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Premier Clothing, Inc., a U.S. firm, obtains a judgment in a U.S. court against Quang Tri, Ltd., a Vietnamese business. Whether the court’s judgment will be enforced by a court in Vietnam depends on the Vietnamese court’s application of a. […]

Normally, corporate shareholders are personally liable for the obligations of the corporation. No special form is required to create a delegation of duties. Answer: T Under a shipment contract, the risk of loss passes to the buyer when the seller […]

The vesting of contractual rights in a third party will always prevent the original parties to the contract from modifying it. A gift is effective whether or not it is accepted. Answer: F Food labels are not required to provide […]

Fact Pattern 41-1 Rock Mining Company operates a gravel pit next to Sid’s residence. Sid files a suit against Rock, alleging that the pit is a nuisance and unreasonably interferes with Sid’s enjoyment of his property. Refer to Fact Pattern […]

The Federal Reserve System acts as a clearinghouse where banks exchange checks. If a sale involves crops that are to be harvested within twelve months, identification takes place when the crops are planted. Answer: T Counteradvertising requires a company to […]

Administrative agencies generally exercise substantial discretion over the type of hearing procedures that they use. A principal is responsible for all intentional torts committed by an agent. Answer: F Filing a financing statement with the appropriate public office is the […]

Solid Toolmakers, Inc., contracts to sell its business to Titan Hardware Corporation. Before either party has performed, rescission of this contract requires a. a mutual agreement to rescind. b. consideration. c. performance by all of the parties. d. an accord […]

Ewald and First Star Company enter into an oral contract under which Ewald agrees to provide delivery service for First Star for nine months. This contract is enforceable by a. Ewald only. b. either party. c. First Star only. d. […]

A right to receive damages on a breach of a contract for a sale of goods may be assigned. Courts do not apply the business judgment rule to analyze whether the directors acted reasonably in resisting a takeover attempt. Answer: […]

Paychex Loan Company extends credit in the ordinary course of its business. Under the Truth-in-Lending Act, Paychex must inform potential borrowers of a. credit terms offered by other lenders and its own credit terms. b. no credit terms. c. only […]

National Drilling Company ships its only pump to American Hydraulics Corporation, the manufacturer, for repair. National hires Overland Transport, Inc., to take the pump to American Hydraulics and to return it to National as soon as the repair is complete. […]

A small difference in job content can justify higher pay for one gender. The owners of a joint stock company are personally liable for its obligations. Answer: T A person can reproduce copyrighted material for purposes such as teaching, including […]

Energy Resources, LLC, is a limited liability company. Rather than distribute its profits to its members, Energy wants to reinvest the profits in its business. For this reason, Energy may prefer to be taxed as a. a corporation. b. a […]

Insurance coverage is never effective until a formal written policy is issued. Andy leases to Burgertown Franchise Corporation a 10,000 square-foot building under a written lease with a twenty-year term, rent payable annually. The lease includes a clause stating that […]

An employer is not liable for the sexual harassment of an employee by a co-worker. A unilateral contract is formed when the one receiving the offer completes the requested act or performance. Answer: T Anticipatory repudiation discharges a contract. Answer: […]

A power of attorney is a written document. An unconscionable contract is a contract entered into unconsciously. Answer: F A trustee has the power to set aside a sale of the debtor’s property. Answer: t City, county, and local governments […]

Faye owns the land on which Golden Spurs Ranch is situated, plus the ranch house, barn, and other structures permanently attached to the land. Faye’s brother Huey owns everything else in the ranch’s operationlivestock, feed, and so on. The personal […]

The officers and other employees of each corporation involved must approve a merger. A contract of suretyship must be in writing to be enforceable. Answer: F The holder of a life estate has the right to use property for whatever […]

Ski Resorts, Inc., wants to add a new run to its facility in a national park on federal land. For this action, an environmental impact statement is a. prohibited. b. required. c. unnecessary. d. voluntary. Kipper files a petition in […]

