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1 Chapter 1 Legal Heritage and the Digital Age VI. Answer to Critical Legal Thinking Case 1.1 Fairness of the Law Many students will react that the statute is unfair as it does not afford women equal status in the […]

1 “Where there is no law, there is no freedom.” John Locke I. Teacher to Teacher Dialogue One of the most common dilemmas facing instructors of business law is the issue of topic choice. By the very nature of the […]

1 Chapter 10 Agreement VI. Answers to Critical Legal Thinking Cases 10.1 Mirror Image Rule No. The court of appeal applied the mirror image rule and held that no contract had been created between the parties. The court stated, “Florida […]

85 “When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean – neither more nor less.” “The question is,” said Alice, “whether you can make words mean so […]

1 Chapter 11 Consideration and Promissory Estoppel VI. Answers to Critical Legal Thinking Cases 11.1 Gift Promise No. Presley’s promise to pay the mortgage is not enforceable. Presley’s promise to pay Ms. Allen’s mortgage was not executed by the time […]

91 “The law has outgrown its primitive stage of formalism when the precise word was the sovereign talisman, and every slip was fatal. It takes a broader view today. A promise may be lacking, and yet the whole writing may […]

1 Chapter 12 Capacity and Legality VI. Answers to Critical Legal Thinking Cases 12.1 Minor Yes. Fountain’s estate is liable to Yale under the doctrine of necessaries. The general rule is that minor child’s contracts are voidable. The rule that […]

96 “An unconscionable contract is one which no man in his senses, not under delusion, would make, on the one hand, and which no fair and honest man would accept on the other.” Fuller, Chief Justice I. Teacher to Teacher […]

1 Chapter 13 Genuineness of Assent and Undue Influence VI. Answers to Critical Legal Thinking Cases 13.1 Unilateral Mistake Yes, Schultz can rescind the contract. A unilateral mistake occurs when only one party to a contract is mistaken about a […]

104 “Freedom of contract begins where equality of bargaining power begins.” Oliver Wendell Holmes, Jr. I. Teacher to Teacher Dialogue This chapter provides a ripe opportunity to go into all sorts of illustrations of “abuse by contract.” The first set […]

1 Chapter 14 Statute of Frauds and Equitable Exceptions VI. Answers to Critical Legal Thinking Cases 14.1 Statute of Frauds No, Hoffman and Frey do not win. Pursuant to the Statute of Frauds, an agreement for the sale of real […]

110 “A verbal contract isn’t worth the paper it’s written on.” Samuel Goldwyn I. Teacher to Teacher Dialogue As a practical matter, most contracts of any importance should be in writing. Most students already intuitively know this. The more important […]

1 Chapter 15 Third-Party Rights and Discharge VI. Answers to Critical Legal Thinking Cases 15.1 Intended or Incidental Beneficiary Ramos/Carson/DePaul (RCD) was an incidental beneficiary of the Phillies-DH agreement. RCD was not an intended beneficiary of the Philadelphia Phillies Agreement […]

117 “An honest man’s word is as good as his bond.” Don Quixote I. Teacher to Teacher Dialogue The materials relating to contract third parties present an interesting challenge to the teacher. While it is relatively easy to talk about […]

1 Chapter 16 Breach of Contract and Remedies VI. Answers to Critical Legal Thinking Cases 16.1 Liquidated Damages Yes, the liquidated damage clause is enforceable and 845 UN Limited Partnership (845 UN) may keep the $8 million down payments paid […]

126 “Contracts must not be sports of an idle hour, mere matters of pleasantry and badinage, never intended by the parties to have any serious effect whatsoever.” Lord Stowell I. Teacher to Teacher Dialogue We are expected to live up […]

1 Chapter 17 Digital Law and E-Commerce VI. Answers to Critical Legal Thinking Cases 17.1 Cybersquatting Ernest & Julio Gallo Winery (Gallo) wins. Gallo registered the trademark “Ernest & Julio Gallo” in 1964 with the United States Patent and Trademark […]

135 “Through the use of chat rooms, any person with a phone line can become a town crier with a voice that resonates farther than it could from any soapbox. Through the use of Web pages, mail exploders, and newsgroups, […]

1 Chapter 18 Formation of Sales and Lease Contracts VI. Answers to Critical Legal Thinking Cases 18.1 Good or Service No, Article 2 does not apply to this transaction. Article 2 applies solely to transactions in goods. Sometimes a sale […]

143 “Commercial law lies within a narrow compass, and is far purer and freer from defects than any other part of the system.” Henry Peter Brougham I. Teacher to Teacher Dialogue Students often meet the introduction of materials on the […]

1 Chapter 19 Title to Goods and Risk of Loss VI. Answers to Critical Legal Thinking Cases 19.1 Conditional Sale Prewitt wins. Prewitt is not responsible for the loss of the coins in the mail. The delivery of coins by […]

151 “A lawyer without history or literature is a mechanic, a mere working mason; if he possesses some knowledge of these, he may venture to call himself an architect.” Sir Walter Scott I. Teacher to Teacher Dialogue The rules of […]

1 Chapter 2 Courts and Jurisdiction VI. Answers to Critical Legal Thinking Cases 2.1 Personal Jurisdiction No, defendants Live Siri Art, Inc. and Siri Galliano are not subject to lawsuit in New York pursuant to New York’s long–arm statute. This […]

9 “I was never ruined but twice: once when I lost a lawsuit, and once when I won one.” Voltaire I. Teacher to Teacher Dialogue Twenty-first century technological advances have provided our students with all kinds of instant access to […]

1 Chapter 20 Remedies for Breach of Sales and Lease Contracts VI. Answers to Critical Legal Thinking Cases 20.1 Nonconforming Goods Hartz wins the lawsuit based upon the buyer’s right to reject nonconforming goods. Sales transactions are subject to the […]

157 “Trade and commerce, if they were not made of Indian rubber, would never manage to bounce over the obstacles which legislators are continually putting in their way.” Henry D. Thoreau I. Teacher to Teacher Dialogue The UCC allows the […]

1 Chapter 21 Warranties VI. Answers to Critical Legal Thinking Cases 21.1 Express Warranty Yes. An express warranty was made by Ashe regarding the quality of the diamonds in the bracelet. The Supreme Court of Virginia held that the term […]

165 “When a manufacturer engages in advertising in order to bring his goods and their quality to the attention of the public and thus to create consumer demand, the representations made constitute an express warranty running directly to a buyer […]

1 Chapter 22 Creation of Negotiable Instruments VI. Answers to Critical Legal Thinking Cases 22.1 Negotiable Instrument Yes, the note executed by Dr. Bailey was a negotiable instrument. To be a negotiable instrument, a writing must contain either an unconditional […]

170 “The great object of the law is to encourage commerce.” Judge Chambre I. Teacher to Teacher Dialogue Many first-time students of law find this group of materials on negotiable instruments to be the most difficult part of the course. […]

1 Chapter 23 Holder in Due Course and Transferability VI. Answers to Critical Legal Thinking Cases 23.1 Payable Jointly No, Johnson’s signature alone was not sufficient to negotiate the check to Midland. An instrument can be payable to two or […]

178 “A negotiable bill or note is a courier without luggage.” Chief Justice Gibson I. Teacher to Teacher Dialogue Because negotiable instruments are meant to be a substitute for money, a comparison to money is useful. If someone hands the […]

1 Chapter 24 Liability, Defenses, and Discharge VI. Answers to Critical Legal Thinking Cases 24.1 Transfer Warranty No, the Pontiac State Bank is not liable to Matco for breach of a transfer warranty. A party who transfers an instrument and […]

184 “If one wants to know the real value of money, he needs but to borrow some from his friends.” Confucius I. Teacher to Teacher Dialogue The objective of this chapter is to review the liability, defense, and discharge aspects […]

1 Chapter 25 Banking System and Electronic Financial Transactions VI. Answers to Critical Legal Thinking Cases 25.1 Cashier’s Check Wood wins, because Wood’s stop–payment order should not have been effective. A cashier’s check, which is drawn on the issuing bank […]

192 “Bankers have no right to establish a customary law among themselves, at the expense of other men.” Justice Foster I. Teacher to Teacher Dialogue This chapter concentrates on the body of UCC rules and the banking system within which […]

