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Anthony believes that he needs to obtain a Chapter 13 discharge in bankruptcy. A Chapter 13 case can be initiated by a filing of a voluntary petition by a. a creditor only. b. a corporation only. c. a debtor only. […]

Under the Statute of Frauds, fixtures, such as buildings, growing crops and minerals, are treated as real property. A franchisor is the purchaser of a franchise. Answer: F Scienter exists if a party makes a statement that he or she […]

Quasi contracts are often used by courts, even in cases where there is an actual contract that covers the area in controversy. Class-action lawsuits are suits in which a number of persons join together to bring an action. Answer: T […]

The state of Illinois enacts a usury statute. The purpose is to a. establish a maximum rate of interest that may be charged for loans. b. establish a minimum rate of interest that may be charged for loans. c. prevent […]

Jane and Phil enter into a contract, but make a bilateral mistake. For the contract to be rescinded by either party, the bilateral mistake must be about a. a material fact. b. value. c. an opinion. d. a prediction. Jack’s […]

Guy is Hot Java Company’s majority shareholder. Guy decides to sell his Hot Java stock. The sale will be an effective transfer of the control of the company. Does Guy owe a duty to Hot Java or its minority shareholders […]

Fact Pattern 31-3 Dhani, an accountant for Eureka, Inc., learns of undisclosed company plans to market a new laptop. Dhani buys 1,000 shares of Eureka stock. He reveals the company plans to Fay, who buys 500 shares. Fay tells Geoff, […]

Carly is a minor. Without her parent’ knowledge, she signs a contract to buy an airplane ticket to Hawaii for spring break. Carly’s parents are a. liable for the contract. b. not liable for the contract. c. liable for up […]

Bylaws are the internal rules of management for a corporation. All oral contracts are enforceable under the UCC. Answer: F Home equity is the portion of a home’s value that is “paid off.” Answer: T In most contracts, promises of […]

During a union election campaign, Autowerks Repair, Inc., prohibits on-site solicitations by any party, including Mechanics Union, which is seeking the worker’ unionization. This violates a. federal labor law. b. federal elections law. c. federal employment discrimination law. d. no […]

Larceny relies on fear and force. Hu believes that he is a victim of a form of employment discrimination that falls under Title VII of the Civil Rights Act. Compliance with this statute is monitored by a. employees and job […]

Fred goes to Carla, a knowledgeable dog breeder, and tells her that he wants to get a dog that will be good with small children. Carla sells Fred a dog. When Fred takes the dog home, it bites both his […]

Corporation’ chief executive officers are directly accountable for the accuracy of financial statements filed with the Securities and Exchange Commission. Corporations can be good citizens by promoting goals that society deems worthwhile. Answer: T Under the UCC, an agreement modifying […]

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. […]

Carrie Ann works at Paper Products, Inc. She considers taking home a few sheets of stationery so she can write letters to her ailing grandmother. Since Paper Products produces thousands of sheets of stationery every day no one will miss […]

O.K. Oil holds itself out to others as being a corporation but makes no attempt to incorporate. In this circumstance, O.K. is most likely a. a corporation by estoppel. b. a de facto corporation. c. a de jure corporation. d. […]

Once a discharge is granted, it may not be revoked, even if, for example, a debtor concealed property to defraud a creditor. On a lessee’s insolvency, the lessor can stop delivery of the goods. Answer: T A party must own […]

For a minor to disaffirm a contract, he or she must present the contract to a court. A quasi contract is not enforceable by a court. Answer: F A copy does not need to be exactly the same as the […]

Fact Pattern 19-1 Echo takes her car to Fix-It, Inc., which repairs the car and bills Echo for $500. Echo writes out a check drawn on Capital Bank, but later, believing that Fix-It did not repair the car properly, issues […]

A written stop payment order is valid for only thirty days. Confiscation occurs when a government seizes private property for an illegal purpose or without just compensation. Answer: T A buyer who obtains substitute goods to replace goods that a […]