Suki files a reorganization plan as part of a bankruptcy proceeding under Chapter 13. The court can approve the plan by applying specific rules to the value of the property to be distributed if there is an objection to the […]

To be enforceable, a writing evidencing an oral contract that would otherwise be unenforceable must include every term. Constitutional law includes only the U.S. Constitution. Answer: F Evergreen Landscapers, Inc., owes Friendly Finance Company $5,000. Evergreen enters into a contract […]

Fernando, a seventeen-year-old, signs a contract to sell his car to Gusto Used Autos. Fernando receives a better offer the next day from Hi-Valu Cars & Trucks, Inc., and accepts the new offer. Fernando is a. liable to Gusto and […]

Motor Parts Corporation offers to buy the stock of NASCAR Products Corporation (NPC). NPC’s directors oppose the offer. Orin and other NPC shareholders file a suit, alleging a breach of the directors’ fiduciary duties. Most likely, the court will a. […]

Fact Pattern 44-1 Nika owns land in Ohio. Her ownership rights include the right to sell or give away the property without restriction, and the right to commit waste, if she chooses. Refer to Fact Pattern 44-1. Nika deeds some […]

A buyer who obtains substitute goods to replace goods that a seller did not deliver can also recover damages from the seller. An owner’s license of a formula to make a certain product to an outside party is a franchise. […]

A treaty is a contract or other agreement between two or more nations that must be ratified by the United Nations to take effect. Whether a contract’s limitation-of-liability clause will be enforced depends on the type of breach that the […]

To recruit employees from other countries, an employer must first complete a verification process. An independent contractor’s physical conduct is controlled, or subject to control, by his or her employer. Answer: F A short-form merger is the legal combination of […]

Holly obtains an insurance policy from Inviolable Insurance Corporation (IIC). IIC may cancel, or refuse to renew, the policy because of a. Holly’s appearance as a witness against IIC. b. Holly’s national origin. c. Holly’s race. d. none of the […]

Tune Products, Inc., offers to sell to Unlimited Sales Company one hundred MP3 players at $50 a piece, subject to certain specific delivery dates. Unlimited replies with a signed purchase order that reads, “Accept your offer for 100 I-appliances at […]

Lather Up Soap Products Company grants its agent Kathy an exclusive territory in which to sell Lather Up products. The firm cannot compete with Kathy in that territory under the principal’s duty of a. avoidance. b. cooperation. c. indemnification. d. […]

Rely Credit Company loans Standard Manufacturing Company $50,000 and takes a se- curity interest in the equipment that Standard buys with the funds and receives on July 1. Standard files for bankruptcy on July 12.Rely does not perfect its security […]

Any person who buys common stock acquires voting rights in a corporation. After a contract is made, a supervening event may make performance impossible and discharge the contract. Answer: T A unilateral mistake of fact will usually enable a party […]

State law governs the procedures that must be followed to create a mechanic’s lien. A guarantor is primarily liable on an obligation. Answer: F A maker is secondarily liable on an instrument. Answer: F A contract may have to be […]

A voidable contract is a valid contract that can be avoided at the option of at least one of the parties to it. Colby contracts in writing to sell his 2005 Dodge-brand pick-up truck to Efrem for $10,500. Colby agrees […]

All bailments include a bailee’s right to use the bailed property. A condition precedent must be met before a party’s performance can be required. Answer: T Despite deviations from the specifications in a construction contract, a builder can be considered […]

In relation to Edie’s solicitation of investors in a nonexistent business, she is charged with “mail fraud.” This requires, among other things, a. claiming that an item is “in the mail” when it is not. b. deceiving postal authorities as […]

Once certified, a pesticide may be used in unlimited quantities on food crops. The members, managers, and agents of a limited liability company are liable for its obligations by virtue of their status. Answer: F A joint venture is taxed […]

Gulf Air, Inc., is the major wholesale distributor of software in the state of Florida. Its closest competitor is Fluid Systems Company, another Florida firm. The two firms agree that Gulf Air will operate in south Florida and Fluid Systems […]

