Zebra Toy Company, located in Chicago, sells $500,000 worth of toys to a London,
England, wholesaler. This contract could be governed by:
a. Illinois’s Uniform Commercial Code.
b. English law.
c. the CISG.
d. All the above are correct.
Claude agrees to lease his house to Irvin for nine months, the lease to begin six months
from the signing of the contract. Under the statute of frauds:
a. the lease is not required to be in writing.
b. the lease is required to be in writing because of the one-year rule.
c. the parol evidence rule renders the lease voidable.
d. the lease is a collateral promise which must be in writing.
The correct order of payment of claims from the debtor’s estate would be:
a. secured claims, priority claims, unsecured claims.
b. secured claims, unsecured claims, priority claims.
c. priority claims, secured claims, unsecured claims.
d. priority claims, unsecured claims, secured claims.
Which of the following would not be personally liable for the debts of the business?
a. A sole proprietor.
b. A partner in a general partnership.
c. A general partner in a limited liability limited partnership.
d. A general partner in a limited partnership.
Which of the following parties can defeat a perfected security interest?
a. A “buyer in ordinary course of business.”
b. A buyer of consumer goods if the buyer is not aware of the security interest, gives
value for the goods, will continue to use the goods as consumer goods, and the secured
party has not filed a financing statement.
c. A buyer who purchases chattel paper or an instrument in the ordinary course of
business, and then takes possession.
d. All of the above are correct.
Fact Pattern 40-1
John purchased $600 worth of clothes from Clothing Mart. He paid for the clothes with
a credit card. When he received his statement, he sent the credit card company a check
for $600. The credit card company mistakenly recorded his payment as $60. When John
received his next statement, he noticed the $540 error and contacted the credit card
company.
A few days later when he attempted to use his card to buy gasoline, he was told by the
cashier that the card had been canceled and she was instructed to take his card. John
was shocked, embarrassed, and angry. When he contacted the credit card company, it
pointed out a provision in his initial contract for the card that stated the company could
revoke his card privileges at any time with or without cause.
Consumers have a right to:
a. exclude as obsolete information about a bankruptcy discharge seven years previously.
b. know the name of anyone to whom credit information has been supplied by a
consumer reporting agency within the last three years.
c. have their own version of a disputed credit situation included in their credit file.
d. have their credit rating reviewed at least once a year.
A handwritten will is called a:
a. holographic will.
b. living will.
c. probated will.
d. nuncupative will.
Creditors of Northern Hydraulics file an involuntary bankruptcy petition against it.
What is true of Northern Hydraulics.
a. Northern Hydraulics has at least $10,425 in debts
b. There are at least 12 creditors
c. a custodian has been appointed
d. It must make all the filings necessary under a voluntary petition
When Myrtle comes home from work one evening, she finds that her yard has been
mowed and trimmed. Later, a man comes to collect for the yard work done. Myrtle
refuses to pay for the work since she has never seen the man before and did not hire
him to do her yard work. Which of the following answers is most accurate?
a. This is an implied, unilateral contract and she must pay the price requested by the
man.
b. This is an express, voidable contract that either party may avoid.
c. The court would order Myrtle to pay the reasonable value of the yard work because
of the benefit conferred on her.
d. Myrtle would not have to pay for the yard work.
An agency relationship can be created:
a. by the conduct of the parties.
b. only by the meeting of all the standards of contract law.
c. only by a written agreement.
d. all of these answers are true
As set forth in the Restatement Second of Contracts, which of the following duties are
imposed on the parties in the performance and enforcement of a contract?
a. perfect performance; honesty
b. strict performance; team work
c. good faith; fair dealing
d. negotiation; arbitration
Under what circumstances might the court reject a debtor’s Chapter 13 plan?
a. The plan requires future earnings to pay off debts.
b. The plan promises to pay all secured and priority claims.
c. The plan anticipates paying the unsecured creditors less than what they would get
under Chapter 7.
d. The plan treats all unsecured classes equally.