1 Chapter 26 Credit, Real Property Financing, and Debtor’s Rights VI. Answers to Critical Legal Thinking Cases 26.1 Lien Graco Fishing and Rental Tools, Inc. (Graco), the materialman, wins. The court held that Graco had properly perfected its materialman’s lien […]

201 “Creditors have better memories than debtors.” Benjamin Franklin I. Teacher to Teacher Dialogue One of the difficulties in teaching these materials is trying to steer students clear of a certain statutory myopia. They read these materials and often come […]

1 Chapter 27 Secured Transactions VI. Answers to Critical Legal Thinking Cases 27.1 Financing Statement No. The bankruptcy court held that creditor PSC Metals, Inc.’s filing of the financing statement under the debtor’s trade name “Keystone Steel & Wire Co.” […]

210 “Debtors are liars.” George Herbert I. Teacher to Teacher Dialogue The study of secured transactions allows teachers to focus on two sides of the same coin. One involves the rights, duties, and obligations of the debtor and creditor. The […]

1 Chapter 28 Bankruptcy and Reorganization VI. Answers to Critical Legal Thinking Cases 28.1 Bankruptcy Estate No, the debtor’s jewelry does not qualify as necessary and proper wearing apparel and is therefore not exempt property from the bankruptcy estate. Mrs. […]

218 “A trifling debt makes a man your debtor; a large one makes him your enemy.” Seneca I. Teacher to Teacher Dialogue The bankruptcy material presents an excellent opportunity to illustrate how law works as the end product of social […]

Chapter 28 224 Debtor-in-Possession – The debtor-in–possession is empowered to operate the debtor’s business during the bankruptcy proceeding. This power includes authority to enter into contracts, purchase supplies, incur debts, and so on. Creditors’ Committees – After an order for […]

1 Chapter 29 Agency Formation and Termination VI. Answers to Critical Legal Thinking Cases 29.1 Scope of Employment No. The court held that James Goldick, an employee of Lapp Roofing and Sheet Metal Company, Inc., was not acting within the […]

229 “Let every eye negotiate for itself, and trust no agent.” William Shakespeare I. Teacher to Teacher Dialogue Agency law is very important in a basic undergraduate law course in that it represents a synergy of two otherwise distinctive bodies […]

1 Chapter 3 Judicial, Alternative, and E-Dispute Resolution VI. Answers to Critical Legal Thinking Cases 3.1 Summary Judgment No, the defendants’ motions for summary judgment should not be granted. The U.S. district court found that substantial issues of fact needed […]

Chapter 3 18 “We’re the jury. Dread our fury!” William S. Gilbert I. Teacher to Teacher Dialogue Only a small percentage of cases make it to trial. The reality is that most cases settle at some point in the process. […]

Chapter 3 24 Mediation – Mediation calls for a neutral third party to act as a mediator, but not decision maker. His job is to encourage settlement between the parties. If the two sides choose an interested third party to […]

1 Chapter 30 Liability of Principals, Agents, and Independent Contractors VI. Answers to Critical Legal Thinking Cases 30.1 Frolic and Detour No. The court held that Spires was not acting within the scope of his employment at the time of […]

236 “The law, wherein, as in a magic mirror, we see reflected not only our lives, but the lives of all men that have been! When I think on this majestic theme, my eyes dazzle.” Oliver Wendell Holmes Jr. I. […]

1 Chapter 31 Employment, Worker Protection, and Immigration Law VI. Answers to Critical Legal Thinking Cases 31.1 Workers’ Compensation Yes. Medrano’s actions at the time of the automobile accident were within the course and scope of his employment, thus entitling […]

243 “It is difficult to imagine any grounds, other than our own personal economic predilections, for saying that the contract of employment is any the less an appropriate subject of legislation than are scores of others, in dealing with which […]

1 Chapter 32 Labor Law VI. Answers to Critical Legal Thinking Cases 32.1 Unfair Labor Practice Yes, the president of the Sinclair Company violated federal labor law by unlawfully interfering with the union election. The Supreme Court held that although […]

251 “Strong responsible unions are essential to industrial fair play. Without them the labor bargain is wholly one-sided.” Louis D. Brandeis I. Teacher to Teacher Dialogue Depending on where your school is located, student sentiment is usually decidedly pro-union or […]

1 Chapter 33 Equal Opportunity in Employment VI. Answers to Critical Legal Thinking Cases 33.1 Sexual Harassment Yes, an employer can be held liable when the sexual harassment conduct of its employees is so severe that the victim of the […]

260 “What people have always sought is equality of rights before the law. For rights that were not open to all equally would not be rights.” Cicero I. Teacher to Teacher Dialogue Discrimination and equal opportunity are hard materials to […]

1 Chapter 34 Small Business, Entrepreneurship, and General Partnerships VI. Answers to Critical Legal Thinking Cases 34.1 Sole Proprietorship No. Jerry Schuster is not liable for the warranty made by his father. James Schuster, the father, was a sole proprietor […]

270 “One of the most fruitful sources of ruin to men of the world is the reckless or want of principle of partners, and it is one of the perils to which every man exposes himself who enters into partnership […]

1 Chapter 35 Limited Partnerships and Special Partnerships VI. Answers to Critical Legal Thinking Cases 35.1 Liability of Limited Partners No, the limited partners are not individually liable to Day. A limited partnership is a domestic limited partnership in the […]

279 “There are a great many of us who will adhere to that ancient principle that we preferred to be governed by the power of laws, and not by the power of men.” Woodrow Wilson I. Teacher to Teacher Dialogue […]

1 Chapter 36 Corporate Formation and Financing VI. Answers to Critical Legal Thinking Cases 36.1 Legal Entity Yes, Deister Corporation can be sued. Corporations are the most dominant form of business organization today. When a corporation is properly incorporated pursuant […]

285 “A corporation is an artificial being, invisible, intangible, and existing only in the contemplation of law. Being the mere creature of the law, it possesses only those properties which the charter of its creation confers upon it, either expressly […]

Corporate Formation and Financing 291 Implied Powers – Implied powers allow a corporation to exceed its express powers in order to accomplish its corporate purpose. Ultra Vires Act – An act by a corporation that is beyond its express or […]

1 Chapter 37 Corporate Governance and Sarbanes-Oxley-Act VI. Answers to Critical Legal Thinking Cases 37.1 Proxy No, Smith and Gibbons cannot reverse their proxy agreement with Zollar. A normal proxy, unless otherwise stated, is valid for 11 months. A proxy […]

297 “Corporation: An ingenious device for obtaining individual profit without individual responsibility.” Ambrose Bierce I. Teacher to Teacher Dialogue This chapter lends itself to the old “black letter” law approach because of the sheer volume of rules, definitions, and procedures […]

Corporate Governance and Sarbanes-Oxley Act 303 The Business Judgment Rule – The business judgment rule states that officers and directors are not liable for honest mistakes of judgment. Fiduciary Duty: Duty of Loyalty The directors and officers must subordinate their […]

1 Chapter 38 Corporate Acquisitions and Multinational Corporations VI. Answers to Critical Legal Thinking Cases 38.1 Shareholder Resolution Yes, the Medical Committee’s proposed shareholder resolution could be stated in terms to meet the requirements of Section 14(a) to be included […]

308 Copyright ©2016 Pearson Education, Inc. “To supervise wisely the great corporations is well; but to look backwards to the days when business was polite pillage and regard our great business concerns as piratical institutions carrying letters of marque and […]

1 Chapter 39 Limited Liability Companies and Limited Liability Partnerships VI. Answers to Critical Legal Thinking Cases 39.1 Limited Liability Yes. The plaintiffs who sued Bone are required to pay the legal fees he incurred while fighting the plaintiffs’ lawsuit. […]

317 “Justice is the end of government. It is the end of civil society. It ever has been, and ever will be pursued, until it be obtained, or until liberty be lost in the pursuit.” James Madison I. Teacher to […]

1 Chapter 4 Constitutional Law for Business and E-Commerce VI. Answers to Critical Legal Thinking Cases 4.1 Supremacy Clause Yes. The U.S. Supreme Court held that the Massachusetts’ anti-Myanmar law conflicted with federal law and was therefore preempted by the […]

