Fact Pattern 14-1
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 stop-payment order.
Refer to Fact Pattern 14-1. Capital Bank
a. is liable to Fix-It for the amount of the check.
b. must stop payment if Capital has a reasonable time to act.
c. need not stop payment unless Echo had a valid reason to act.
d. need not follow Echo’s order unless the check was certified.
Elton presents an uncertified check for payment more than six months after its date. The
check was drawn by Dakota on her account in First Community Bank. The usual
banking practice in such a case is to
a. cash the check.
b. consult the customer.
c. refuse to cash the check.
d. ask the payee what he or she would prefer.
Billy opens a bicycle shop that sells an innovative new kind of bicycle. He decides to
call the bicycles “Bicycles.” Billy extensively markets his product, has a high sales
volume and becomes well known for selling Bicycles. The term Bicycle
a. is automatically protected against trademark infringement.
b. receives no protection against trademark infringement.
c. can be registered as a trademark to obtain protection against trademark infringement.
d. can be registered as a certification mark.
Patricia commits an act via e-mail against Othman Finance Company, a business in
California, where the act is a cyber crime. Patricia resides in New York where the act is
not a crime. Prosecution of Patricia in California involves questions of
a. jurisdiction.
b. “maximum contacts.”
c. the immunity of Internet service providers.
d. encryption.
Quality Sales Corporation enters into contracts over the Internet. Quality can protect
itself against disputes involving these contracts by making important terms
a. reasonably clear.
b. difficult to notice.
c. impossible to find.
d. standardized.
Noni and Myra enter into a contract for a sale of clarinets and other wind instruments.
Noni does not deliver. Myra can normally recover as damages the difference between
a. any loss avoided and any profit gained.
b. the actual price and the hoped-for price.
c. the contract price and the market price.
d. the current prices in the parties’ locations.
Jumbo Jumpin” Jelly Beans, LLC, is a limited liability company. Unless indicated
otherwise on Jumbo’s federal tax form, the firm will be taxed as
a. a cooperative.
b. a corporation.
c. a joint venture.
d. a partnership.
Fern and Gray want to form a limited partnership to manage two restaurants, Caf Latte
and Deli Delite. In most states, a limited partnership will be created when
a. a certificate of limited partnership is filed.
b. a partnership agreement is executed.
c. the business for which the firm is formed actually begins.
d. the partners make their capital contributions.
Silas sells his farm to Kathy. The title is transferred by deed. Kathy is the
a. grantee.
b. grantor.
c. tenant.
d. adverse possessor.
Jackie distributes a handbill throughout her neighborhood accusing her neighbor Ked of
being a convicted sex offender. The statement is defamatory if
a. a neighbor repeats it.
b. Ked suffers emotional distress.
c. the statement is true.
d. the statement is false.
Over the Internet, Red & White Contractors, Inc., arranges to lease storage space from
Blue Services Company. To complete the deal, Red & White clicks on a button that
says, in reference to certain terms, “I agree.” Most likely, the parties have
a. a binding contract that includes the terms.
b. a binding contract that does not include the terms.
c. an unenforceable contract that includes the terms.
d. an unenforceable contract that does not include the terms.
Lia works for Media Marketing Company. Her job includes putting ‘spin” on the firm’s
successes and failures. In this context, ethics consist of
a. “bad” versus “good” publicity.
b. questions of rightness and wrongness.
c. the firm’s quarterly revenue.
d. whatever is legal.
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.
The payment of Hu’s debt to Ian is guaranteed by Hu’s personal property. To give notice
of his interest in Hu’s property to other creditors, Ian is most likely to
a. attach a bright label to Hu’s property.
b. e-mail other potential creditors.
c. file a financing statement with the appropriate authority.
d. publish a notice in local newspapers.
Fact Pattern 18-1
Beth, who has a disability, is an employee of Corporate Office Company (COC). After
the installation of new doors on COC’s building, Beth finds it nearly impossible to get
in and out. For repeatedly failing to be on time, COC replaces Beth with Dian, who
does not have a disability.
Refer to Fact Pattern 18-1. To succeed with a claim against COC under the Americans
with Disabilities Act, Beth will have to show that
a. Beth consistently met the essential requirements of her job.
b. COC refused to make reasonable accommodation for Beth.
c. Dian is unqualified for Beth’s position.
d. the doors were installed as an act of intentional discrimination.
