WGU: Business Law - C713 exam questions and answers 2024

Define and describe "negotiation." negotiation is the transfer of an instrument in such form that the transferee becomes a holder requires both delivery and indorsement What are the two methods of negotiation? order instrument or a bearer instrument. Order Instrument contains the name of a payee capable of indorsing, as in "Pay to the order of Jamie Fowler. Bearer Instrument negotiated by delivery—that is, by transfer into another person's possession. Indorsement is not necessary What as an "endorsement?" a signature with or without additional words or statements. Most often written on the back. If there is no room on the instrument, the endorsement can be written on a separate piece of paper (called an allonge) A person who transfers a note or a draft by signing (endorsing) it and delivering it to another person is an endorser. The person to whom the check is endorsed and delivered is the endorsee. Differentiate between blank, special, qualified, and restrictive endorsements. A blank endorsement does not specify a particular indorsee and can consist of a mere signature. An order instrument indorsed in blank becomes a bearer instrument and can be negotiated by delivery alone A special endorsement contains the signature of the endorser and identifies the person to whom the indorser intends to make the instrument payable—that is, it names the endorsee. An order instrument unqualified endorsements. In other words, the endorser is guaranteeing payment of the instrument in addition to transferring title to it. An indorser who does not wish to be liable on an instrument can use a qualified indorsement to disclaim this liability [UCC 3-415(b)]. The notation "without recourse" is commonly used to create a qualified indorsement. A restrictive indorsement requires the indorsee to comply with certain instructions regarding the funds involved but does not prohibit further negotiation of the instrument Describe some of the common endorsement problems. 1. Misspelled Names 2. Instruments can be payable to Entities 3. Alternative or Joint Payees-requires endorsement of only one of the payees Differentiate between a holder and a holder in due course (HDC). When an instrument is transferred, an ordinary holder obtains only those rights that the transferor had in the instrument. holder in due course (HDC) takes an instrument free of most of the defenses and claims that could be asserted against the transferor. What are the three requirements for holder in due course (HDC)? 1. for value 2. in good faith 3. without notice that it is defective (such as when the instrument is overdue, dishonored, irregular, or incomplete) Describe the "Shelter Principle." The principle that the holder of a negotiable instrument who cannot qualify as a holder in due course (HDC), but who derives his or her title through an HDC, acquires the rights of an HDC. Anyone, no matter how far removed from an HDC, who can ultimately trace her or his title back to an HDC comes within the shelter principle. The idea is based on the legal theory that the transferee of an instrument receives at least the rights that the transferor had. Limitations if fraud is involved. Define "Deceptive Advertising. occurs if a reasonable consumer would be misled by the advertising claim. Explain how online deceptive advertising is monitored. The FTC actively monitors online advertising and has identified hundreds of Web sites that have made false or deceptive claims for products. The FTC has issued guidelines to help online businesses comply with existing laws prohibiting deceptive advertising Describe the actions that can be taken by the FTC 1. Formal Complaint 2. Cease and desist order 3. Counteradvertising-correct earlier false claims that were made about a product 4. Multiple product order-requires a firm to stop false advertising for all of its products. 5. Restitution Describe the Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994. Directed to FTC to establish rules governing telemarketing and to bring actions against fraudulent telemarketers labeling and packaging laws: The Energy Policy and Conservation Act of 1975 Requires automakers to attach an information label to every new car. The label must include the Environmental Protection Agency's fuel economy estimate for the vehicle. In general, labels must be accurate, and they must use words that are easily understood by the ordinary consumer. In some instances, labels must specify the raw materials used in the product, such as the percentage of cotton, nylon, or other fiber used in a garment. What is the Fair Packaging and Labeling Act? 1. Requires that labels identify: a. The product b. The net quantity of the contents(#of servings & size of serving) c. The manufacturer d. The packager or distributor Explain the Postal Reorganization Act of 1970. under the Postal Reorganization Act, a consumer who receives unsolicited merchandise sent by U.S. mail can keep it, throw it away, or dispose of it in any manner that she or he sees fit. The recipient will not be obligated to the sender What is the purpose of the Federal Food, Drug, and Cosmetic Act? The most important federal legislation regulating food and drugs is the Federal Food, Drug, and Cosmetic Act (FDCA). The act protects consumers against adulterated (contaminated) and misbranded foods and drugs. Establish food standards,specifies safe levels of potentially hazardous food additives, and provides classifications of foods and food advertising.Similar to FDA. Describe the Consumer Product Safety Act. In 1972, the Consumer Product Safety Act created the first comprehensive scheme of regulation over matters of consumer safety. The act also established the Consumer Product Safety Commission (CPSC), which has far-reaching authority over consumer safety. The CPSC conducts research on the safety of individual consumer products and maintains a clearinghouse on the risks associated with various products. 1. Set Safety standards for consumer products 2. Ban the manufacture and sale of any product that the commission believes poses an "unreasonable risk" to consumers. 3. Remove from the market any products it believes to be imminently hazardous.