Constitutional Law for Business and E-Commerce 29 “We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings […]

Constitutional Law for Business and E-Commerce 35 The Equal Protection Clause prohibits state, local, and federal governments from treating persons that are similarly situated differently, including corporations. There are three different standards that have been established by the U.S. Supreme […]

1 Chapter 40 Franchise and Special Forms of Business VI. Answers to Critical Legal Thinking Cases 40.1 Agency No, Re/Max International, Inc. (Re/Max) is not liable for the automobile accident caused by Nascimento that injured plaintiff Ana Maria de Oliveira […]

325 “It has been uniformly laid down in this Court, as far back as we can remember, that good faith is the basis of all mercantile transactions.” Buller, Judge I. Teacher to Teacher Dialogue Franchises are a way of doing […]

1 Chapter 41 Investor Protection and E-Securities Transactions VI. Answers to Critical Legal Thinking Cases 41.1 Definition of a Security The notes issued by the Co-Op are “securities.” In order for the defendant, Ernst & Young, to be subject to […]

334 “When there is blood on the street, I am buying.” Nathaniel Mayer Victor Rothschild I. Teacher to Teacher Dialogue One of the most unfortunate aspects of our overly litigious society is the notion that the government must somehow “cover” […]

Chapter 41 340 436 F.3d 1140, 2006 U.S. App. Lexis 3008 (2006), United States Court of Appeals for the Ninth Circuit Facts: Upon receiving news that Nvidea had been awarded the contract to develop a video game console for Microsoft […]

1 Chapter 42 Ethics and Social Responsibility of Business VI. Answers to Critical Legal Thinking Cases 42.1 False Advertising No. Papa John’s advertising slogan “Better Ingredients. Better Pizza” is not false advertising. One form of non-actionable statements of general opinion […]

346 “Ethical considerations can no more be excluded from the administration of justice, which is the end and purpose of all civil laws, than one can exclude the vital air from his room and live.” John F. Dillon I. Teacher […]

1 Chapter 43 Administrative Law and Regulatory Agencies VI. Answers to Critical Legal Thinking Cases 43.1 Government Regulation Yes, the Federal Communications Commission’s (FCC) regulation and censoring of Pacifica Foundation (Pacifica) in this case was lawful and constitutional. The U.S. […]

351 “Good government is an empire of laws.” John Adams I. Teacher to Teacher Dialogue An acquaintance of mine spent nearly thirteen years working in the federal bureaucracy as a U.S. estate and gift tax attorney. During his tenure with […]

1 Chapter 44 Consumer Protection and Product Safety VI. Answers to Critical Legal Thinking Cases 44.1 Food Regulation Yes, Engel and Gel Spice violated the section of the Federal Food Drug and Cosmetic Act that concerns adulterated foods. The FDA […]

358 “I should regret to find that the law was powerless to enforce the most elementary principles of commercial morality.” Lord Herschell Reddaway v. Banham (1896) I. Teacher to Teacher Dialogue Consumer law issues include those of contracts (including UCC […]

1 Chapter 45 Environmental Protection VI. Answers to Critical Legal Thinking Cases 45.1 Wetlands The Army Corps of Engineers (Army Corps) prevail pursuant to the Clean Water Act (CWA). The CWA provides that the Secretary of the Army may issue […]

365 “All animals are equal but some animals are more equal than others.” George Orwell I. Teacher to Teacher Dialogue Some topics are easier to teach than others. When dealing with subjects like negotiable instruments, students appreciate the necessity of […]

1 Chapter 46 Antitrust Law and Unfair Trade Practices VI. Answers to Critical Legal Thinking Cases 46.1 Division of Markets Yes, BRG of Georgia, Inc. (BRG) and Harcourt Brace Jovanovich (HBJ) are liable for violating Section 1 of the Sherman […]

372 “While competition cannot be created by statutory enactment, it can in large measure be revived by changing the laws and forbidding the practices that killed it, and by enacting laws that will give it heart and occasion again. We […]

Antitrust Law and Unfair Trade Practices 379 prices, producing an actual injury to the plaintiff. If the plaintiff has not suffered an actual injury, they cannot recover. Indirect Price Discrimination – Indirect price discrimination provides better prices to favored customers […]

1 Chapter 47 Personal Property and Bailment VI. Answers to Critical Legal Thinking Cases 47.1 Mislaid Property The money was mislaid property. Mislaid property is property that is intentionally put into a certain place and later forgotten. Mislaid property is […]

385 “Property and law are born and must die together.” Jeremy Bentham I. Teacher to Teacher Dialogue The laws of contracts, property, and torts all have not only significant roles in business, but also play vital roles in how one […]

1 Chapter 48 Real Property VI. Answers to Critical Legal Thinking Cases 48.1 Recording Statute No. Howard Savings Bank’s mortgage on the property was not properly recorded and indexed and therefore did not give notice of its existence to subsequent […]

394 “Without that sense of security which property gives, the land would still be uncultivated.” Francois Quesnay I. Teacher to Teacher Dialogue This chapter tends to be an eye opener for the students in that, although they already have a […]

1 Chapter 49 Landlord-Tenant Law and Land Use Regulation VI. Answers to Critical Legal Thinking Cases 49.1 Americans with Disabilities Act Yes. Cinemark’s wheel-chair seating arrangement in its stadium-style theaters violates Standard 4.33.3 and Title III of the Americans with […]

404 “Good fences make good neighbors.” Robert Frost I. Teacher to Teacher Dialogue One sure way to engage student interest in a topic is to build on their personal experiences outside the classroom. The most difficult topic of negotiable instruments […]

1 Chapter 5 Intentional Torts and Negligence VI. Answers to Critical Legal Thinking Cases 5.1 Assumption of the Risk Yes, riding the mechanical bull was an open and obvious danger for which Lilya had voluntarily assumed the risk. The court […]

Chapter 5 “Negligence is not actionable unless it involves the invasion of a legally protected interest, the violation of a right. Proof of negligence in the air, so to speak, will not do.” C. J. Cardozo I. Teacher to Teacher […]

1 Chapter 50 Insurance VI. Answers to Critical Legal Thinking Cases 50.1 Exclusion from Insurance Policy No, this accident is not covered by the homeowners’ policy issued by National America. Although most homeowners’ policies include personal liability insurance, which provides […]

412 “The underwriter knows nothing and the man who comes to him to ask him to insure knows everything.” L. J. Scrutton I. Teacher to Teacher Dialogue Insurance is not necessarily a sexy subject when presented in terms of contract […]

1 Chapter 51 Accountants’ Duties and Liability VI. Answers to Critical Legal Thinking Cases 51.1 Accountant’s Liability to a Third Party No, George Korbakes & Company, LLP (GKCO), the auditor of Brandon Apparel Group, Inc. (Brandon), is not liable to […]

420 “In our complex society the accountant’s certificate and the lawyer’s opinion can be instruments for inflicting pecuniary loss more potent than the chisel or the crowbar.” Justice Blackmun I. Teacher to Teacher Dialogue Much has been written about the […]

1 Chapter 52 Wills, Trusts, and Estates VI. Answers to Critical Legal Thinking Cases 52.1 Ademption Yes, the bequests to Anderson and Baker were specific bequests that were adeemed when the stock was sold. Therefore, Anderson and Baker are not […]

430 “When you have told someone you have left him a legacy, the only decent thing to do is to die at once.” Samuel Butler I. Teacher to Teacher Dialogue This chapter covers the law of wills and trusts. You […]

1 Chapter 53 Family Law VI. Answers to Critical Legal Thinking Cases 53.1 Marital Assets Mississippi follows the doctrine of equitable distribution. However, since this doctrine refers to a fair distribution and not necessarily an equal distribution, there was still […]

439 “The happiest moments of my life have been the few which I have passed at home in the bosom of my family.” Thomas Jefferson I. Teacher to Teacher Dialogue An entire body of family law has arisen in the […]

1 Chapter 54 International and World Trade Law VI. Answers to Critical Legal Thinking Cases 54.1 Foreign Sovereign Immunity Yes. Argentina is subject to the lawsuit in the United States. The commercial activity exception to the Foreign Sovereign Immunities Act […]

