The payment of Waldo’s debt to Main Street Bank is guaranteed by Waldo’s personal
property. This is governed by
a. the Uniform Commercial Code.
b. the Federal Trade Commission.
c. the U.S. Constitution’s commerce clause.
d. the Bankruptcy Reform Act of 2005.
Pilar is interested in buying a franchise from Quixotic Travel & Tours Corporation.
Quixotic must disclose material facts that Pilar needs to make an informed decision
concerning this purchase, according to
a. no law.
b. the Petroleum Marketing Practices Act of 1979.
c. the Federal Trade Commission’s Franchise Rule.
d. the Uniform Commercial Code.
On Mitchell’s eighteenth birthday, he decides that he no longer wants to keep a fishing
boat he bought from Water Craft, Inc., when he was seventeen. His right to disaffirm
the deal will depend on
a. why Mitchell no longer wants to keep the boat.
b. why Mitchell entered into the contract to buy the boat.
c. whether Mitchell acts within a reasonable period of time.
d. whether Water Craft has the right to disaffirm.
Digital Storage, Inc., offers to sell provide cloud-computing services to Entrepreneur
Enterprises, Inc., but mistakenly transposes some of the digits in the price so that
$15,400 appears in the offer as $14,500. Entrepreneur Enterprises accepts the written
offer. Digital Storage’s best defense against enforcement of the contract is that
Entrepreneur Enterprises knew
a. a bilateral mistake supports the cancellation of a contract.
b. a mistake of value supports the cancellation of a contract.
c. a unilateral mistake supports the cancellation of a contract.
d. the price was below the prices of comparable devices.
In the following situations, two parties claim the same goods. Who is most likely to
prevail in each circumstance? Explain.
(a) Olan steals Phil’s television set and sells it to Quincy, an innocent purchaser, for
value. Phil learns Quincy has the set and demands its return.
(b) Riley takes his television set for repair to Slick, a merchant who sells new and used
television sets. By accident, one of Slick’s employees sells the set to Tuna, an innocent
purchaser-customer, who takes possession. Riley wants his set back from Tuna.
Petro Oil Refinery asks Quality Bank for a loan to increase its oil inventory. Quality
requires Robin, Petro’s president, sign a personal guaranty to pay the debt if Petro
defaults. Meanwhile, to sell fifty barrels of refined oil to Slick Lubricants, Inc., Petro
asks its outside accountant Tina to co-sign a credit application.
If, after the loan agreement is signed, Slick agrees to a higher rate of interest without
telling Tina, then Tina is
a. discharged from the agreement.
b. liable at the higher rate of interest.
c. liable at the lower rate of interest.
d. liable for the principal only.
Winona enters into a contract with Peyton to buy Peyton’s land based on Peyton’s
assertion that the land is legally open to development. After the sale, Winona learns
what Peyton knew previouslyonly a small section of the land can be built on. A local
law prohibits construction on the rest of the property. Winona can
a. not avoid the contract because persons are assumed to know the law.
b. avoid the contract due to a mutual mistake.
c. avoid the contract due to a mistake in value.
d. avoid the contract due to fraud.
Lucy, a minor, disaffirms a contract for necessaries without returning the goods. To
Manny’s Food Mart, the seller, Lucy is required to pay
a. nothing.
b. the reasonable value of the goods.
c. the sales price of the goods.
d. the ultimate worth of the goods.
Kelly, the owner of Llama Farms, a sole proprietorship, wants to obtain additional
business capital but to maintain control. This can best be accomplished by
a. borrowing funds.
b. bringing in partners.
c. issuing stock.
d. selling the business.
Dani is considering forms of business organization for her financial advisory firm. Like
most states, Dani’s state requires that to form a limited liability company, she must file
with a central state agency
a. articles of certification.
b. articles of formation.
c. articles of organization.
d. no specific documents.
