CPCU 530 STUDY TEST QUESTIONS
WITH 100% CORRECT ANSWERS
What are the 3 types of express warranties? - Answer--Product Description
-Product Facts
-Product Model
What are the 2 types of implied warranties? - Answer--Product is suitable for merchant
-Product is suitable for purpose
When can a buyer withdraw acceptance of goods? - Answer--Seller Assurance (the
seller assured the buyer that the goods are conforming)
-Seller Fails to Fix (the buyer accepted because they assumed the seller would replace
the defective goods)
-Undetected Nonconforming (hard to notice, later found)
-Unknown Nonconforming (accepted before learning of the nonconformance)
What remedies does a buyer have if a seller breaches the contract? - Answer--
Difference Between Substitute (seller pays the difference between their product and the
purchased replacement)
-Difference of Market Price (seller pays the difference of market price at the time of
breach and the current MP of the goods)
-Difference of Nonconforming (seller pays the difference between the value of the
nonconforming good and the value of the good if it were conforming)
-Performance (if the goods are unique/non-replaceable)
Statute of Frauds - Answer--Requires certain contracts to be signed & in writing
-Enforced to prevent fraudulent contracts
-Ex: marriage contracts, property sales
UCC Article 7 - Answer--Provides standards for documents of title when dealing with
shipping/storage concerns
-Documents of title are typically created by the bailee as a receipt of delivery
What are the 3 types of Documents of Title? - Answer-***typically created by the
consignee***
-Bill of Lading
-Delivery Order
-Warehouse Receipt
,Bill of Lading - Answer--A receipt provided by the shipper, serves as proof of the
transaction, represents a title for the goods in the shipment
-Includes the agreement terms (delivery, owner, other involved parties, description of
goods, etc.)
Who are the 3 parties to a Bill of Lading? - Answer--Shipping Carrier (UPS, Fedex)
-Consignor (sends the goods)
-Consignee (receives the goods)
What are the 2 types of Bills of Lading? - Answer--Order: negotiable, the consignee may
transfer the goods to a 3rd party
-Straight: non-negotiable, specifically assigns 1 consignee to maintain possession of the
goods
Delivery Order - Answer--Document of Title, created by the consignee
-Orders goods to be delivered to a party who issues a warehouse receipt or bill of lading
Warehouse Receipt - Answer--Document of Title, created by the warehouse
(consignee)
-Includes a detailed description of the goods
-The warehouse operator is liable for damage to the goods
-Negotiable Instrument (can be sold/traded)
Credit Laws - Answer--Require businesses to disclose information to consumers &
creditors
-Require businesses to treat all consumers fairly
Fair Trade Laws - Answer--Encourage competition, remove trade restrictions, drive
product innovation/quality/customer service
What are the 3 Fair Trade Laws? - Answer--Federal Trade Commission Act
-Magnuson-Moss Warranty Act
-State Unfair Trade Practice Acts
Federal Trade Commission Act (FTC) - Answer--Forbids unfair competition & deceiving
customers
McCarran-Ferguson Act - Answer--Prohibits the federal government from regulating the
insurance industry
-Insurers are subject to state regulations
Sherman Anti-Trust Act - Answer--Prohibits companies from hindering
competition/preventing trade/monopolizing/price fixing/etc.
, Magnuson-Moss Warranty Act - Answer--Provides requirements for warranties when
offered by a seller
-Date of expiration, how to collect compensation, etc.
Full Warranty vs. Limited Warranty - Answer--Full: the seller will repair the defect, or
provide a refund in any circumstance
-Limited: the seller selects which product defects/conditions are subject to the warranty
Federal Bankruptcy Laws - Answer--Chapter 7: the company must liquidate & distribute
its' assets to creditors
-Chapter 11: the company can restructure its' debt & remain in business
-Chapter 13: the company/individual can use a payment plan without the threat of a
lawsuit from creditors
Employment at Will - Answer--Employers may terminate employees at any time for any
reason
*EXCEPTIONS*
-Good Faith: cannot fire without reasonable cause, good faith is assumed as part of the
relationship
-Implied Employment: if the employer's actions indicate that a contract exists
-Public Policy: can't fire employee for refusing to commit a crime on the employer's
behalf
-Statutory: laws which protect employees from certain employee conduct
Procedural Law - Answer--Defines the process of enforcing laws
-Ex: whether a party should sue in state or federal court
Substantive Law - Answer--Defines the rights & duties of a party
-Ex: defining the laws which determine if an act is illegal
What are the 2 types of law applied in the United States? - Answer--Civil Law (breach of
a party's rights)
-Criminal Law (criminal acts)
Who are the 2 parties to a contract? - Answer--Promisor (makes the promise)
-Promisee (party to which the promise is made
What are the 4 characteristics of contracts? - Answer--Execution (Executed / Executory)
-Formation (Express / Implied)
-Promise (Bilateral / Unilateral)
-Voidability (Void / Voidable)
Implied Contract - Answer--Terms are defined by the actions of the involved parties
-Implied-In-Fact: formed based on presumptions from prior dealings between the parties