446 “International law, or the law that governs between nations, has at times, been like the common law within states, a twilight existence during which it is hardly distinguishable from morality or justice, till at length the imprimatur of a […]

1 Chapter 6 Product and Strict Liability VI. Answers to Critical Legal Thinking Cases 6.1 Defect in Design Yes, Doncasters, Inc. is strictly liable for the death of the deceased parties of the crash of the Twin Otter airplane because […]

Strict Liability and Product Liability 49 A manufacturer is strictly liable in tort when an article he places on the market, knowing that it is to be used without inspection for defects, proves to have a defect that causes injury […]

1 Chapter 7 Intellectual Property and Cyber Piracy VI. Answers to Critical Legal Thinking Cases 7.1 Patent No, the claimed invention is not patentable. In order to be patentable, the claimed invention must be novel and nonobvious. Laws of nature, […]

Chapter 7 56 The Congress shall have the power…to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries. Article I, Section 8, clause […]

1 Chapter 8 Criminal Law and Cybercrime VI. Answers to Critical Legal Thinking Cases 8.1 Search and Seizure No. The police officers’ use of the global positioning system (GPS) without first obtaining a search warrant does not constitute an unreasonable […]

Chapter 8 66 In our complex society the accountant’s certificate and the lawyer’s opinion can be instruments for inflicting pecuniary loss more potent than the chisel or the crowbar. Justice Blackmun I. Teacher to Teacher Dialogue There can be no […]

Criminal Law and Cyber Crimes 73 The Fifth Amendment provides that no person can be compelled in any criminal case to give evidence against him/herself. We speak of those asserting this privilege as pleading or taking the Fifth. Only individuals […]

1 Chapter 9 Nature of Traditional and E-Contracts VI. Answers to Critical Legal Thinking Cases 9.1 Implied-in-Fact Contract Yes. There was an implied-in–fact contract between the parties. The law allows for recovery of damages for the breach of an implied-in-fact […]

79 “The movement of the progressive societies has hitherto been a movement from status to contract.” Sir Henry Maine I. Teacher to Teacher Dialogue What elevates a mere agreement between two or more private parties into a legally recognized contract […]

In an auction without reserve, the seller is the offeree. Collision insurance covers damages to a car in a natural disaster. Answer: FALSE A voluntary petition is a petition filed by a creditor that states that the debtor has paid […]

Violations of generally accepted accounting principles (GAAPs) or generally accepted auditing standards (GAASs), or International Financial Reporting Standards (IFRSs), if applicable, are prima facie evidence of negligence in any court action. An orally agreed upon power of attorney is acceptable […]

The Worker Adjustment and Retraining Notification (WARN) Act is a federal act that requires employers with 100 or more employees to give their employees 60 days’ notice before engaging in certain plant closings or layoffs. Objective theory of contracts states […]

Private civil actions are permitted under the Fair Labor Standards Act. Under common law, the inclusion of additional terms in the acceptance of an offer is considered a counteroffer rather than an acceptance. Answer: TRUE Section 2 of the Sherman […]

A contract is considered to be supported by legal value if the promisor suffers a legal detriment. If a delegatee has not assumed the duties under a contract, the delegatee is not liable to the obligee for nonperformance. Answer: TRUE […]

A disclaimer of opinion is a clause in auditing that a company can claim wherein the auditor is not allowed to access a high-priority portion of a company’s financial records. A sole proprietor is legally responsible for the business’s contracts. […]

In case a corporation’s assets are liquidated, the preferred stockholders are paid before common stockholders. Rubber-stamps are not recognized as signing instruments under the Uniform Commercial Code (UCC). Answer: FALSE An insurer will issue an umbrella policy only if a […]

The patent term begins to run from the date the patent is issued. Section 5 of the Federal Trade Commission (FTC) Act can be used to prohibit unfair and deceptive business practices. Answer: TRUE A person can sue for nonperformance […]

ISPs are not liable for the content transmitted over their networks by e-mail users and websites. A party in a contract that uses its bargaining power unfairly can render the contract unconscionable. Answer: TRUE Title VII of the Civil Rights […]

The check collection process, which may involve multiple banks, is governed by Revised Article 3 of the UCC. Most Statutes of Frauds permit lease contracts that last for less than five years to be orally contracted. Answer: FALSE Instruments that […]

The merger of two grocery store chains that serve the same geographical market is an example of a horizontal merger. An agency by ratification occurs when a principal ratifies an authorized act. Answer: FALSE An easement is a form of […]

If a lender extends unsecured credit to a debtor, the creditor takes no interest in any collateral to secure the loan. Negotiationis a procedure whereby the parties choose an impartial third party to hear and decide the dispute. Answer: FALSE […]

The statute of repose begins to run when the plaintiff suffers injury. Common carriers are held to a duty of strict liability. Answer: TRUE A person who is insane but not adjudged insane cannot void a contract he or she […]

If the landlord recovers from the assignor, the assignor has no course of action to recover from the assignee. A trademark is only issued if the registrant proves he has used the mark in commerce. Answer: TRUE In a draft […]

When a mutual mistake of value occurs, the contract remains enforceable by either party. All general partners have an equal right to participate in the managementof the general partnership business unless otherwise specified in the general partnership agreement. Answer: TRUE […]

One of the parties being intoxicated at the time of marriage is a ground for a legal annulment. Natural monopolies are found to violate Section 2 of the Sherman Act. Answer: FALSE The deferred posting rule allows banks to fix […]

Setting of minimum resale prices is a rule of reason violation of Section 1 of the Sherman Act. The World Trade Organization (WTO) was created as a successor to the General Agreement on Tariffs and Trade (GATT). Answer: TRUE An […]

Distinctive marks are ordinary words or symbols that have acquired special meaning with a product or service. Implied warranties of quality cannot be disclaimed. Answer: FALSE Garnishment is a court order that permits the seizure of a debtor’s property that […]

The holder of a negotiable instrument has the same rights as the holder of an ordinary nonnegotiable contract. An easement contractoccurs when one person agrees to answer for the debts or duties of another person. Answer: FALSE Article 3 of […]

A divorce is the only method for legally terminating a marriage. The Due Process Clause of the U.S. Constitution grants Congress the power “to regulate commerce with foreign nations, and among the several states, and with Indian tribes.” Answer: FALSE […]

In all child custody cases, only the custodial parent has the right to make decisions on behalf of the child. A reward is a form of bilateral contract. Answer: FALSE A single failure by a franchisee to meet a quality-control […]

An LLC (limited liability company) is not liable for injury caused by an LLC member while acting within the ordinary course of business of the LLC. For conscious parallelism to be proven, each manufacturer should be found to have acted […]

A risk utility analysis requires showing that a product is more dangerous than the ordinary consumer would expect. A complainant can file his or her claim of discrimination with a state fair employment practices agency instead of the Equal Employment […]

A sales contract evidenced by writing cannot be contradicted by a prior oral or written agreement. A landlord owes a duty to deliver possession of the leased premises to the lessee. Answer: TRUE A principal owes a duty to indemnify […]

In most states, contracts for the sale of goods for $900 do not require to be in writing. The United States follows the principle of restricted immunity for suits against foreign nations. Answer: TRUE A participant in an activity covered […]

If the object of a contract becomes illegal after the contract is entered into, the parties are discharged from the contract. To meet the mirror image rule, the offeree must accept the terms of the offer without modification. Answer: TRUE […]

A proxy contest is one in which incumbent directors are impeached. The Establishment Clause guarantees that there will be no state-sponsored religion. Answer: TRUE Advertising is categorized as limited protected speech. Answer: TRUE A written reconveyance transfers the title of […]

Under the European Union, customs duties have been eliminated among member nations. In an auction with reserve, the seller retains the right to refuse the highest bidder. Answer: TRUE A sole proprietor has limited personal liability. Answer: FALSE A special […]

Article 2A of the UCC deals with lessors and lessees. A person who leases a single-family dwelling and does not own more than three single-family dwellings does not come under the purview of the Fair Housing Act of 1968. Answer: […]

Lila, a newspaper columnist from Chicago, is unhappy with the soaring price of fuel in the U.S. She publishes an article that criticizes the government’s refusal to offer gasoline at a subsidized price. This is an example of fully protected […]