Which of the following statements concerning a Chapter 11 reorganization plan is true?
a. A reorganization plan will be confirmed by the court only if a majority of each class
of creditors votes in favor of the plan.
b. A reorganization plan can be confirmed by the court over objections of some
creditors if the court determines that the plan is feasible and fair.
c. Only the bankruptcy court has the authority to confirm or reject the reorganization
plan. Creditors do not have a right to vote on the plan.
d. A reorganization plan binds only the debtor and not the creditors.
Lying on her hospital bed alone one night, Phyllis grabs a pen and paper. With the last
of her strength, she wrote her last will and testament leaving all her worldly possessions
to her next-door neighbor, Aaron. This type of will is:
a. a nuncupative will.
b. disinherited children’s share will.
c. holographic will.
d. None of the above.
Which of the following is NOT a stakeholder?
a. a business competitor.
b. shareholders.
c. employees.
d. the environment.
Affirmative action programs:
a. are required if needed to overcome specific past discrimination.
b. are permissible only if they have time limits and nondiscriminatory alternatives are
not available.
c. result only from litigation or from Executive Order 11246.
d. were found to be no longer permissible as a result of a 1995 Supreme Court decision.
Tony fell and injured himself in a Mega Toy Store. Mega Toy Store is incorporated in
Delaware. Tony is a resident of Nevada but was injured in a Mega Toy Store located in
Arizona. Mega Toy does not do business in Nevada. Tony’s damages exceed $100,000.
If Tony decides to sue Mega Toy Store:
a. he may file the lawsuit in an Arizona state court.
b. he may file the lawsuit in a federal district court in Arizona.
c. he must file the lawsuit in a federal district court because the federal courts would
have diversity jurisdiction in this case.
d. Either a or b.
Under the Electronic Communications Privacy Act:
a. violators are subject to both criminal and civil penalties.
b. violators may be subject to civil, but not criminal, penalties.
c. only the unauthorized disclosure of e-mail messages constitutes a violation.
d. only the unauthorized interception of e-mail messages by the government or an ISP
constitutes a violation.
Which of the following is most likely to constitute fraud?
a. A false prediction that a painting’s value will rise.
b. A false statement that a used car is “the best deal in town.”
c. A false statement that a $30,000 car attracts members of the opposite sex.
d. Silence as to a toxic waste problem on real property that the buyer would not
reasonably find.
Denzil was one of 50,000 people defrauded of $40 in an advertising scam. His best
course of action to recover his money is to:
a. mediate the claim with the advertiser.
b. bring an individual lawsuit against the advertiser in a state appellate court.
c. bring an individual lawsuit in a U.S. District Court.
d. become part of a class action lawsuit, which might include plaintiffs who are
unaware of the lawsuit or are even unaware they were harmed.
If a company has violated antitrust laws:
a. the Justice Department can initiate only noncriminal charges against the violator.
b. the Federal Trade Commission may file criminal proceedings against the violator.
c. any private person or company that has been harmed by the violator can file a lawsuit
to recover damages.
d. All the above.
All the business forms listed below have limited liability except the:
a. limited liability company.
b. general partnership.
c. Subchapter “S” corporation.
d. corporation.
A letter of intent is not likely to be enforceable unless:
a. there is a clearly stated start date for the contract.
b. both parties agree on compensation.
c. it is clear that both parties intended to be bound by the letter.
d. conditions in the letter are met.
First Bank loaned $400,000 to Thomas, taking a security interest in his yacht. Thomas
defaulted on the loan and First Bank repossessed the boat. First Bank sold the yacht at a
public sale. The sale yielded $50,000 more than the debt. First Bank:
a. must pay Thomas the $50,000.
b. is entitled keep the $50,000.
c. must share the $50,000 equally with Thomas.
d. must pay the surplus to the Secretary of State.
Under FTC rules, a customer can cancel a door-to-door sales contract within:
a. three business days of the sale.
b. five business days of the sale.
c. one calendar week from the date the sale was made.
d. a “reasonable time after the sale was made.
Explain the difference between an ISP and a Web host, and discuss whether they are
treated alike under the Communications Decency Act (CDA).