The courts consider legitimate competitive behavior permissible only if it does not result in the breaking of a contract. If a life insurance applicant pays a premium but dies before the physical exam, there is obviously no coverage. Answer: F […]

Mona, an accountant, prepares for NuTech Corporation a financial statement that omits a material fact. The financial statement is included in NuTech’s registration statement, which Pam reads. Pam buys NuTech stock. Under Section 11 of the Securities Act of 1933, […]

Healthy Harvest Company runs a candy and fruit processing and packaging plant. Most of Healthy Harvest’s business is done during holiday seasons, especially between Halloween and New Year’s Day, and in the spring. The company hires a large temporary workforce […]

Marvin is an employee of Wild Thing Farms. Marvin finds out that the head of Wild Thing Farms is illegally importing endangered animals to sell as pets. If Marvin reports his employer’s illegal activities he will probably be protected fro […]

According to the Foreign Sovereign Immunities Act, a foreign state that has committed a tort in the United States is protected from the jurisdiction of the U.S. courts. The Second Amendment to the U.S. Constitution reserves all powers not delegated […]

Daria writes a check for $100 drawn on Village Bank and presents it to Fast Cash, Inc., for payment. If the check is not backed by sufficient funds, Daria may be prosecuted for a. forgery. b. fraud. c. negligence. d. […]

Consideration is the value given in return for a promise. A buyer in the ordinary course of business has priority over any security interest created by the seller. Answer: T Substantive due process focuses on the substance of legislation. Answer: […]

Under the Age Discrimination in Employment Act of 1967, a plaintiff must prove that he or she was replaced by a person “outside the protected class.” There are additional disclosure requirements for a higher-priced mortgage loan. Answer: t Article 2 […]

Barb, a real estate agent, is showing John a house. She tells him that this is a house where “his family can live happily ever after.” John buys the house, but his wife does not like it. John a. can […]

Jen signs a check “pay to the order of Key” drawn on Jen’s account in Little Bank to buy Key’s car. If there are insufficient funds in Jen’s account to cover the amount of the check, but the bank pays […]

Fresh Harvest Company, which is based on Georgia, packages and sells vegetables. Jack, who is a resident of North Carolina, buys a Fresh Harvest product, eats it, and suffers severe food poisoning. Jack wants to file a suit against Fresh […]

Oklahoma enacts a law requiring all businesses in the state to donate 10 percent of their profits to Protestant churches that provide certain services to persons whose income is below the poverty level. PriceLess Stores files a suit to block […]

An agency can terminate once its purpose is achieved. A sale of all of a corporation’s assets requires the approval of its shareholders. Answer: T A preemptive right is a preference over other shareholders to cast the determining vote on […]

Monopoly power may be proved by evidence that a firm used its power to control prices. The price that a secured party obtains on a sale of collateral is all that the creditor can recover on the debt. Answer: F […]

If a contractual promise is not fulfilled, the person who made it may be required to perform the promised act. A partnership cannot be a shareholder in an S corporation. Answer: T Federal law encourages private lenders to modify mortgages […]

A customer has sixty days from the date of receipt of a statement of an electronic transfer to notify the financial institution of any errors. A court can refuse to enforce a contract that the court deems to have been […]

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 […]

An executed contract is one that has been fully performed by both parties. Conditioning the sale of one product on the purchase of another is an exclusive-dealing contract. Answer: F Discharge in bankruptcy is no defense on any instrument regardless […]

A party seeking to recover in quasi contract must show that he or she has been unjustly enriched. Generally, an employer’s monitoring of electronic communications in the workplace does not violate employee’ privacy rights. Answer: T Under the covenant of […]

Private parties cannot sue violators of Section 10(b) and Rule 10b-5. A mechanic’s lien is possessory. Answer: F An accountant’s liability under the Securities Act of 1933 requires privity of contract with the purchaser of a security. Answer: F An […]