When a group of plaintiffs with common claims collectively bring a lawsuit against a defendant, it is known as consolidation. The FDA cannot recall any cosmetics that contain unsubstantiated claims of preserving youth or increasing virility from the market. Answer: […]

Nonperformance of a covenant is not considered a breach of contract because a covenant is an unconditional promise. One of the services provided by the Department of Homeland Security is emergency preparedness and response to terrorist incidents. Answer: TRUE Statutesare […]

It is legal for a union to begin a strike thirty days after it has informed the employer about the strike. A deceased joint tenant’s will is effective over the right to survivorship. Answer: FALSE A contract made by a […]

The principal is liable for an innocent misrepresentation made by an agent acting within the scope of employment. Attachments are funds advanced to a debtor from a line of credit secured by collateral. Answer: FALSE All creditors must file a […]

Minor breach occurs when a party renders substantial performance of his or her contractual duties. A lawyer who fails to file a document with the court on time, causing the client’s case to be dismissed is liable for legal malpractice. […]

Nonnegotiable instruments are negotiated by holders in due course. Only movable goods come under the scope of Article 2 of the UCC. Answer: TRUE If a shoplifting suspect is detained for an unreasonably long time and is found to be […]

A presentment is a demand for the acceptance of a dishonored instrument. The delivery term “no-arrival, no-sale” can be added to a shipment contract. Answer: FALSE If a seller is a merchant with respect to certain goods, there is an […]

A person having origins in any of the original peoples of the Middle East belongs to the Caucasian racial group. The agent is not liable on the contract in a fully disclosed agency. Answer: TRUE Cabinet members of cabinet-level federal […]

An unequivocal acceptance must not contain conditions or exceptions. The 2005 act requires an attorney certificationwhereby an attorney who represents a client in bankruptcy must certify the accuracy of the information contained in the bankruptcy petition. Answer: TRUE The EPA […]

Federal workers are not covered under the Equal Pay Act. There are no specific governmental laws endorsing a moral minimum of social responsibility on corporations. Answer: FALSE A short-form merger does not require the approval of the board of directors […]

Merely observing data on a protected computer without authorization does not amount to a federal crime. If the defendant does not answer the complaint, a default judgment is entered against him or her. Answer: TRUE Personal and universal defenses can […]

Apparent agency arises when a franchisee creates the appearance of being a franchisor’s agent when in fact an actual agency does not exist. Predictions about the future generally do not form the basis for fraud. Answer: TRUE A general partnership […]

Utilitarianism directs an individual to choose the action that provides the greatest good for the greatest number of people. When a drug manufacturer places prescription drugs in containers that can be easily opened by children, the manufacturer can be subjected […]

A no-fault insurance assures an insured party that coverage is available if they are injured in an automobile accident. Members of LLCs (limited liability companies) are not personally liable for the LLCs’ debts, obligations, and liabilities. Answer: FALSE Chattel paper […]

The term ISP refers to users who disguise computer viruses as executable programs and send them across the Internet. The income or losses of a Limited liability company (LLC) flow through to the members’ individual income tax returns, which avoids […]

The duty of restitution states that a competent party should be placed in status quo by the minor upon disaffirmance of a contract. The mislabeling of medicinal devices is prohibited under the Nutrition Labeling and Education Act. Answer: FALSE Abstractions […]

The first 12 circuits of the federal court system are geographical. Pre-established damages agreed to in a contract are known as liquidated damages. Answer: TRUE The delegation doctrine only allows executive and legislative powers to an administrative agency, and not […]

A principal who signs a contract with a third-party is obligated to perform that contract. Attachment is a situation in which the value of a creditor’s collateral is insufficient to satisfy the debt for which it is collated. Answer: FALSE […]

A living will states a person’s wishes regarding estate planning. The Fair Labor Standards Act guarantees workers unpaid time off from work for family and medical emergencies and other specified situations. Answer: FALSE According to Rawls’s social justice theory, moral […]

The uninsured motorist coverage only covers when the accident is an insured’s fault. The National Labor Relations Board oversees union elections. Answer: TRUE Certified checks become stale after two years from the date of their issue. Answer: FALSE Accountants can […]

Under the defense of contributory negligence, if Mary is partially responsible for her injuries, then she can recover partial damages from the defendant. In a spendthrift trust, all control over the trust is removed from the beneficiary. Answer: TRUE A […]

If no beneficiary is mentioned in a life insurance, then the proceeds of the insurance go to the insured’s estate. A properly executed subsequent will revokes a prior will. Answer: TRUE If a bank does not honor a check when […]

Under the Consumer Product Safety Act, a private party can sue for an injunction to prevent violations of the act or of CPSC rules and regulations. Point sources are sources of pollution that are fixed and stationary. Answer: TRUE An […]

When one party takes specific action to cover a material fact from another party, fraud by enticement occurs. Provisions of federal law are valid as long as they do not conflict with any state law. Answer: FALSE A requirements contract […]

The Sarbanes-Oxley Act requires the chief executive officer (CEO) and chief financial officer (CFO) to certify annual and quarterly reports. After becoming sober, an intoxicated person can ratify the contracts he or she entered into while intoxicated. Answer: TRUE For […]

An unconscionable contract can be enforced if the unconscionable clause is removed from it. The Environmental Protection Agency lacks adjudicative powers to hold hearings and order remedies for violation of environmental laws. Answer: FALSE A codicil is considered to be […]

If a light-skinned member of a race refuses to hire a dark-skinned member of the same race, it constitutes racial discrimination. In deciding the motion for judgment on the pleadings, the judge also considers facts outside the pleadings. Answer: FALSE […]

A letter of credit is considered an informal contract as it does not have a special method of creation. An offer to create a unilateral contract cannot be accepted by a promise to perform. Answer: TRUE A contract is considered […]

A legal right that arises out of a breach of contract may be assigned. A private plaintiff can bring an action of employment discrimination under Section 1981 of the Civil Rights Act of 1866 without going through the procedural requirements […]

In a destination contract, title passes to the buyer when the seller tenders delivery of the goods at the specified destination. Nuncupative wills are legally binding oral wills that are made on a testator’s deathbed in the absence of witnesses. […]

A terminated life estate property reverts to the grantor or the grantor’s estate or other designated person. In a lease transaction, title to the leased goods passes to the lessee. Answer: FALSE An offer is terminated if the subject matter […]

A subsidiary corporation ceases to exist after a share exchange. Bilateral contracts are accepted only upon the offeree’s performance of the required act. Answer: FALSE Real property cannot be owned by more than one person. Answer: FALSE The euro can […]

The inaccessibility exception is a rule that permits employees and union officials to engage in union solicitation on company property if the employees are beyond reach of reasonable union efforts to communicate with them. Writ of garnishment is an order […]

It is not necessary for a limited partnership to have general partners if the limited partners share management responsibility among themselves. The concept of federal law taking precedence over state or local law is called the preemption doctrine. Answer: TRUE […]

Relativism is one of the principles of Kantian ethics that states that the actor must abide by the rule he or she uses to judge the morality of someone else’s conduct. A corporation can be incorporated in several states. Answer: […]

If the product or service offered by a franchisor has not been tested, it should appear on the Federal Trade Commission (FTC) franchise notice. Article 2 of the UCC applies to sales contracts for the sale of intangible goods. Answer: […]

A proxy card authorizes another person to vote the shareholder’s shares. Any age below the statutory age of majority is called the period of minority. Answer: TRUE Mitigation of damages is a nonbreaching party’s legal duty to avoid or reduce […]

Improvements to existing machines, processes, or compositions of matter cannot be patented. A general warranty deed contains the greatest number of warranties and provides the highest level of protection to a grantee. Answer: TRUE The holder of a negotiable instrument […]

If an insured does not have an insurable interest in the property being insured, the contract is treated as a wager. General-jurisdiction trial courts can be found in every state. Answer: TRUE In modern real estate law, the doctrine of […]

A ticket to a movie theater or sporting event is an example of a license. A buyer or lessee who rightfully covers may sue the seller or lessor for additional expenses paid. Answer: TRUE A maker or drawer can appoint […]

An insurance broker is an agent of an insurer. Foreign corporations can elect to be taxed as an S corporation. Answer: FALSE An LLLP is a foreign limited liability limited partnership in the state in which it is formed. Answer: […]