Mark is creating a Web site through which he will enter into contracts over the Internet.
Important terms to include in his offers include
a. provisions specifying the remedies if the contract is breached.
b. a detailed history of his business.
c. glowing reviews from former customers.
d. his educational background.
Lucy is a limited partner in Metro Contractors, a limited partnership, which cannot pay
its debts. Lucy is personally liable for the debts
a. in proportion to the number of partners in the firm.
b. to no extent.
c. to the extent of her capital contribution.
d. to the full extent.
Kai files a suit against Lana based on one of Lana’s statements that Kai alleges is
fraudulent. To give rise to fraud, the statement must be one of
a. emotion.
b. fact.
c. illusion.
d. opinion.
Newt is considering forms of business organization for Newton Design, an architectural
firm. An advantage of a limited liability partnership is that partners can avoid personal
liability for
a. their own wrongful acts.
b. only other partners’ malpractice.
c. only partnership obligations that exceed capital contributions.
d. only partnership obligations that fall within capital contributions.
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.
Clive works for Digby Excavation Corporation. While operating a backhoe, Clive
suffers an injury. Clive will be compensated under state workers’ compensation laws
only if
a. he does not have health insurance.
b. he is completely disabled.
c. his injury was accidental.
d. his injury was intentional.
Hill & Dale Credit Corporation makes mortgage loans to consumers secured by their
principal homes. For a Hill & Dale loan to qualify as a Higher-Priced Mortgage Loan
(HPML), its annual percentage rate must exceed, by a certain amount,
a. the average prime offer rate for a comparable transaction.
b. the consumer’s income-to-debt ratio.
c. the percentage of income that a consumer can devote to its payment.
d. the projected increase in market value of the consumer’s home.
Brasilia, a real estate broker licensed only in Connecticut, concludes a land sale in
Delaware. She can
a. collect the commission if it has not been paid.
b. keep the commission if it has already been paid.
c. foreclose on the property to obtain any unpaid amount.
d. not collect the commission, keep it, or foreclose on the property.
Sweets Store buys chocolate from Tasty Candies, Inc. The parties agree that the
chocolate will be shipped “F.O.B. Sweets” via United Railroad Corporation. The
chocolate is lost in transit. The loss is suffered by
a. Sweets and Tasty, but not United.
b. Sweets only.
c. Sweets, Tasty, and United.
d. Tasty only.
John steals an old, battered bicycle that is parked, unlocked, in front of a convenience
store. He repairs, paints, and replaces parts on the bike until it is like new. The original
owner, Kim, claims the bike. The bike belongs to
a. John and Kim as tenants in common.
b. John because he made substantial improvements to it.
c. John because Kim claimed it only after John improved it.
d. Kim because John stole it.
Giant Lift Corporation purchases all of the assets of Heavy Hydraulics Corporation.
With respect to Heavy Hydraulics’s liabilities, Giant Lift is
a. automatically responsible.
b. not responsible under any circumstances.
c. responsible if Heavy Hydraulics is a competitor of Giant Lift.
d. responsible if the sale is in fact a merger or consolidation.
Sela agrees to act on Thom’s behalf, subject to Thom’s control, and Thom trusts Sela to
so act. They set out the terms in a written document, which they both sign. This is
a. an agency by agreement.
b. an agency by estoppel.
c. an agency by ratification.
d. not the creation of an agency relationship.
Venerable Company leases office furniture to Design Architects, Inc., under a contract
that states, “Bailee agrees to pay Bailor for any damage to the furniture.” During the
lease, while the furniture is in Design’s possession, it is stained by inks used in
computer printers, copiers, fax machines, and so on. Most likely liable for the damage
is
a. Venerable.
b. Design.
c. “Bailor.”
d. no one.
Tyrone is seventeen years old. Under the Fair Labor Standards Act, he
a. cannot work in a hazardous occupation.
b. cannot work during school hours.
c. must obtain a permit to work.
d. none of the choices.
Va-Va-Voom Products, Inc., engages in deceptive advertising when it markets its
product Weight-No-More as able to help consumers lose weight in their sleep.