Kelly tells Jimmy she will pay him $1,000 if he builds a shed in her backyard. Kelly is
a(n)
a. offeree.
b. offeror.
c. promisee.
d. contractor.
Betty is selling her used clothing shop on Main Street. In the sale agreement, there is a
covenant not to compete that prohibits Betty from opening another used clothing shop
within 300 miles of the shop she is selling. A court will most likely conclude that this
restriction on competition is
a. reasonable.
b. unreasonable and order Betty’s successor to stop doing business.
c. unreasonable and may reform the covenant .
d. unreasonable and prohibit both parties from opening used clothing shops.
Darwin borrows $200,000 from Evermore Bank to buy a home. Less than six months
into the term, Darwin stops making payments on the loan. To initiate the process to
repossess and auction off the property securing the loan, Evermore must
a. issue a notice of sale to the borrower.
b. offer the property for sale in an auction on the courthouse steps.
c. record a notice of default with the appropriate county office.
d. resort to litigation to establish clear ownership of the property.
When Jeff’s car breaks down, he asks Insta-Tow, Inc., to tow it to Huey’s Repair Shop.
There is no discussion of a price, and Jeff and Insta-Tow do not sign any documents.
Later, Insta-Tow sends Jeff a bill. With respect to Jeff’s obligation to pay the bill, this is
a. an express contract.
b. an implied contract.
c. an implied-in-law contract.
d. no contract.
To initiate a lawsuit, Darla files a complaint against E-Sales Company, which responds
with an answer. Together, the complaint and answer are
a. a motion to dismiss.
b. a summons.
c. a writ of certiorari.
d. the pleadings.
Krissa, a horse breeder, shows Maggie, a customer looking for a new stallion for her
breeding program, a stallion and tells her that the stallion is very fertile and can easily
breed twenty mares per year. Krissa’s statement is
a. an express warranty.
b. an implied warranty.
c. a warranty of title.
d. puffery.
Like other corporations, Restwell Hotels Inc. can extend its operations through
a. liquidating and distributing its assets.
b. buying the assets of, or a controlling interest in, another corporation.
c. filing articles of dissolution with the state.
d. appointing a receiver to wind up the corporate affairs.
The brakes on a River Valley Railroad train malfunction and it rolls towards
maintenance workers on the tracks. Everyone gets out of the way except Dick, who
wants to show off. The train hits Dick, who sues Stops-it, Inc., the brakes’ manufacturer.
Stops-it can raise the defense of
a. a component-part manufacturer.
b. assumption of risk.
c. consumer participation.
d. product misuse.
In Kettle Cafe’s suit against Food Services, Inc., the court issues a judgment in Kettle’s
favor. The judgment can be appealed to an appropriate court of appeals by
a. either party.
b. Kettle only.
c. Food Service only.
d. neither party.
Stature Loan Company has notice that a promissory note is overdue if the note is a
demand instrument and Stature takes it
a. an unreasonable time after its due date.
b. before its due date.
c. on its due date.
d. without noticing its due date.
Della, an officer for Energy Petrol Corporation (EPC), buys 100 shares of EPC stock.
One week later, EPC announces that it will merge with a competitor, Fuel Oil Company,
and the price of EPC stock increases. One month later, Della sells her shares for a
profit. Under Section 16(b) of the Securities Exchange Act of 1934, Della would not be
liable if, after buying the stock, she had waited
a. less than fourteen days to sell it.
b. more than six months to sell it.
c. ninety days to sell it.
d. two months to sell it.
Beau sells a 1940 Ford pick-up truck car to Cody without disclosing that he had
originally planned to restore the truck but changed his mind because of the cost. Beau is
liable for
a. opinion.
b. fraud.
c. mistake.
d. nothing.
Ben and Andrew are parties to a contract. They agree on a novation. The novation does
not require
a. the existence of a previous, valid obligation.
b. agreement by all the parties to a new contract.
c. performance of the original contract by all of the parties.
d. a new, valid contract.