Yvon is charged with the crime of theft for taking Zach’s briefcase, which Yvon mistakenly thought was hers. A mistake of fact is a defense a. if the fact was not reasonably made known to the public. b. if the […]

Most franchise agreements provide that termination must be “for cause.” To vote their shares, shareholders must attend a meeting and vote in person. Answer: F States’ authority to regulate Internet gambling is limited to their physical boundaries. Answer: T Quotas […]

Under the Americans with Disabilities Act of 1990, a person with a physical impairment that ‘substantially limits” everyday activities is disabled. Bankruptcy law has one goalto encourage the continued use of credit Answer: F A bank has no right to […]

Courts have no difficulty applying traditional laws to crimes committed in cyberspace. A buyer in the ordinary course of business has priority over any security interest created by the seller. Answer: T A power of attorney can be given only […]

If a voidable contract is avoided, the parties to it are released from it. An ethics program can clarify what a company considers to be unacceptable conduct. Answer: T A financing statement is effective only if it is filed electronically. […]

Salt Corporation wants to acquire or merge with Pepper Corporation. The board and the shareholders of Pepper are resisting. Salt should a. file a plan of merger with the secretary of state. b. file an article of merger with Pepper. […]

Sharon, the human resources director for Tempo Corporation, attempts to comply with the law in dealing with applicants and employees. One of the challenges Sharon faces is that the legality of an action is a. always clear. b. never clear. […]

Orin relinquishes the right to his daughter Neko’s control, care, custody, and earnings. This act is a. disaffirmance. b. emancipation. c. ratification. d. severability. Standard Business Corporation can be compelled to dissolve by a. its creditors only. b. itself, through […]

A franchise is a form of business organization. For a creditor to have an enforceable security interest, the debtor must have title to the collateral. Answer: F A warranty deed provides the most protection against defects of title. Answer: T […]

Pat enters into an agreement with Ole! Food, Inc., to operate a franchise in Region City. Later, Ole! grants franchises to others within the city, Pat files a suit to close them. This suit will likely a. fail because excluding […]

Land includes all of the waters on or under its surface. If a contract for a sale of goods does not include a price term, a reasonable price can be determined by looking at the market for the goods. Answer: […]

A remedy is the relief provided to an innocent contracting party when the other party breaches the contract. A bank that fails to detect an alteration to its customer’s check is liable to the customer for the loss. Answer: T […]

Firms overseas have almost total legal protection against government acts in the countries in which they operate, under the act of state doctrine. The state can bring an action to dissolve a corporation that has failed to pay its annual […]

Carol files a suit against Downwind Boat Corporation. Downwind responds that it appears from the pleadings the parties do not dispute the facts and the only question is how the law applies to those facts. Downwind supports this response with […]

Resolving whether a promise should be enforced is the essence of contract law. In a limited liability limited partnership, the liability of a general partner is the same as the liability of a limited partner. Answer: T A customer must […]

Detailed Designs Company, an architectural firm, wants to hire Eduardo, a noncitizen. A temporary work visa is most likely to be set aside for a noncitizen who is a. a “person of ethnic similarity to the employer’s workforce.” b. a […]

Star Resorts Corporation wants to terminate its franchise arrangement with Tony. Their contract does not provide for notice of termination or set a time for winding up the business. This means that to wind up, Tony a. has a reasonable […]

Benny dies without a will, with no surviving spouse or child. Benny’s survivors include his granddaughter Callie, his nephew Doug, and his cousin Earl. In most states, his estate would pass to a. Callie. b. Doug. c. Earl. d. the […]

An auction”we ask you to bid on this item”is an offer. A personal name is not protected under trademark law unless it acquires a secondary meaning. Answer: T Shareholders have no responsibility for the day-to-day management of a corporation. Answer: […]

Milo files a suit against Neighbors Insurance Corporation under the doctrine of prom- issory estoppel. Milo must show that a. Milo justifiably refused to fulfill a promise to Neighbors. b. Milo justifiably relied on Neighbors’s promise to his detriment. c. […]