The common law of contract allows for gap-filling terms that are implied in the contract. Warranties are the buyer’s or lessee’s assurance that the goods meet certain standards. Answer: TRUE Employers are never strictly liable to any of their employees […]

All states provide that persons under a certain age, such as 14 or 15 years of age, cannot be married. If a newspaper review calls a commercially-successful actor talentless, it is liable for defamation of character. Answer: FALSE To be […]

Confusion occurs if two or more persons commingle fungible goods. Checks and drafts are considered informal contracts as their method of creation varies from one bank to another. Answer: FALSE In an F.O.B. point of shipment, the buyer bears the […]

The federal government is primarily responsible for the implementation of the Clear Water Act in all states. A manufacturer of matches is not strictly liable if an arsonist uses its matches to burn down a building. Answer: TRUE Administrative agencies […]

Hostile tender offers are tender offers made without the permission of the target company’s management. A civil lawsuit does not require a unanimous jury vote. Answer: TRUE A requirements contract is a contract in which a buyer agrees to purchase […]

Fraud in the inception is a type of personal defense. A foreign corporation can conduct commerce in a state if it obtains a certificate of authority from the state. Answer: TRUE Dual agency is permitted if all parties to a […]

In an area franchise, the franchisor authorizes the franchisee to negotiate and sell franchises on behalf of the franchisor. Section 7 of the National Labor Relations Act is a federal law that gives employers the right to terminate union practices […]

The Sarbanes-Oxley Act makes it lawful for an accounting firm to simultaneously provide audit and certain nonaudit services to a public company if the firm is registered. If the object of an offer is made illegal prior to the acceptance […]

Traditional contract rules do not apply to e-contracts. The Critical Legal Studies School of jurisprudential thought seeks to restrict the subjective decision-making powers of judges. Answer: FALSE The United States considers Native American tribes as “domestic dependent” nations with limited […]

All substantive rules are subject to judicial review. The Sarbanes-Oxley Act contains provisions for prosecuting U.S. firms that bribe foreign officials. Answer: FALSE The owner of the premises where a property is mislaid is entitled to take possession of the […]

The nature and duration of visitation rights is determined by the parent who has legal custody without the involvement of the court. A tort can be considered an assault without there being any actual physical contact. Answer: TRUE The coming […]

According to the RMBCA, only corporations with 50 or fewer shareholders may elect statutory close corporation status. In an auction with reserve, the bidder is the offeror. Answer: TRUE A holder can convert a blank indorsement into a special indorsement […]

General government regulation consists of laws that regulate the operation of the three branches of the federal government. A living trust is a document that states which lifesaving measures the signor does and does not want. Answer: FALSE The shareholders […]

Value has been given by the holder if he or she acquires a security interest in or lien on an instrument. The length of time the parties live together is sufficient to establish a common law marriage. Answer: FALSE The […]

The liability of manufacturers, sellers, lessors, and others for injuries caused by defective products is commonly referred to as product liability. An implied warranty of fitness for a particular purpose is breached if the goods do not meet the buyer’s […]

The franchisor is liable for the contracts entered into and torts committed by the franchisee while the franchisee is acting within the scope of the apparent agency. A license is a contract that transfers complete rights in intellectual property and […]

The unfair advantage theory is intended to prevent wealthy companies from overwhelming the competition in a given market. Rabbinic jurisprudence is administered by rabbi-judges sitting as the Beis Din. Answer: TRUE A limited partnership cannot have general partners. Answer: FALSE […]

Under the UCC, an agreement sufficient to constitute a contract for the sale or lease of goods may be found even though the moment of its making is undetermined. A gift of $100,000 to a named beneficiary is an example […]

States lack the power to enact antitrust statutes autonomously. Preferred stockholders are given the right to vote for the board of directors of the corporation. Answer: FALSE A plaintiff must file a claim against an employer within 180 days of […]

The National Labor Relations Act establishes the right of employers to terminate the employment of members of unions whose continued picketing hinders the progress of the business. Euthanasia pursuant to a living will is considered legal. Answer: FALSE After the […]

An S corporation must pay federal income tax at the corporate level. A decree of judicial dissolution is granted to a partner whenever it is not reasonably practical to carry on the business in conformity with the limited partnership agreement. […]

An S corporation cannot have more than 100 shareholders. The Endangered Species Act applies only to private parties. Answer: FALSE Only one continuation statement can be filed for a financing statement. Answer: FALSE The CAN-SPAM Act does not regulate spam […]

The Chief Justice of the Supreme Court is elected by the Associate Justices of the U.S. Supreme Court. The UCITA (Uniform Computer Information Transactions Act) establishes uniform legal rules for the formation and enforcement of electronic contracts and licenses. Answer: […]

A nolo contendere plea can be used as evidence of liability against the accused at a subsequent civil trial. Unilateral mistake is a mistake in which only one party is mistaken about a material fact regarding the subject matter of […]

An offer is not effective until it is actually received by the offeree. The measure of damages for nondelivery is the difference between the contract price and the market price at the time the breach is realized. Answer: TRUE The […]

A principal can authorize an independent contractor to enter into contracts. If a defendant is found not guilty in a criminal case, the government can retry the case with a new jury. Answer: FALSE Principals are liable for negligence caused […]

“All signatures are genuine or authorized” is a transfer warranty that a transferor of a negotiable instrument for consideration makes. The decisions handed down by the general-jurisdiction trial courts are appealable to an intermediate appellate court or the state supreme […]

The approval of the surviving corporation’s shareholders is not required if the merger or share exchange increases the number of voting shares of the surviving corporation by 20 percent or less. Procedural administrative law establishes the procedure that must be […]

E-mail contracts do not meet the requirements of the Statute of Frauds. The merchant courts were established because of the unfair results and limited remedies available in the chancery courts. Answer: FALSE The extension of secured credit requires a debtor’s […]

If a seller does not disclose legal disputes involving the property being sold, he or she is liable for silence as misrepresentation. In a bailment for the sole benefit of the bailor, the bailee owes a duty of great care […]

Agency relationships created against public policy are void and unenforceable. The Law and Economics School of jurisprudential thought believes that promoting market efficiency should be the central goal of legal decision making. Answer: TRUE If no time is stated in […]

Insurance coverage is typically suspended during grace periods for payments. If the accord is performed, it is called a satisfaction. Answer: TRUE A three-party secured transaction occurs when a seller sells goods to a buyer who has obtained financing from […]

For an implied agency to function, implied authority cannot conflict with express authority. A seller’s or lessor’s statement of opinion of the goods does not create an express warranty. Answer: TRUE A contract requires an offer and an acceptance. Answer: […]

Shareholder approval is not required to make any changes in a corporation. The violation of a statute that proximately causes an injury is termed as negligence per se. Answer: TRUE Premiums are based on an estimate of the number of […]

Some states that do not permit same-gender partners to marry provide that they can enter into civil unions. Without mutual assent, there is no contract. Answer: TRUE An existing limited partnership cannot be converted to a limited liability limited partnership. […]

An instrument is not considered canceled if it is destroyed or mutilated by accident or by an unauthorized third party. To be actionable as fraud, the misrepresentation must have been the sole factor in inducing the innocent party to enter […]

Profits and losses from a Limited liability company (LLC) do not have to be distributed in the same proportion. Shareholders are responsible for determining how much will be paid in dividends. Answer: FALSE A stop-payment order can be issued either […]

A power of attorney gives an agent the power to sign legal documents on behalf of the principal. A person with voidable title to goods can transfer the goods title to a good faith purchaser for value. Answer: TRUE Shareholders […]

The act of people interested in the lawsuit joining as parties to an existing lawsuit is called arbitration. Any contract entered into by a person who has been adjudged insane is void. Answer: TRUE Powers not given to the federal […]

State governments do not have the power to regulate commerce with foreign nations. The Consumer Product Safety Commission (CPSC) is an independent federal administrative agency empowered to regulate potentially dangerous consumer products and issue product safety standards. Answer: TRUE Only […]

Article 2 of the Uniform Commercial Code (UCC) is also applied by federal courts to sales contracts governed by federal law. The Law and Economics School believes that legal decision making should be functional to market efficiency. Answer: TRUE Liquidated […]