A void contract is enforceable if it is in writing. It is presumed that a co-tenancy is a tenancy in common unless it is clear that the parties intended to establish a joint tenancy. Answer: T Most franchise agreements provide […]

Jon writes a check to LocoMotion, Inc., as payment for a golf cart but soon discovers the cart is broken. He goes to Fairway Bank, the drawee, and orally authorizes Lolly, a bank officer, to stop payment on the check. […]

Kris presents an instrument that states “pay to the order of Kris” to Metro Bank for payment. This is a special type of draft drawn on a bank, ordering the bank to pay a fixed amount of money on demand. […]

Antitrust legislation was created because of the belief that competition leads to lower prices. No contract can prohibit delegation of the duties of the contract. Answer: F Under the Sarbanes-Oxley Act, accountants must retain working papers relating to an audit […]

Mickey is a director of Fine Art Dealers, Inc. Mickey is trained in art valuation. Fine Art Dealers makes several purchases in which it pays too much money for artwork. Mickey approves all the transactions without reading the details. Mickey […]

Writers acquire ownership of their work through production. The injury suffered by a nonbreaching party due to the breach of a contract may be remedied by payment of compensatory damages. Answer: t Merchants must ship orders within the time promised […]

The initial board of directors of a corporation is normally elected at the first annual shareholder’ meeting by a majority vote of the shareholders. Under the Americans with Disabilities Act of 1990, an employer must hire unqualified applicants who have […]

Grady enters into a contract to buy 440 acres from Hollis to expand Grady’s ranch. Hollis breaches the contract. Grady’s normal remedy is a. damages. b. reformation. c. rescission. d. specific performance. Law enforcement officers suspect Chris of drug trafficking. […]

Life tenants are persons who share ownership rights simultaneously. A copyright owner must place a © or an ® on the work to have the work protected from copyright infringement. Answer: F There are three categories of property. Answer: F […]

Under no circumstances can a non-partner be regarded as an agent whose acts are binding on the partnership. Revocation is effective on dispatch. Answer: F To avoid liability for negligence, a business owner must protect its patrons against all risks. […]

A franchisor can require a franchisee to purchase certain supplies from the franchisor at an established price. If a seller is an expert and gives an opinion as an expert, then he or she usually creates an express warranty. Answer: […]

First Design Corporation, a business firm, and Glen, a consumer, make a deal over the Internet that involves e-signatures. Under the E-SIGN Act, the e-signatures a. are as valid as signatures on a paper document. b. must be encrypted to […]

EthicsPoint is an organization through which employees can report unethical behavior as long as they are willing to identify themselves. Statutes often set forth rules specifying the terms of contracts. Answer: T Parents who sign a contract made by their […]

Under the Fourth Amendment, a general search warrant and a general search through a person’s belongings are permitted. When an agency relationship is terminated, the principal has a duty to personally notify third parties who knew of its existence. Answer: […]

Herb, a computer programmer for Inventory Control Corporation, is arrested in his employer’s parking lot on suspicion of larceny. Herb must be informed of his right to a. a trial by jury. b. punishment. c. question witnesses. d. remain silent. […]

The crime of theft requires the taking of property, without regard to whether the perpetrator knew it belonged to another. The drawee who signs a draft or check is not primarily liable to any subsequent holders. Answer: F Implied warranties […]

Orin creates a living trust to pass his assets, including stock in Petro Oil Company and other business investments, to his heirs. One advantage of this arrangement is that a. income taxes do not have to be paid on trust […]

Sights Unseen, Inc., (SUI) sells telescopes with distinctively designed lenses and mirrors. Later, without SUI’s permission, Telescopes Etc. Corporation begins to sell scopes with identical structures of lenses and mirrors. This is most likely a. copyright infringement. b. patent infringement. […]

A joint venture resembles a partnership but is taxed like a corporation. A limited liability company can sue or be sued, enter into contracts, and hold title to property. Answer: T SEC Rule 10b-5 applies to almost all cases involving […]