Generally, a corporation that purchases the assets of another corporation is automatically responsible for the liabilities of the selling corporation. A price-fixing agreement has the potential to lessen competition. Answer: T The Bill of Rights confers absolute rights, not subject […]

Finn and Glenda want to form and do business as Hobby Crafts Corporation. A corporation is a legal entity created and recognized by a. a central federal administrative agency. b. a city or county clerk’s office. c. an artificial legal […]

An involuntary bankruptcy occurs when a debtor’s creditors are forced to accept a discharge of the debtor’s debts. Cooperative research by small-business firms is exempt from antitrust law. Answer: T Pricing information cannot be a trade secret. Answer: F Shareholder […]

Common law is a term for the law that is known to most of us. Express warranties displace all inconsistent implied warranties. Answer: F Employers can agree with unions not to handle, use, or deal in non-union-produced goods. Answer: F […]

The function of the courts is to interpret and apply the law. Generally, there is a uniform body of national corporate law. Answer: F The board of directors of each corporation involved must approve a share exchange. Answer: T The […]

Clifton is a director of Dri-Cleaning Corporation. In this capacity, Clifton has a right of a. accounting. b. loyalty. c. participation. d. service. Rig Heli-Pads, Inc., enters into a contract to employ Scott as an on-site project manager for two […]

Skyla and Terry want to form and do business as Unique Boutique Corporation. The state statute governing the formation and operation of their corporation is most likely guided by a. city or county corporate codes. b. the Entrepreneur’s Corporate Handbook. […]

A party who unintentionally uses the trademark of another is not liable for trademark infringement. Bubbly Bottling Company is engaged in the soft-drink bottling and distribution industry in the states of New York and New Jersey. The firm currently has […]

Under certain conditions, a purchase-money security interest will take priority over a previous creditor’s interest in after-acquired property. In mediation, the mediator proposes a solution that includes what compromises are necessary to reach an agreement. Answer: T Guy is Hot […]

It is possible to copyright an idea. UniOil, a U.S. firm, owns property in Venezuela. When the government of Venezuela seizes the property, UniOil asks a U.S. court to order the property’s return. The court rules that Venezuela is exempt […]

Dunn and Etta are limited partners in Fancee Fashion Stores, a limited partnership. In terms of the firm’s books, Dunn and Etta are entitled to a. access in proportion to their participation in management of the firm. b. access to […]

Beyond-the-Sea Corporation and Homeport Company make a deal for Homeport’s products, via e-records. Under the UETA, an e-record is considered sent when it a. is signed and encrypted, and will be sent without changes. b. is stored in the sender’s […]

Cotton Products Corporation is a public company whose shares are traded in the public securities markets. The Securities Act of 1933 requires Cotton to disclose financial and other significant information concerning its securities in order to a. increase corporate accountability […]

Mello Coffee Shops, Inc., sells a franchise to Noah’s Arch, a café. Mello is a. a franchisee. b. a franchisor. c. an agent. d. a principal. Vieux Carré S.A., a French firm, imports its goods into the United States and […]

Khali’s debt to Lew is past due. Lew obtains a judgment against Khali to collect the debt, but Khali refuses to pay. Lew asks the court to order Khali’s employer to pay a portion of Khali’s paycheck to Lew. This […]

Elmo is the owner and manager of a business trust. Under the terms of a business trust, Elmo is required to a. distribute the profits and manage the property. b. distribute the profits only. c. manage the property only. d. […]

A misdemeanor is a crime punishable only by a fine. A person who holds all rights in property owns the property in fee simple. Answer: T Creditors are required to provide consumers with copies of records that can help the […]

Unlike stalking in the “real” world, cyberstalking requires an “incredible threat.” For an effective bailment, the bailor must deliver possession of the bailed property with its title. Answer: F Express powers of a corporation can be found in the corporate […]

A limited liability partnership can be formed in virtually any state. A bank cannot recover from a holder who cashes a check bearing a forged indorsement once the bank has accepted and paid the item. Answer: F To establish a […]

