typically does not have sufficient assets to pay creditors.

B. Chapter 11 gives small farm operations the opportunity to reorganize their debts without the threat of creditor lawsuits.

C. Chapter 14 gives small business owners and wage earners the opportunity to reorganize their debts without the threat of creditor lawsuits.

D. Chapter 13 bankruptcy permits the bankrupt party to discharge any alimony and child support payments.

15. Which one of the following represents a provision of the Fair Credit Reporting Act?

A. Producers of goods who choose to provide a warranty must make certain the warranty conforms to certain standards.

B. Consumers must receive notice of refusal of credit or insurance for personal, family, or household purposes or employment.

C. A credit cardholder’s liability will be limited to $50 if the card is lost or stolen and used without permission, if the theft is reported within a certain period of time.

D. Creditors must disclose finance charges, which include costs incidental to real estate transactions.

16. Which of the following acts regulates consumer reporting organizations?

A. Equal Credit Opportunity Act.

B. Fair Credit Reporting Act.

C. Truth-in-Lending Act.

D. Fair Credit Billing Act.

17. Which one of the following statements is correct regarding fair trade laws?

A. The Federal Trade Commission Act primarily attempts to ensure uniform standards for product warranties.

B. Unlike the Federal Trade Commission Act, many state unfair trade practices acts apply specifically to insurance.

C. The five-member Federal Trade Commission takes action against unfair practices through regulatory control action.

D. Under the Magnuson-Moss Warranty Act, a producer of good must provide a warranty that conforms to specific standards.

18. Which one of the following statements is correct regarding the Truth in Lending Act?

A. The primary purpose of the Act is to replace or preempt state credit disclosure laws.

B. Under the Act, a credit card holder’s liability is $200 if the card is stolen and used without permission.

C. The Act allows a credit card holder to withhold payment without paying a finance charge when the price of goods is in dispute.

D. The Act applies to personal credit transactions and transactions between commercial entities.

19. Under the Truth in Lending Act, a purchaser not satisfied with a product purchased with a credit card has a right to not pay the remaining amount due if the purchaser first:

A. Tries in good faith to return the property or give merchant a chance to cure.

B. Files a written report with the credit card company.

C. Deducts the value of any product already used.

D. Files a statement with the Better Business Bureau.

20. Which one of the following items can be discharged in a Chapter 7 bankruptcy?

A. Alimony.

B. Recent student loans.

C. Recent back taxes.

D. Consumer debt.

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21. Under the Fair Credit Reporting Act, a credit agency can furnish a credit report in all of the following circumstances, EXCEPT:

A. In response to a court order.

B. Under written instructions of the subject of the report.

C. To determine eligibility for credit, employment, or insurance underwriting.

D. In response to a written request from a family member.

22. Marie had four credit cards in her wallet when the wallet was stolen. She reported the cards as missing the next morning, but the following transactions had already occurred:
• Discover - $350
• MasterCard - $100
• VISA - $325
• American Express - $25
How much is Marie’s expected liability for the fraudulent transactions on these cards?

A. $50.

B. $175.

C. $200.

D. $800.

23. Valerie wanted to become a licensed hair stylist. She paid $600 to her cousin, who runs the hair styling certificate program at the local college. Her cousin asked a credit reporting agency for a copy of Valerie’s credit report. Which one of the following statements is correct, assuming the license is not a business license requiring an examination of Valerie’s credit?

A. The credit agency cannot furnish the report because of the provisions of the Fair Credit Reporting Act.

B. The credit agency can furnish the report because it was requested by an educational institution.

C. The credit agency cannot furnish the report because Valerie paid for the training in cash.

D. The credit agency can furnish the report because it was requested by Valerie’s family member.

24. The “fair use” of copyrighted material is permitted without the owner’s consent. Which one of the following is a factor the courts consider in determining fair use?

A. Expiration of the copyright.

B. Nature of the work.

C. Holder of a similar patent.

D. State of domicile of the author.

25. Which one of the following statements is correct regarding property?

A. Mineral rights are an example of real property.

B. An insurance policy is an example of tangible property.

C. Buildings are considered personal property.

D. An individual must own property in order to have possession of the property.

26. Which one of the following statements is correct regarding basic concepts of property law?

A. For works created after 1977, a copyright extends for a period of up to 20 years, at which time it can be renewed for an additional 10 years.

B. A person possessing property, but not owning the property, can exclude all others from using the property, except for the owner.

C. The creator of a new manufacturing machine can protect their intellectual property rights by registering a trade secret with the U.S. Treasury Department.

D. For most purposes, intellectual property rights are governed by state law.

27. Ralph owns a breeding dog that that just gave birth to four puppies. Ralph is considered the owner of the puppies due to the principal of:

A. Confusion.

B. Gifting.

C. Bailment.

D. Accession.

28. Which one of the following represents a requirement of a bona fide gift?

A. The donor cannot retain an interest in the gift.

B. The donee must accept the gift.

C. The donor must disclaim the gift.

D. The donee must sign a written document acknowledging receipt of the gift.

29. A patent is granted by the federal government to a person who has:

A. Made an addition to property.

B. Given physical expression to an idea.

C. Composed an original form of expression.

D. Created a distinctive design or set of words to identify a product or service.

30. All of the following are required elements for something to be considered a gift, EXCEPT:

A. Donative intent.

B. Delivery.

C. Acceptance.

D. Attribution.

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31. Tom and Brad own cows in adjoining pastures. Tom owned 60 cows, and Brad owned 40 cows. A storm knocked over Brad’s fence, allowing his cows to intermingle with Tom’s cows. The cows are unidentifiable. Which one of the following statements is correct?

