WGU C713 BUSINESS LAW EXAM 2 COMPLETE 150
ACTUAL QUESTIONS WITH DETAILED VERIFIED
ANSWERS /ALREADY GRADED A+
Define and describe "negotiation." - Correct Answer - negotiation is the transfer of an
instrument in such form that the transferee becomes a holder
requires both delivery and indorsement
Define and describe "risk of loss" and how it applies to shipment and destination
contracts. - Correct Answer - When risk of loss passes from a seller or lessor to a buyer
or lessee is generally determined by the contract between the parties.
In a destination contract, the risk of loss passes to the buyer or lessee when the goods
are tendered to the buyer or lessee at the specified destination
The risk of loss in a shipment contract passes to the buyer or lessee when the goods
are delivered to the carrier
Define and describe a "bailee." - Correct Answer - A bailment is a temporary delivery of
personal property, without passage of title, into the care of another, called a bailee.
Under the UCC, a bailee is a party who—by a bill of lading, warehouse receipt, or other
document of title—acknowledges possession of goods and/or contracts to deliver them.
For instance, a warehousing company or a trucking company may be a bailee.
Describe the different types of conditional sales. - Correct Answer - The UCC states that
(unless otherwise agreed) if the goods are for the buyer to use, the transaction is a sale
on approval. If the goods are for the buyer to resell, the transaction is a sale or return.
pg. 1
,1. Sale on approval-
A type of conditional sale in which the buyer may take the goods on a trial basis. The
sale becomes absolute only when the buyer approves of (or is satisfied with) the goods
being sold.
2. Sale or return-
A type of conditional sale in which title and possession pass from the seller to the
buyer; however, the buyer retains the option to return the goods during a specified
period even though the goods conform to the contract.
Describe "monopolization." - Correct Answer - 1. The possession of monopoly power in
the relevant market.
2. "The willful acquisition or maintenance of the power as distinguished from growth or
development as a consequence of a superior product, business acumen, or historic
accident."
Describe "price discrimination." - Correct Answer - Setting prices in such a way that two
competing buyers pay two different prices for an identical product or service.
What are types of "exclusionary practices?" - Correct Answer - exclusive-dealing
contracts and tying arrangements.
exclusive-dealing contract-An agreement under which a seller forbids a buyer to
purchase products from the seller's competitors.
tying arrangement-An agreement between a buyer and a seller in which the buyer of a
specific product or service becomes obligated to purchase additional products or
services from the seller.
Differentiate between horizontal and vertical mergers - Correct Answer - 1. Horizontal
Mergers:
A merger between two firms that are competing in the same market. Causes Significant
market share.
pg. 2
,2. Vertical Merger:
The acquisition by a company at one stage of production of a company at a higher or
lower stage of production (such as its supplier or retailer).
Define "interlocking directorates." - Correct Answer - the practice of having individuals
serve as directors on the boards of two or more competing companies simultaneously.
Specifically, no person may be a director for two or more competing corporations at the
same time if either of the corporations has capital, surplus, or undivided profits
aggregating more than $28,883,000 or competitive sales of $2,888,300 or more. The
Federal Trade Commission adjusts these threshold amounts each year.
Differentiate between Cashier's checks, Traveler's checks, and certified checks. -
Correct Answer - 1. Cashiers Checks
when a bank draws a check on itself, the check is called a cashier's check and is a
negotiable instrument on issue
Except in very limited circumstances, the issuing bank musthonor its cashier's checks
when they are presented for payment.
2. Travelers Check
A check that is payable on demand, drawn on or payable through a bank, and
designated as a traveler's check.
Traveler's checks are designed to be a safe substitute for cash when a person is on
vacation or traveling and are issued for a fixed amount, such as $20, $50, or $100
3. Certified Check
A check that has been accepted by the bank on which it is drawn. Essentially, the bank,
by certifying (accepting) the check, promises to pay the check at the time the check is
presented.
Describe the bank-customer relationship. - Correct Answer - The bank-customer
relationship begins when the customer opens a checking account and deposits funds
that the bank will use to pay for checks written by the customer.
pg. 3
, How is risk of loss affected when the seller breaches? When the buyer breaches? -
Correct Answer - If the goods are so nonconforming that the buyer has the right to reject
them, the risk of loss does not pass to the buyer.
With nonconforming goods, the risk of loss does not pass to the buyer until either:
1. The defects are cured—that is, the goods are repaired, replaced, or discounted in
price by the seller—see Chapter 18.
2. The buyer accepts the goods in spite of their defects (thus waiving the right to
reject).
The general rule is that when a buyer or lessee breaches a contract, the risk of loss
immediately shifts to the buyer or lessee. This rule has three important limitations [UCC
2-510(3), 2A-220(2)]:
3. The seller or lessor must have already identified the contract goods.
4. The buyer or lessee bears the risk for only a commercially reasonable time after the
seller or lessor has learned of the breach.
5. The buyer or lessee is liable only to the extent of any deficiency in the seller's or
lessor's insurance coverage.
Define and describe "insurable interest." - Correct Answer - An interest either in a
person's life or well-being or in property that is sufficiently substantial that insuring
against injury to (or the death of) the person or against damage to the property does not
amount to a mere wagering (betting) contract.
A buyer or lessee has an insurable interest in identified goods. The moment the contract
goods are identified by the seller or lessor, the buyer or lessee has a property interest in
them. That interest allows the buyer or lessee to obtain the necessary insurance
coverage for those goods even before the risk of loss has passed [UCC 2-501(1), 2A-
218(1)]. Identification can be made at any time and in any manner agreed to by the
parties.
A seller has an insurable interest in goods as long as he or she retains title to the goods.
