Mercury Motors inadvertently mixes up a work order on Peter’s car. Peter brought the
car in to have the tires rotated. Mercury tuned up the motor by mistake, conferring a
benefit on Peter. If Mercury Motors insists that Peter pay for the price of the tune-up,
Mercury Motors:
a. can recover its reliance interest.
b. cannot recover its expectation interest because there was no enforceable agreement.
c. will win based on breach of contract.
d. will lose because a personal service contract was involved.
Assume that Jessie and Lester have formed a contract whereby Jessie agrees to deliver
10,000 dozen “Grade A Large Eggs” to be shipped in recycled paper cartons. A shortage
of paper makes paper cartons much more expensive, so Jessie uses styrofoam cartons
and ships the eggs. Lester is entitled to cancel the contract based on this deviation of
terms in the contract.
a. True
b. False
Bob, a house builder, contracts with Ollie to build a house on Ollie’s lot. The total price
of the construction is $100,000, $20,000 of which will be Bob’s profit. After Bob has
put $10,000 worth of materials into the house, Ollie wrongfully refuses to let him finish
the house. If Bob sues for damages, he will be able to collect:
a. $10,000.
b. $20,000.
c. $30,000.
d. $100,000.
Newt, a gun dealer, offers to sell a rare civil war musket to Rush, another dealer, for
“$15,000, insurance and shipping paid by buyer.” Rush responds, “I accept. Insurance
and shipping costs divided equally between seller and buyer.” The parties:
a. do not have a contract since the acceptance violated the mirror image rule.
b. do not have a contract since Rush’s response was a counteroffer.
c. have a contact and, in the majority of states, the terms of the offeree control.
d. have a contract and, in the majority of states, the different terms will cancel each
other out.
Shoe Sunshine, Inc. filed for bankruptcy protection under Chapter 11 and submitted a
plan of reorganization within 120 days after filing for relief. Two of the classes of
creditors voted against the plan. However, the bankruptcy judge considered the plan to
be reasonable, achievable, and fair, and approved it in spite of these creditors’
objections. This action by the judge is called a “cramdown.”
a. True
b. False
The Consumer Product Safety Commission (CPSC) is an independent federal
administrative agency. Which statement is correct about the chairperson?
a. The chairperson serves at the whim of the President and can be fired at any time.
b. The chairperson can only be fired by the President for good cause.
c. The chairperson cannot be fired by the President since the CPSC is an independent
agency.
d. The chairperson has a lifetime appointment and cannot be fired.
Mike made the following offer to Mick: “I will pay you $500 if you agree to paint my
house.” Mick replied that he would. At this point, the contract is an:
a. executed, bilateral, express contract.
b. executory, bilateral, implied-in-law contract.
c. executory, unilateral, express contract.
d. executory, bilateral, express contract.
Judicial review can best be described as the power of federal courts to:
a. review state court decisions.
b. review state executive action.
c. review state and federal legislative and executive action.
d. none of the above.
Sarah, an employee of Amex Corporation, committed a serious criminal act in an
attempt to obtain a large sales order for her employer. A court found her guilty of the
felony and also found the corporation guilty of criminal conduct. The company was
fined $1 million. The court:
a. erred in fining the company since finding both Sarah and the corporation guilty
violates the Double Jeopardy Clause of the Constitution.
b. acted properly if this were a federal proceeding; however, it did not act properly if
this were a state proceeding.
c. acted properly if this were a state proceeding but not if this were a federal case.
d. acted properly in this case.
The “business judgment rule” has been replaced by “good faith statutes in most states.
a. True
b. False
Marvin contracts with House Painters R Us to paint the interior of his house lemon
yellow throughout. The total contract price is $7,000. House Painters R Us’s anticipated
profit on the job is $4500. If Marvin breaches the contract before House Painters R Us
has begun work on the job and has not incurred any expenses, then its damages will be
$7000.
a. True
b. False
Jack goes to Fast Copy Center and pays to have 40 copies of a textbook made. Jack
then sells the photocopied versions of the book to fellow students for $60 a copy (as
opposed to the $95 textbook price). The textbook author learns of this and sues Jack and
the copy center. Which statement is correct?
a. Jack and the copy center are both liable to the author.
b. Jack is liable to the author but the copy center is not.
c. The copy center is liable to the author but Jack is not.
d. Neither the copy center nor Jack is liable to the author.
