1. At her neighbor's garage sale, Constance buys 2 living room couches and a coffee table for $250, which she uses to replace the broken furniture at home. Unbeknownst to Constance, the neighbor still owed money to All Purpose Furniture, Inc., where he had purchased the furniture on credit. If All Purpose informs Constance that she must return the furniture because they have a security interest in the collateral

Select one:

a.

They are partially correct; Constance must pay half of what the neighbor owes and he must pay the rest.

b.

They are incorrect; Constance takes the furniture free of All Purpose's security interest because she is a buyer in the ordinary course of business.

c. They are correct; Constance took the furniture at her own risk & is subject to All Purpose's security interest.

d.

They are correct; a perfected security interest takes priority.

2. After Mafioso Bank repossesses Maliks yacht, but before it sells the yacht at auction, Cousin Bubba agrees, as a gift to Malik, to pay off the balance of Maliks debt to Mafioso, including Mafiosos expenses of repossession. Cousin Bubbas generosity is a

Select one:

a.
Redemption.

b.
Private purchase of the yacht that Bubba now owns.

c.
Way to keep Malik forever in his debt.

d.
Foreclosure.

3. Island Breeze Company designs and manufacturers desk fans. Little Billy Brady and his 5-year-old twin brother were injured when they removed the cover of the fan and used it to as a gun to shoot marble bullets at each other. In a product liability suit, Island Breezes best defense is

Select one:

a. the design of the fan.

b. the manufacturing of the fan.

c.

Billy and his brother were knowledgeable users.

d. Billy and his brother's unforeseeable misuse of the fan.

4. Morticia sells her waterfront property, worth $2 million, to Fester, Inc. in exchange for stock of the same price. Later, Fester's shareholders learn that the property was only worth $1 million. Which of the following is true?

Select one:

a. Morticia must pay Fester Inc. the difference in price between the value of the property when she purchased it and the value of the property when she sold it to Fester Inc. in exchange for shares of stock.

b. Nothing happens. The parties are free to contract and Morticia made a good deal whereas Fester, Inc. made a bad deal.

c. Morticia must pay Fester Inc. the difference in price between the value of the property and the value of the stock she received.

d. Fester Inc. must sell the waterfront property and give the proceeds to Morticia.