Discharge of an instrument by payment can be raised against enforcement of a negotiable instrument by an ordinary holder. A personal articles floater helps insure specific items like heirlooms. Answer: TRUE Joint marital debts are debts incurred by the spouses […]

Unqualified indorsements are considered negotiable instruments. Section 10(b) of the Securities Exchange Act prohibits the use of manipulative and deceptive devices in contravention of the rules and regulations prescribed by the SEC. Answer: TRUE The Norris-LaGuardia Act is a federal […]

The theory of moral minimum emphasizes correcting social injuries caused by a business. Consequential damages are unforeseeable damages. Answer: FALSE Only the offeree has the legal power to accept an offer and create a contract. Answer: TRUE E-mail contracts are […]

A spouse wishing to obtain a no-fault divorce merely has to assert irreconcilable differences with his or her spouse. Breach of contract by one party to a licensing agreement gives the nonbreaching party the right to recover damages. Answer: TRUE […]

An employer threatening to close an organization because employees of an organization formed a union is considered an unfair labor practice. Res ipsa loquitor is a tort in which the violation of a statute or an ordinance constitutes the breach […]

A unilateral mistake occurs if both parties know the object of the contract but are mistaken as to its value. A voidable contract is also termed as an unenforceable contract. Answer: FALSE Strict liability applies to services but not products. […]

Under the Federal Unemployment Tax Act, employers are exempted from paying unemployment taxes. If an agency terminates by operation of law, there is no duty to notify third parties about the termination. Answer: TRUE The articles of incorporation must contain […]

Assumption of risk is a defense a defendant can use against a plaintiff who knowingly and voluntarily participates in a risky activity that results in injury. Theft committed by an unauthorized entry through an unlocked door would be considered burglary. […]

Utilitarianism postulates doing the greatest good for the greatest number of people. If a person owns real property in fee simple, his or her ownership is limited in duration. Answer: FALSE The trademark symbol “TM” is used to indicate a […]

A franchise is an example of a license. A bargaining unit must consist of employees from a single company. Answer: FALSE A bridge would be an example of real property. Answer: TRUE Persons who transfer goods without proper title breach […]

The Department of Homeland Security is an example of a federal administrative agency. Decisions reached by an administrative law judge are final and cannot be appealed. Answer: FALSE ISPs provide e-mail accounts to users, Internet access, and storage on the […]

Only the defendant can appeal in a criminal case. Defendants cannot assert a due diligence defense against liabilities arising from the violation of Section 11 of the Securities Act of 1933. Answer: FALSE In the context of limited partnership, general […]

For a gift promise to be enforceable, the promisee must offer a consideration. Agents of an LLC (limited liability company) are not permitted to enter into contracts on behalf of the LLC. Answer: FALSE A friendly merger of two corporations […]

Shippers can purchase comprehensive insurance to cover the risk of loss to their goods during shipment. Self-dealing is when shareholders use their position to deprive the board of directors of personal monetary gain. Answer: FALSE In a sale on approval, […]

A homeowner’s policy does not cover theft that takes place at an insured’s workplace even if the item is insured. Antitrust, bankruptcy, patent and copyright cases can be heard by state courts. Answer: FALSE Human beings are protected in the […]

All federal administrative agencies answer directly to the president. Separate property is included in community property. Answer: FALSE If a document of title is required, title must pass when and where the seller delivers the goods to the buyer. Answer: […]

Properties owned by state and federal governments are subject to the doctrine of adverse possession. The U.S. government can gag citizens from criticizing the President. Answer: FALSE A ratified contract can be disaffirmed even after the minor reaches the age […]

A doctor driving on the wrong side of the road crashes into an eight-year-old boy riding a bicycle. Fearing the consequences, the doctor flees without reporting the accident or giving first-aid to the boy. The doctor is liable for professional […]

A decree of specific performance is a court order that demands the seller or lessor to perform the contract. An offer that is made to two or more persons jointly must be accepted jointly. Answer: TRUE If an employer categorically […]

An offeror can revoke his or her offer even after an agreement or acceptance has been reached. A franchisor deals with the franchisee as an independent contractor. Answer: TRUE The federal district courts are empowered to impanel juries, receive evidence, […]

Common stockholders receive dividends declared by the board of directors. Under the common law, innkeepers are not liable for lost or stolen guest property when compared to the innkeepers’ statutes. Answer: FALSE An insured can cover his automobile under both […]

A lienholder must file a notice of lien with the county recorder’s office in the county in which the real property subject to the lien is located. The Privacy Act provides that documents in the possession of federal administrative agencies […]

The ULPA contains provisions for the formation, operation, and dissolution of limited partnerships. Terms such as ‘sell,” “convey,” and “give” indicate the intent to transfer a contract right. Answer: TRUE Proof of actual deception is required for an advertising to […]

According to a minor’s duty of restoration, the goods received from an adult should be returned in status quo after the contract has been disaffirmed by the minor. A consignee is a person to whom a common carrier makes a […]

If a person owns real property in fee simple, his or her ownership has no limitation on inheritability. A special indorsement is negotiable by indorsement and delivery. Answer: TRUE A registration statement need not contain details on how the proceeds […]

A reply is a document filed by the original plaintiff in response to the defendant’s cross-complaint. Extortion of public officials is called extortion under color of official right. Answer: TRUE An order instrument is payable to anyone in physical possession […]

During the sale of a house, if the seller does not inform the buyer about construction flaws of the house despite the buyer’s enquiry, the seller is liable for fraud by concealment. The FDA labels ordinary household soap as a […]

The Clear Water Act extends its protection to the oceans. The primary level of the national ambient air quality standards (NAAQS) protects vegetation. Answer: FALSE Any lease for a stated period, irrespective of its duration, is called periodic tenancy. Answer: […]

Nonrestrictive indorsements contain instructions from the indorser. Article 2 of the Uniform Commercial Code establishes precise rules for determining the passage of title in sales contracts. Answer: TRUE FDA approval is not mandatory for medical devices to be legally sold […]

Trees, crops, minerals, and timber are barred from being included in contracts involving interests in real property. Antitrust laws are constant across changes in governmental administration. Answer: FALSE After the copyright period runs out, the work enters the public domain. […]

Separate property does not include property owned by a spouse prior to the marriage. According to Regulation A, securities of up to $5 million can only be sold to accredited investors. Answer: FALSE If an employer refuses to promote a […]

Trade names or assumed names cannot be used for signing negotiable instruments. Article 2 of the Uniform Commercial Code (UCC) prescribes a set of uniform rules for the creation and enforcement of contracts for the sale of goods. Answer: TRUE […]

Federal and state government statutes that regulate the safety of food, drugs, cosmetics, toys, vehicles, and other products are collectively referred to as consumer protection laws. Unlicensed persons cannot recover payment for services where they do not have the required […]

The Health Care Reform Act requires health plans that provide dependent coverage to continue coverage for a dependent child until the child turns 26 years of age. An affirmation of the value of goods creates an express warranty. Answer: FALSE […]

Subsurface rights cannot be sold separately from surface rights. The Private Securities Litigation Reform Act of 1995 replaced proportionate liability of the defendant with joint and several liability. Answer: FALSE If a nurse administers CPR to save the life of […]

A choice of law clause is a mandatory clause that should be present in every international contract. The Uniform Partnership Act’s definition of a general partner includes other limited partnerships. Answer: TRUE Relatives who receive property under intestacy statutes are […]

Limited partners of a limited liability limited partnership (LLLP) are involved in the management functions of the partnership. If the value of the collateral securing a secured loan is less than the secured interest, the secured creditor is an oversecured […]

When a customer deposits a check into a checking account for collection, the depository bank does not have to pay the customer the amount of the check until the check “clears.” The measure of damages awarded to the innocent party […]

A promissory note may only be a two-party instrument. A pretrial hearing is also known as a settlement conference. Answer: TRUE Express warranties must contain the word “express” in writing to be legitimate. Answer: FALSE Unlawful eviction occurs when a […]

.bz is a restricted domain extension and can only be used by businesses or organizations in Brazil. Ross makes an offer to Elizabeth to sell his automobile to her for $10,000. In this case, Ross is the offeree and Elizabeth […]