Nick represents himself as a contractor in Ohio, but he is not licensed in that state. A contract between Pat and Nick by which Nick agrees to build a warehouse for Pat in Ohio is a. enforceable only if Pat […]

Denise, Ervin, and Flem occupy the positions of directors on the board of Gallery Corporation. As directors, they may not a. authorize major corporate policy decisions. b. decide to issue stock and bonds, and declare dividends. c. select and remove […]

The Idaho Supreme Court rules against Jiffy Mart in a case against Kwik Stop Stores, Inc. Jiffy Mart files an appeal with the United States Supreme Court. The Court does not hear the case. This a. is a decision on […]

Edgy Engine Components, Inc., a maker of vehicle parts, refuses to sell to Fidgety Fix-It, Inc., a national vehicle service firm. Edgy Engine convinces Greasy Motor Parts Company, a competitor, to do the same. This is a. a group boycott. […]

In a dispute over a sale involving a bicycle, Dain argues that as to this deal Elle’s Hobby Shop, where Dain bought the bike, is a merchant. A court may determine whether Elle’s is a merchant by assessing whether a. […]

Elegant Carpets, Inc., and Fantastic Floors Stores enter into a contract for a sale of carpeting. Under a shipment contract, the seller must a. allow the buyer to reject the goods for any reason. b. deliver the goods to a […]

Dwayne and Ewell enter into a contract for the design of an addition to Dwayne’s house for which he agrees to pay Ewell. Ewell transfers his right to payment under the contract to Flex Construction Company. Flex is a. a […]

When a landlord sells leased premises to a third party, any existing leases terminate automatically. When two conflicting security interests are unperfected, the first to attach has priority. Answer: T A client’s negligence may constitute a defense to a charge […]

Geoff serves in a representative capacity for Huck. To accomplish the objectives of this relationship, Geoff’s authority can be implied a. by contradiction. b. by custom. c. by lack of reason. d. under no circumstances. John writes a check to […]

The concept of a floating lien does not apply to a shifting stock of goods. If the subject matter of a contract turns out to be more valuable than one of the parties believed it would be, that party can […]

Jen operates Jen’s Fruits & Vegetables, a small market stocked entirely with produce grown on her adjacent farm. Under what clause of the Constitution can the federal government regulate Jen’s activities? What is Jen’s best argument against federal regulation of […]

Beans Coffee & Cocoa Company makes and sells a chocolate-flavored coffee drink under the name “CoCoCafe.” Darkroast Java, Inc., later markets a similar tasting drink under the name “KoKoKafe.” This is most likely a. copyright infringement. b. patent infringement. c. […]

Fact Pattern 25-3 Chocolate! Chocolate! Corporation is a new company that needs to borrow money to meet its payroll. Dayna, president and owner of Chocolate! Chocolate!, asks Evermore Credit Union to loan the funds to Chocolate! Chocolate! Refer to Fact […]

Dumping is the sale of imported goods at “greater than fair value.” Lack of discriminatory intent is a complete defense to a charge of unlawful employment discrimination. Answer: F The crime of theft requires the taking of property, without regard […]

The Magnuson-Moss Warranty Act modifies UCC warranty rules to some extent in consumer transactions. Under the Statute of Frauds, all written contracts are enforceable. Answer: F Whether the federal government preempted a certain area is always clear. Answer: F A […]

For most purposes, the law recognizes a partnership as an aggregate of its members. Generally, stock offerings that are made in a limited manner during any twelve-month period are not exempt from the registration requirement. Answer: F Congress determines the […]

Rita believes that Shady Grove Apartments, Inc., her landlord, has violated the law in a way that entitles her to withhold the rent. This remedy is generally associated with a. breach of the covenant of quiet enjoyment. b. breach of […]

Jo files a suit against Lara in a Missouri state court. Lara’s only connection to Missouri is an ad on the Web originating in Nebraska. For Missouri to exercise jurisdiction, the issue is whether Lara, through her ad, has a. […]