E-mation, Inc hires Marvin to steal trade secrets from one of its competitors for
$10,000. Marvin demands half of the money up front. E-mation pays Marvin $5000 but
Marvin decides not to pursue theft of the trade secrets. E-mation sues Marvin for the
return of the $5000. What will the court do with this contract?
a. The court will order Marvin to return the $5000.
b. The court will order Marvin to return the $5000 with interest.
c. The court will order Marvin to obtain the trade secrets.
d. The court will not do anything to help E-mation get its money back.
When a principal is partially disclosed:
a. the agent and principal will be jointly and severally liable on the contract.
b. the agent and principal will be only jointly liable on the contract.
c. only the principal can be liable.
d. only the agent is liable.
The federal judicial branch of the U.S. government:
a. interprets statutes.
b. passes statutes.
c. issues executive orders.
d. creates administrative agencies.
If Chuck buys frozen cheese from Cheese Inc., then fails to inspect the cheese within a
reasonable amount of time and does not reject the shipment, Chuck has accepted the
shipment even if there is non-conformity.
a. True
b. False
If Morales and Rolfes Supply negotiate for the purchase and sale of a supply of fuel for
a three-year period for Morales business:
a. the contract may indicate a method for determining the price, without stating a
definite price.
b. Morales and Rolfes must depend on the UCCs gap-filler provisions to determine a
price since the fuel is a “good covered by Article 2 of the UCC.
c. the contract price must remain the same for the entire three-year contractual period.
d. their contractual requirements regarding definiteness would be the same under the
UCC and the common law.
Who has the right to manage the business of a corporation?
a. Shareholders.
b. Officers.
c. Bondholders.
d. The board of directors.
A corporation is required to have at least one class of stock with voting rights.
a. True
b. False
Corporate managers serve only one master, which is the best interest of the
shareholders.
a. True
b. False
You go to a theater to see a play one Saturday evening. You have :
a. purchased an interest called a “profit.
b. an easement by reservation.
c. a license to enter the theater.
d. no property right in the theater just by purchasing the ticket for the play.
Under the Equal Pay Act of 1963 an employee may not be paid at a lesser rate than
employees of the opposite sex for tasks requiring equal skill, effort, and responsibility
under similar working conditions.
a. True
b. False
Warranty liability is the liability of someone who gives payment on a negotiable
instrument.
a. True
b. False
The European Union is one of the worlds most powerful regional associations with 42
member nations as of 2011.
a. True
b. False
For the business judgment rule to apply:
a. there must be a conflict of interest.
b. the director must exercise extraordinary care.
c. the director must act in the best interests of the corporation.
d. All of the above.
Which of the following is NOT a protected category under Title VII?
a. Unattractiveness
b. Race
c. National origin
d. Sex
Jennifer has offered to sell her laptop computer for $750 to Jack. She tells Jack that the
computer is only six months old but, in fact, it is three years old, and Jennifer wants to
unload the lemon. Jack agrees to buy the computer based on Jennifer’s representations.
This contract is:
a. a void agreement because of the fraud involved.
b. a voidable contract, one that Jack can void.
c. a voidable contract, one that Jennifer can void.
d. a void contract because of the UCC.
Considering the relationship between laws and morality, a person who sees a young
child playing on a railroad track must remove the child if a train is approaching.
a. True
b. False
To become a ‘socially conscious organization, typically three-fourths of the investors
must approve, and they must undergo a certification process.
a. True
b. False
Iris received a discharge under a Chapter 7 bankruptcy. She cannot receive another
discharge under Chapter 7 for at least:
a. six years after the prior filing.
b. eight years after the prior filing.
c. ten years after the prior discharge.
d. She cannot file another Chapter 7, but could file a Chapter 11 or 13 bankruptcy.
Willis and Leslie orally agree to the sale of a parcel of land for $50,000: one-half
payable now as a down payment; one-half payable in 30 days at the time of closing
when the title will be transferred. The buyer, Willis, is to have possession immediately.
Willis pays Leslie $25,000, takes possession of the land, and starts building a house. At
the time of closing, Willis has made a substantial beginning on the house. However,
Leslie refuses to transfer the title, claiming the oral contract is not enforceable. This
contract is:
a. enforceable, because the statute of frauds does not apply to this interest in land.
b. unenforceable, because there is no writing signed by Leslie.
c. enforceable, because Willis has partially performed the oral contract and made
improvements on the land.
d. unenforceable, because the parol evidence rule applies.
When one party to a contract fails to perform as promised, it is called:
a. litigation.
b. breach.
c. liquidated damages.
d. bad faith.