Under the UCC, parties to a contract cannot limit or exclude consequential damages. The basis for an employee’s contribution to Social Security is the employee’s age. Answer: F Punitive damages are generally available in contract disputes. Answer: F If the […]

Wings2Go Corporation fails to hold an organizational meeting. In this circumstance, at common law Wings2Go is most likely a. a corporation by estoppel. b. a de facto corporation. c. a de jure corporation. d. ultra vires. Willy deposits $5,000 with […]

Fraud occurs only when there is reliance on a statement of opinion. Equity is a branch of law, founded in justice and fair dealing, that seeks to supply a remedy when no adequate remedy at law is available. Answer: T […]

Vieux Carré S.A., a French firm, imports its goods into the United States and offers those goods for sale at “less than fair value.” “Fair value” is the price of a. comparable goods in a select “basket” of other countries. […]

Duffy is a passenger in a car that Caleb is driving when an accident occurs. Both Caleb and Duffy are emotionally rattled, but neither is physically hurt. Caleb is not liable to Dufy on a negligence theory because a. both […]

Craft Engineering, Inc., contracts for a sale of technical instruments to Detail Design Company. Before the date on which performance is due, Craft notifies Detail that it will not perform. This is a. anticipatory repudiation. b. perfect tender. c. rejection […]

Peter and Ray are riding their horses together. Peter jokingly tells Ray that Ray’s horse is too slow. Ray laughs and jokingly responds “Yes, he is too slow! I would sell him for $5!” Peter hands Ray $5. This is […]

A firm offer by a merchant may be oral. Dominique, a certified public accountant, provides accounting services to Eagle Corporation. The services include preparing Eagle’s financial reports and issuing opinion letters based on the reports. In 2008, Eagle falls into […]

Sayers is very clever and spends lots of time creating new things. Which of the following is not copyrightable? a. A sculpture of Sayers’s horse b. A book about Sayers’s life c. A movie about Sayers’s life d. Sayers’s idea […]

Ross, an employee at Super Snowboard Company, is laid off. Before he exits Super’s building, he e-mails the company’s marketing campaign to Winter Sports Corporation, Super’s competitor, without permission. This is a. copyright infringement. b. patent infringement. c. trademark infringement. […]

A business firm may have to comply with the laws of any jurisdiction in which it actively targets customers. Under the Restatement (Third) of Torts, accountants can be held liable for negligence to any third parties. Answer: F A court […]

Erasmus files a suit against Drain-Pro Plumbing & Repair LLC under the Civil Rights Act of 1964, claiming reverse discrimination. To support this claim, Erasmus must show that he is a member of a. a protected class. b. a majority […]

The Arizona Supreme Court rules against Jennifer in a case against Kut Rate Stores, Inc. Jennifer wants to appeal her case to the United States Supreme Court. She must ask the Court to issue a writ of a. appeal. b. […]

The payment of Frida’s debt to Gianini is guaranteed by Frida’s personal property. Gianini is a. a debtor. b. a secured party. c. a secured transaction. d. a security interest. National Capital Corporation and International Investments, Inc., form a joint […]

Children must be at least thirteen years old to work in hazardous occupations. All states have intermediate appellate courts. Answer: F The First Amendment protects defamatory speech. Answer: F Generally, federal securities law are patterned after state’ antifraud laws. Answer: […]

When a conflict arises among the documents that involve Express Flights Corporation, the first priority for resolving the conflict is given to a. resolutions of the board of directors. b. Express Flights’s bylaws. c. state statues. d. the U.S. Constitution. […]

The payment of Brian’s debt to Chuck is guaranteed by Brian’s personal property. This is a. an attachment. b. a secured transaction. c. perfection. d. a violation of most state laws. Gage buys from Fishing Guide Corporation the exclusive right […]

Rangle contracts with Siena to buy a certain horse for her. Rangle makes a deal with Timberline Stables, the owner of the horse, and makes a down payment. Siena fails to pay the rest of the price. Timberline sues Rangle […]