Julie works as an employee for Organic Produce Express, Inc. (OPI). Rowan, who is
unemployed, collects unemployment compensation. This compensation is provided by a
tax on
a. Julie and other employees.
b. Julie, OPI, and other employees and employers.
c. OPI and other employers.
d. not Julie, OPI, or other employees or employers.
Pat, an accountant, includes a false statement in a report for Quantity Overstock, Inc.,
that is filed with the Securities and Exchange Commission. Quantity publishes a
misleading ad about its future prospects. Rita sees the ad and calls Stan, who buys stock
in Quantity. Under Section 18 of the Securities Exchange Act of 1934, liability may
attach to
a. Pat’s report.
b. Quantity’s ad.
c. Rita’s call.
d. Stan’s purchase.
Telfonix Corporation, a U.S. firm, and Adex, Inc., a British firm, are parties to a
contract with a forum-selection clause. The forum specified in the clause
a. must be within the geographic boundaries of the United States.
b. must be within the geographic boundaries of Britain.
c. need not be within the geographic boundaries of either party.
d. must be within the geographic boundaries of either the United States or Britain.
Dina asks Edie to co-sign a credit application so that she can borrow money and buy a
truck from First Street Motors. If, after the loan agreement is signed, Dina agrees to a
higher rate of interest without telling Edie, then Edie is
a. discharged from the agreement.
b. liable at the higher rate of interest.
c. liable at the lower rate of interest.
d. liable for the principal only.
Rafi, a director of Super Service Station Corporation, does not attend a board meeting
for three years. During that time, Twyla, Super’s president, makes improper loans that
cost the company $100,000. Rafi is most likely
a. liable for negligence or mismanagement.
b. liable for violation of the business judgment rule.
c. not liable because missing meetings is an honest mistake.
d. not liable because missing meetings is only poor judgment.
Jared is arrested and found guilty of a misdemeanor. His punishment will not include
a. imprisonment for six months.
b. a fine of $100.
c. death.
d. imprisonment for six months and a fine of $500.
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
property is owned by
a. Faye and Huey.
b. Faye only.
c. Golden Spurs Ranch.
d. Huey only.
David, the chief accounting officer of Tension Fencing Corporation, wants to be sure
that all the company’s accounts are legal and ethical. Sometimes, however, he is unsure
exactly what is legal and what is illegal. David should
a. not worry about what is legal or illegal as long as the corporate executives benefit in
the short run.
b. try his best to not do anything illegal and keep documentation showing that he
always acts in good faith.
c. not worry about what is legal or illegal as long as it benefits the shareholders.
d. not worry about what is legal or illegal as long as it benefits the chief executive of the
corporation.
An assignment of the interest of a limited partner dissolves a limited partnership.
To succeed in a strict product liability suit, an injured plaintiff must show that a
product’s defect was the proximate cause of the injury.
Browse-wrap terms are arguably not enforceable.
The registered agent is the person who can receive legal punishment (such as fines and
imprisonment) on behalf of the corporation.
A principal who causes a third person to believe that another person is the principal’s
agent can be estopped from denying the agency relationship.
A syndicate may be organized as a corporation but not as a partnership.
Before a seller can have an insurable interest in goods, the goods must be identified to a
contract.
A generic term is not protected under trademark law unless it acquires a secondary
meaning.
A person who transfers an instrument for consideration makes certain warranties to the
transferee.
A state long arm statute allows a court to exercise jurisdiction over out-of-state
defendants based on activities that took place within the state.
A failure to return personal property is disparagement of property even if the rightful
owner consented to the initial taking.
If no heirs are found, the property of a decedent is transferred to a charitable
organization.
Foreclosure is the postponement, for a limited time, of part or all of the payments on a
loan in jeopardy of repossession and sale.
In certain circumstances, bargains are so oppressive that the courts relieve innocent
parties of part or all of their duties.
Any event that makes its unlawful for a partnership to continue its business will result
in dissolution.