Va-Va-Voom is ordered to include in all future advertising of Weight-No-More the
statement, “This product will not cause anyone to lose weight while sleeping.” This is
a. a counteradvertising order.
b. restitution.
c. a “cooling-off” law.
d. a validation notice.
Gas Up, Inc., designs, makes, and sells a fuel injection system that copies Hybrid
Corporation’s design without Hybrid’s permission. This is most likely
a. copyright infringement.
b. patent infringement.
c. trademark infringement.
d. a theft of trade secrets.
Applied Business Corporation makes and markets its products nationwide. Under the
stakeholder approach, to be considered socially responsible when making a business
decision, Applied must take into account the needs of
a. its consumers, the community, and society only.
b. its employees and owners only.
c. its employees, owners, consumers, the community, and society.
d. no one.
InterComp normally sells $50,000 worth of software to Power Source, a retail
electronics store, each summer on terms requiring payment in sixty days. One year,
InterComp wants cash, but Power Source wants the usual sixty days. To meet both
needs, the parties can arrange
a. a certificate of deposit.
b. a bearer bond.
c. a trade acceptance.
d. an international letter of credit.
Self-defense is a defense to negligence.
In defense against payment, an insurance company can raise any of the defenses that
would be valid in an ordinary action on a contract.
Secure Courier, Inc., has a requirements contract with Petro Distribution Corporation
that obligates Petro to supply Secure with all the gasoline it needs for its delivery
vehicles for one year at $2.30 per gallon. A clause inserted in small print in the contract
by Secure, and not noticed by Petro, states, “The buyer reserves the right to reject any
shipment for any reason without liability.” For six months, Secure orders and Petro
delivers under the contract without any controversy. Then, because of a war in the
Middle East, the price of gasoline to Petro increases substantially. Petro tells Secure it
cannot possibly fulfill their contract unless Secure agrees to pay $2.50 per gallon.
Secure, in need of the gasoline, agrees in writing to modify the contract. Later that
month, Secure learns it can buy gasoline at $2.40 per gallon from Refined Oil
Company. Secure refuses delivery of its most recent order from Petro, claiming, first
that the contract allows it to do so without liability, and second, that it is required to pay
only $2.30 per gallon if it accepts the delivery. Discuss Secure’s contentions.
French’s Fast Fries (3F) requires that its employees wear uniforms and protective
clothing while on the job. 3F provides a locker room for the employees to leave their
street clothes and personal items while working. A sign on the back of the locker room
door states, “French’s is not responsible for the loss of any property in the locker room.”
Grant, a 3F employee, changes his clothes in the locker room before starting work and
leaves his wallet and watch in a pocket of his jacket hanging in his locker. When he
returns after his shift, the wallet and watch are gone. Does Grant’s leaving personal
items in the locker room constitute a bailment? If so, what type of bailment? If not,
what legal relationship is it? Does 3F’s sign exculpate the company for Grant’s loss?
Why or why not?
Foreign exchange markets comprise a worldwide system for buying and selling
currency.
A crime can be committed only against persons.
Stating on an instrument the underlying terms of an agreement renders the instrument
nonnegotiable.
A marketing technique can be a trade secret.
Failure to live up to a standard of care may be an act or an omission.
To avoid liability for negligence, a business owner must protect its patrons against all
risks.
The owner of a fee simple absolute has the right to use property for whatever purpose
he or she sees fit.
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.
During a storm on Blue Lake, a boat sinks, but its owner Cappy survives. Cappy plans
to return to the site of wreck to salvage its equipment and his possessions, but he
delays. Meanwhile, Dick, an amateur diver, discovers the wreck and strips it clean of
useful items. Cappy learns of the recovery and files a suit against Dick, claiming that
the items are his. Dick responds that the sunken boat was abandoned and therefore he
has good title to everything to which he took possession. What is the court likely to
rule, and why?
Rubber stamp signatures can be legally binding signatures.
The crime of bribery occurs when the bribe is offered.
Under the UCC, parties to sales and lease contracts are not free to establish whatever
terms they wish.
If there is no definite period stated, a firm offer by a merchant is irrevocable without the
necessity of consideration for up to six months.
Generally, the agent owes the principal no duties.