Even after title passes to a buyer, a seller who has a security interest (a right to secure
payment) in the goods still has an insurable interest and can insure the goods
pg. 4
ACTUAL QUESTIONS WITH DETAILED VERIFIED
ANSWERS /ALREADY GRADED A+
Define and describe "negotiation." - Correct Answer - negotiation is the transfer of an
instrument in such form that the transferee becomes a holder
requires both delivery and indorsement
Define and describe "risk of loss" and how it applies to shipment and destination
contracts. - Correct Answer - When risk of loss passes from a seller or lessor to a buyer
or lessee is generally determined by the contract between the parties.
In a destination contract, the risk of loss passes to the buyer or lessee when the goods
are tendered to the buyer or lessee at the specified destination
The risk of loss in a shipment contract passes to the buyer or lessee when the goods
are delivered to the carrier
Define and describe a "bailee." - Correct Answer - A bailment is a temporary delivery of
personal property, without passage of title, into the care of another, called a bailee.
Under the UCC, a bailee is a party who—by a bill of lading, warehouse receipt, or other
document of title—acknowledges possession of goods and/or contracts to deliver them.
For instance, a warehousing company or a trucking company may be a bailee.
Describe the different types of conditional sales. - Correct Answer - The UCC states that
(unless otherwise agreed) if the goods are for the buyer to use, the transaction is a sale
on approval. If the goods are for the buyer to resell, the transaction is a sale or return.
pg. 1
,1. Sale on approval-
A type of conditional sale in which the buyer may take the goods on a trial basis. The
sale becomes absolute only when the buyer approves of (or is satisfied with) the goods
being sold.
2. Sale or return-
A type of conditional sale in which title and possession pass from the seller to the
buyer; however, the buyer retains the option to return the goods during a specified
period even though the goods conform to the contract.
Describe "monopolization." - Correct Answer - 1. The possession of monopoly power in
the relevant market.
2. "The willful acquisition or maintenance of the power as distinguished from growth or
development as a consequence of a superior product, business acumen, or historic
accident."
Describe "price discrimination." - Correct Answer - Setting prices in such a way that two
competing buyers pay two different prices for an identical product or service.
What are types of "exclusionary practices?" - Correct Answer - exclusive-dealing
contracts and tying arrangements.
exclusive-dealing contract-An agreement under which a seller forbids a buyer to
purchase products from the seller's competitors.
tying arrangement-An agreement between a buyer and a seller in which the buyer of a
specific product or service becomes obligated to purchase additional products or
services from the seller.
Differentiate between horizontal and vertical mergers - Correct Answer - 1. Horizontal
Mergers:
A merger between two firms that are competing in the same market. Causes Significant
market share.
pg. 2
,2. Vertical Merger:
The acquisition by a company at one stage of production of a company at a higher or
lower stage of production (such as its supplier or retailer).
Define "interlocking directorates." - Correct Answer - the practice of having individuals
serve as directors on the boards of two or more competing companies simultaneously.
Specifically, no person may be a director for two or more competing corporations at the
same time if either of the corporations has capital, surplus, or undivided profits
aggregating more than $28,883,000 or competitive sales of $2,888,300 or more. The
Federal Trade Commission adjusts these threshold amounts each year.
Differentiate between Cashier's checks, Traveler's checks, and certified checks. -
Correct Answer - 1. Cashiers Checks
when a bank draws a check on itself, the check is called a cashier's check and is a
negotiable instrument on issue
Except in very limited circumstances, the issuing bank musthonor its cashier's checks
when they are presented for payment.
2. Travelers Check
A check that is payable on demand, drawn on or payable through a bank, and
designated as a traveler's check.
Traveler's checks are designed to be a safe substitute for cash when a person is on
vacation or traveling and are issued for a fixed amount, such as $20, $50, or $100
3. Certified Check
A check that has been accepted by the bank on which it is drawn. Essentially, the bank,
by certifying (accepting) the check, promises to pay the check at the time the check is
presented.
Describe the bank-customer relationship. - Correct Answer - The bank-customer
relationship begins when the customer opens a checking account and deposits funds
that the bank will use to pay for checks written by the customer.
pg. 3
, How is risk of loss affected when the seller breaches? When the buyer breaches? -
Correct Answer - If the goods are so nonconforming that the buyer has the right to reject
them, the risk of loss does not pass to the buyer.
With nonconforming goods, the risk of loss does not pass to the buyer until either:
1. The defects are cured—that is, the goods are repaired, replaced, or discounted in
price by the seller—see Chapter 18.
2. The buyer accepts the goods in spite of their defects (thus waiving the right to
reject).
The general rule is that when a buyer or lessee breaches a contract, the risk of loss
immediately shifts to the buyer or lessee. This rule has three important limitations [UCC
2-510(3), 2A-220(2)]:
3. The seller or lessor must have already identified the contract goods.
4. The buyer or lessee bears the risk for only a commercially reasonable time after the
seller or lessor has learned of the breach.
5. The buyer or lessee is liable only to the extent of any deficiency in the seller's or
lessor's insurance coverage.
Define and describe "insurable interest." - Correct Answer - An interest either in a
person's life or well-being or in property that is sufficiently substantial that insuring
against injury to (or the death of) the person or against damage to the property does not
amount to a mere wagering (betting) contract.
A buyer or lessee has an insurable interest in identified goods. The moment the contract
goods are identified by the seller or lessor, the buyer or lessee has a property interest in
them. That interest allows the buyer or lessee to obtain the necessary insurance
coverage for those goods even before the risk of loss has passed [UCC 2-501(1), 2A-
218(1)]. Identification can be made at any time and in any manner agreed to by the
parties.
A seller has an insurable interest in goods as long as he or she retains title to the goods.
Even after title passes to a buyer, a seller who has a security interest (a right to secure
payment) in the goods still has an insurable interest and can insure the goods
pg. 4