The proceeds from the sale of real or personal property authorized by a writ of execution are used to pay the creditor the amount of the final judgment. Contracts involving fraud in the inception are void. Answer: TRUE If a […]

If there is a confidential relationship between two people, any contract made by the servient party that benefits the dominant party is presumed to be entered into under undue influence. An artisan’s lien is a statutory lien given to workers […]

Only written express warranties are valid. A seller can recover lost profits in a case where damages measured by the difference between contract price and market price would not put the seller in the same position as the performance of […]

The Bill of Rights establishes the United States as a federal nation and divides power between the center and the states. Nominal damages are awarded when no financial loss resulted from the breach. Answer: TRUE Any state or local law […]

A person who was legally insane at the time of entering a contract is relieved of his or her duties from the contract. Ordinances are not codified into code books. Answer: FALSE Express contract can be stated orally. Answer: TRUE […]

An award of child support to be paid to the custodial parent by a noncustodial parent is a fixed amount that cannot be modified with changing conditions. The pollutant standards under the national ambient air quality standards (NAAQS) are set […]

If one or both parties to a sales contract are merchants, any additional terms are considered proposed additions to the contract. Renter’s insurance fails to cover an insured for personal liability. Answer: FALSE Operational regulation of commercial airlines by the […]

If a universal defense is proven, the holder or HDC cannot recover on the negotiable instrument. The House of Representatives has the power to impeach the president for certain activities, such as treason, bribery, and other crimes. Answer: TRUE The […]

Complaints regarding violations of the ADA are filed with the U.S. Department of Justice. Firearms represent an example of consumer products which do not come under the CPSC rules. Answer: TRUE Goods in possession of bailees are considered to be […]

Not painting the house on time is a violation of a tenant’s duty not to commit waste. The Securities Act of 1933 requires that before a corporation or another business sells securities to the public, the issuer must file a […]

Promissory notes are never payable on demand. An agreement is created when the offeree receives the offer. Answer: FALSE The Health Care Reform Act prevents insurance companies from denying health care insurance to individuals with preexisting health conditions. Answer: TRUE […]

Accountants can be held liable for negligence in preparing unaudited financial statements. According to the Electronic Funds Transfer Act and Regulation E adopted by the Federal Reserve Board, a bank can send unsolicited electronic funds transfer system (EFTS) debit cards […]

A merged corporation ceases to exist after the merger. The U.S. Congress gives the Supreme Court discretion to decide what cases it will hear. Answer: TRUE According to the UCC, a seller or buyer who reserves the right to fix […]

In small claims courts, it is necessary that the parties are represented by a lawyer at all times. Acceptance of a part of any commercial unit is acceptance of the entire unit. Answer: TRUE Financing statements are effective for five […]

The coverage of a standard fire insurance policy cannot be enlarged by adding riders or endorsements to the policy. The International Court of Justice is composed of 15 judges who serve nine-year terms. Answer: TRUE A company slogan is an […]

According to the fault rule, if the person who gave the engagement ring breaks off the engagement, then the other party can rightfully keep the engagement ring. Limited partners have unlimited personal liability for the debts and obligations of the […]

If both parties to a contract are minors, both parties have the right to disaffirm the contract. A check that has been outstanding for more than three months is considered stale, and the bank is under no obligation to pay […]

A disparagement is an untrue statement made by one person or business about the products, services, property, or reputation of another business. Innocent misrepresentation is treated as a unilateral mistake. Answer: FALSE The person who is given a life estate […]

A unilateral refusal to deal is a violation of Section 1 of the Sherman Act because there is a concerted action with others. The United Nations (UN) Security Council is composed of all UN member nations. Answer: FALSE A corporation […]

If no other form of business organization is chosen in a business operated by only one person, the business is by default a sole proprietorship. The party to whom the duty is owed is the delegatee. Answer: FALSE In a […]

In a criminal lawsuit, the government is represented by a lawyer called a defense attorney. A limited partnership is a foreign limited partnership outside the state in which it is organized. Answer: TRUE Shareholders are liable for the debt and […]

A drive-other coverage protects an insured for damages to a rental car caused by the insured. Once an accord has been reached, the original contract cannot be enforced under any circumstance. Answer: FALSE Common law of contracts refers to contract […]

An indorsement that purports to prohibit further negotiation of an instrument does not destroy the negotiability. A third party who sues to recover on a partnership contract need not name all the general partners in the lawsuit. Answer: FALSE The […]

In a criminal conspiracy, the commission of the act is not necessary. Registered accounting firms that audit more than 100 public companies annually are subject to inspection and review by the Public Company Accounting Oversight Board (PCAOB) once a year. […]

According to the Uniform Simultaneous Death Act, each deceased’s property goes to the government in case of simultaneous deaths. An indorsee who accepts a defective instrument qualifies as a holder in due course. Answer: FALSE[/cpmembership] Contracts involving fraud in inducement […]

In the United States, sales contracts and contracts for the payment of money are not assignable. In a sale or return contract, the buyer has the option of returning all the goods to the seller. Answer: TRUE If the builder […]

Bylaws of a corporation must be filed with a government official. An undeveloped real estate property is an example of future goods. Answer: FALSE To create an implied-in-fact contract, it must be established that a plaintiff provided a property or […]

Contracts for the provision of personal services are generally not assignable. The U.S. Equal Employment Opportunity Commission enforcing equal opportunity in employment laws is an instance of general government regulation. Answer: TRUE A will has to be written on legal […]

For noncarrier deliveries, if the seller or lessor has no place of business, the place of delivery is the seller’s or lessor’s residence. The First Amendment’s Freedom of Speech Clause protects both speech and conduct. Answer: FALSE A creditor’s action […]

In a manager-managed LLC (limited liability company), it is necessary that the manager is a member of that LLC. A change of venue may be requested in order to find a jury that is not prejudiced. Answer: TRUE Shareholders are […]

A contract that has been fully performed by both sides is called an executory contract. A statute of limitations establishes the time period during which a lawsuit must be brought. Answer: TRUE According to the failing company doctrine, two or […]

The firm offer rule allows the offeror to revoke an offer at any point of time prior to its acceptance. A third party can bring a tort action against an accountant in case of constructive fraud. Answer: TRUE A tender […]

Disclaimer of consequential damages is unlawful in most instances. In a sublease, no legal relationship is formed between the landlord and the sublessee. Answer: TRUE To be enforceable, a contract must be supported by consideration. Answer: TRUE A debtor-in-possession is […]

Once the number of board of directors is fixed by the articles of incorporation, the number cannot be amended. If an accession is made wrongfully, the improver acquires title to the improved property and does not have to pay the […]

The Uniform Transfers to Minors Act establishes procedures for adults to make irrevocable gifts of money and securities to minors. For a life insurance, insurable interest is necessary at the time of loss. Answer: FALSE Only outstanding shares have the […]

Greenmail refers to a target corporation’s purchase of its stock from an actual or perceived tender offeror at a premium. Statements of opinion and sales talk do not constitute false and deceptive advertising. Answer: TRUE A limited liability company is […]

An employee who earns tips must be paid minimum wage, excluding the income from tips. The written confirmation rule requires that both parties to an oral agreement send written confirmation of the sale or lease. Answer: FALSE The legality of […]

Indorsements are required to negotiate bearer papers. If no document of title is required, title only passes at the time and place of delivery. Answer: FALSE Kantian ethics is based on the premise that people can use reasoning to reach […]

The Federal Trade Commission (FTC) does not require the registration of the disclosure document with the FTC prior to its use. Workers who quit work without just cause can claim unemployment benefits. Answer: FALSE Shareholder voting agreements have to be […]

The legal rule of imputed knowledge means that the principal is assumed to know what the agent knows. An act of an employer to prevent employees from entering the work premises when the employer reasonably anticipates a strike is known […]

Execution is a postjudgment court order that permits the seizure of the debtor’s property that is in the possession of the debtor. A Limited liability company (LLC) organized in the United States is considered a domestic LLC throughout the United […]

Personal injury is not covered under a standard fire insurance policy. Persons who entered into an illegal contract but withdrew before the illegal act was performed can sue to recover consideration. Answer: TRUE Limited liability companies are created by federal […]