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.