WITH 100% CORRECT ANSWERS
What are the 3 types of express warranties? - Answer--Product Description
-Product Facts
-Product Model
What are the 2 types of implied warranties? - Answer--Product is suitable for merchant
-Product is suitable for purpose
When can a buyer withdraw acceptance of goods? - Answer--Seller Assurance (the
seller assured the buyer that the goods are conforming)
-Seller Fails to Fix (the buyer accepted because they assumed the seller would replace
the defective goods)
-Undetected Nonconforming (hard to notice, later found)
-Unknown Nonconforming (accepted before learning of the nonconformance)
What remedies does a buyer have if a seller breaches the contract? - Answer--
Difference Between Substitute (seller pays the difference between their product and the
purchased replacement)
-Difference of Market Price (seller pays the difference of market price at the time of
breach and the current MP of the goods)
-Difference of Nonconforming (seller pays the difference between the value of the
nonconforming good and the value of the good if it were conforming)
-Performance (if the goods are unique/non-replaceable)
Statute of Frauds - Answer--Requires certain contracts to be signed & in writing
-Enforced to prevent fraudulent contracts
-Ex: marriage contracts, property sales
UCC Article 7 - Answer--Provides standards for documents of title when dealing with
shipping/storage concerns
-Documents of title are typically created by the bailee as a receipt of delivery
What are the 3 types of Documents of Title? - Answer-***typically created by the
consignee***
-Bill of Lading
-Delivery Order
-Warehouse Receipt
,Bill of Lading - Answer--A receipt provided by the shipper, serves as proof of the
transaction, represents a title for the goods in the shipment
-Includes the agreement terms (delivery, owner, other involved parties, description of
goods, etc.)
Who are the 3 parties to a Bill of Lading? - Answer--Shipping Carrier (UPS, Fedex)
-Consignor (sends the goods)
-Consignee (receives the goods)
What are the 2 types of Bills of Lading? - Answer--Order: negotiable, the consignee may
transfer the goods to a 3rd party
-Straight: non-negotiable, specifically assigns 1 consignee to maintain possession of the
goods
Delivery Order - Answer--Document of Title, created by the consignee
-Orders goods to be delivered to a party who issues a warehouse receipt or bill of lading
Warehouse Receipt - Answer--Document of Title, created by the warehouse
(consignee)
-Includes a detailed description of the goods
-The warehouse operator is liable for damage to the goods
-Negotiable Instrument (can be sold/traded)
Credit Laws - Answer--Require businesses to disclose information to consumers &
creditors
-Require businesses to treat all consumers fairly
Fair Trade Laws - Answer--Encourage competition, remove trade restrictions, drive
product innovation/quality/customer service
What are the 3 Fair Trade Laws? - Answer--Federal Trade Commission Act
-Magnuson-Moss Warranty Act
-State Unfair Trade Practice Acts
Federal Trade Commission Act (FTC) - Answer--Forbids unfair competition & deceiving
customers
McCarran-Ferguson Act - Answer--Prohibits the federal government from regulating the
insurance industry
-Insurers are subject to state regulations
Sherman Anti-Trust Act - Answer--Prohibits companies from hindering
competition/preventing trade/monopolizing/price fixing/etc.
, Magnuson-Moss Warranty Act - Answer--Provides requirements for warranties when
offered by a seller
-Date of expiration, how to collect compensation, etc.
Full Warranty vs. Limited Warranty - Answer--Full: the seller will repair the defect, or
provide a refund in any circumstance
-Limited: the seller selects which product defects/conditions are subject to the warranty
Federal Bankruptcy Laws - Answer--Chapter 7: the company must liquidate & distribute
its' assets to creditors
-Chapter 11: the company can restructure its' debt & remain in business
-Chapter 13: the company/individual can use a payment plan without the threat of a
lawsuit from creditors
Employment at Will - Answer--Employers may terminate employees at any time for any
reason
*EXCEPTIONS*
-Good Faith: cannot fire without reasonable cause, good faith is assumed as part of the
relationship
-Implied Employment: if the employer's actions indicate that a contract exists
-Public Policy: can't fire employee for refusing to commit a crime on the employer's
behalf
-Statutory: laws which protect employees from certain employee conduct
Procedural Law - Answer--Defines the process of enforcing laws
-Ex: whether a party should sue in state or federal court
Substantive Law - Answer--Defines the rights & duties of a party
-Ex: defining the laws which determine if an act is illegal
What are the 2 types of law applied in the United States? - Answer--Civil Law (breach of
a party's rights)
-Criminal Law (criminal acts)
Who are the 2 parties to a contract? - Answer--Promisor (makes the promise)
-Promisee (party to which the promise is made
What are the 4 characteristics of contracts? - Answer--Execution (Executed / Executory)
-Formation (Express / Implied)
-Promise (Bilateral / Unilateral)
-Voidability (Void / Voidable)
Implied Contract - Answer--Terms are defined by the actions of the involved parties
-Implied-In-Fact: formed based on presumptions from prior dealings between the parties