A. Since Brad’s fence fell, Tom will obtain title to Brad’s cows regardless of the location of the cows.

B. Tom and Brad will jointly own the herd of cows in proportion to the original number of cows owned.

C. Tom and Brad will each hold a 50% interest in the entire herd of cows.

D. The cows must be sold, and any loss resulting from the sale will be the responsibility of Brad.

32. Which one of the following represents the most complete form of property ownership?

A. Retained interest.

B. Fee simple estate.

C. Reversionary interest.

D. Estate for term of years.

33. Which one of the following statements is correct regarding a life estate?

A. A life estate is the most complete form of ownership.

B. The length of the life estate can only be measured by the tenant’s life.

C. The owner of the life estate can pass the interest in the property to heirs upon death.

D. A life estate is the right to use property for one’s lifetime.

34. Which one of the following statements is correct regarding property owned as tenancy in common?

A. Ownership interests of each tenant must be equal.

B. A deceased tenant’s interest will pass to the other tenants by operation of law.

C. Tenants need not derive their interests in the same deed from the same grantor.

D. It can only be used with personal property.

35. Which one of the following statements is correct regarding condominium (condo) ownership?

A. A condo owner has a joint tenancy with rights of survivorship interest.

B. A condo owner may not mortgage the condo but must first offer to sell the shares to other owners in the association.

C. A condo owner is permitted to retain title to a unit but sell their undivided interest in the common area.

D. A condo owner has a direct property interest in the land and buildings.

36. A correct statement regarding the comparison of property held as joint tenancy with right of survivorship and tenancy by the entirety is that both forms of ownership:

A. Permit a tenant to dispose of his or her interest during their lifetime without destroying the form of ownership.

B. Allow unequal ownership interests among the tenants, if agreed upon in writing by the tenants.

C. Provide that a deceased owner's interest passes to the surviving tenant without passing through probate.

D. Are restricted to spouses.

37. Lynda owns a piece of rental real estate in Kansas. She grants Connie the right to receive all income from the property until the time of Connie’s death. After Connie’s death, the property will pass to Lynda’s son. Which one of the following represents Connie’s interest in the property?

A. Remainder interest.

B. Life estate.

C. Joint tenancy.

D. Fee simple.

38. A bailee can limit liability for the bailed goods in the bailment contract. The right to limit liability extends only to liability for:

A. Ordinary negligence.

B. Gross negligence.

C. Wanton misconduct.

D. Fraud.

39. Which one of the following statements is correct regarding the rights and duties of a bailee?

A. The bailee does not have an insurable interest in the bailed goods.

B. When the bailment is for the sole benefit of the bailee, the bailee must exercise reasonable care.

C. The bailee has no duty to obtain insurance on the bailed goods.

D. The bailee can transfer title of bailed goods to a third party under contract.

40. Tim borrowed Melinda’s car so he could get to work. As a bailee with respect to Melinda’s car, Tim must exercise:

A. Slight care.

B. Extraordinary care.

C. Moderate care.

D. Reasonable care.

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41. Which one of the following statements is correct regarding the rights and duties of a bailee?

A. A bailee will not be permitted to obtain insurance on the bailed goods because there is no insurable interest.

B. The nature of the property transferred is the principal consideration in determining the rights and duties of a bailee.

C. A bailee can transfer title of bailed goods to a third party.

D. If the bailment benefits the bailor and bailee, the bailee can use the property only as specified in the bailment agreement.

42. In a bailment for the bailor’s sole benefit, the bailee can use the property:

A. Only to the extent necessary to preserve and protect it.

B. In any way the bailee desires.

C. In any way that has been contemplated by the bailor.

D. Only as specified in the bailment agreement.

43. Which one of the following statements is correct regarding rights and duties of bailees and bailors?

A. In a bailment for the bailee’s sole benefit, the bailee can use the property only to the extent necessary to preserve and protect it.

B. When express compensation has not been paid to a bailee, the bailee can sell the bailed property after issuing a 30-day notice.

C. A bailee can only limit their liability when the bailment is for the bailor’s and balee’s mutual benefit.

D. A bailor who negligently entrusts property to an incompetent bailee can be held liable for resulting injuries to third parties.

44. Jan left her car at the auto repair shop to be fixed. An unidentified arsonist burned down the repair shop in the middle of the night, causing severe damage to Jan’s car. Assuming there was no issue with any of the repair shop’s fire protection systems:

A. The repair shop is fully at fault for the damage to the car.

B. Jan and the repair shop are equally at fault for the damage to the car.

C. The repair shop is not responsible for the damage to the car.

D. Jan is fully at fault for the damage to the car.

CPCU 410 Module 4 Test Bank

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