In Ellis v Grant Thornton:
a. the lead partner issues an adverse opinion.
b. held Grant Thornton liable for the back wages of the Keystone banks president.
c. held that Grant Thornton did not know an employee would rely on the report and
therefor it was not liable.
d. The lead partner was found guilty of fraud.
An employer is in the process of negotiating a new contract with its union. During
negotiations, the employer changed the workweek from a five-day, eight-hour-per-day
week to a four-day, ten-hour-per-day week. Which statement is correct?
a. This is a violation of the National Labor Relations Act.
b. This is not a violation of the NLRA because the employer is bargaining with the
union.
c. This is not violation of the NLRA because the total number of work hours per week
has not changed.
d. Whether or not this is a violation of the NLRA will depend on the relevant state
statutory law.
Unethical behavior in an organization can create:
a. a cynical workforce.
b. a resentful workforce.
c. an unproductive workforce.
d. All of the above.
Larry works as an exotic dancer at Silly-Cone, an adult nightclub. Though he gets tips
from the patrons, Larry is paid a weekly salary. Larry discovers that though he works
the same number of hours, female dancers are paid a salary double his. If Larry sues the
Silly-Cone management, who will win?
a. Larry because of the Equal Pay Act.
b. Larry if all the women earn more than he does.
c. Silly-Cone if they have a legitimate non discriminatory reason for the pay disparity.
d. Silly-Cone because employers can discriminate in sexually oriented businesses.
Randi, a resident of Oregon, was involved in a auto accident while in Idaho. The other
party lives in Wyoming. Randi wishes to recover the $28,000 cost to repair her car. The
most appropriate court for her to file her lawsuit is in a:
a. federal court in Idaho.
b. state court in Idaho.
c. federal court in Wyoming.
d. federal court in Oregon.
I hire a secretary to run my office. Which of the following does she not have implied
authority to do.
a. call someone to repair the copy machine.
b. hire a maid to come in and clean
c. purchase new computers for the entire offices.
d. order donuts for breakfast for all the office employees.
An express contract:
a. must be in writing.
b. may be inferred by the conduct of the parties involved.
c. has both parties setting forth their intentions.
d. is not valid in many states.
Trisha loaned Brian $600 evidenced by a promissory note. When Brian paid off the
loan, he did not ask Trisha for the note. She sold it to Carin, a holder in due course.
Brian does not have to pay Carin since he already paid Trisha the full $600.
Generally, workers compensation statutes are voluntary and employers can elect to
participate or not.
The doctrine of precedent is binding on all courts from county courts to the U.S.
Supreme Court..
Define discovery, and identify and explain five of the most important forms of
discovery.
Local regulation is more effective than state or federal regulation in controlling air
pollution.
Roger, a minor, buys a stereo from Tuneland, Inc. Roger uses the stereo for a few
months, returns it to Tuneland, and demands his money back. In a majority of states,
Roger may return the stereo and he does not have to pay for the use of the stereo or the
damages.
Under the Family and Medical Leave Act, an employee can take up to 12 weeks of paid
leave each year for certain personal and family illness situations.
Alimony and child support obligations are considered priority claims.
Ralco was preparing Heidi’s tax return. In confidence, Heidi revealed some information
to Ralco. Under the federal accountant-client privilege, the information Heidi disclosed
is protected from disclosure in a criminal action by the U.S. government.
A product liability case may be brought in warranty, negligence, or strict liability, but it
must have the element that a person or business has been hurt by goods.
Owners of preferred stock typically have a preference in liquidation.
The Moores lease contains a clause allowing their landlord to raise their rent during the
course of their lease if the landlords property taxes increase on the leased premises.
This clause is unenforceable, since tenants deserve to know their rent amount is fixed
during their agreed rental time.
Public officials and public figures receive less protection from defamation than ordinary
people.
The Takings Clause in the Constitution of the United States prevents the government
from taking property for public use without paying a fair price.
If the court awards a partition to co-tenants, the court will normally attempt a partition
by kind. If partition by kind is impossible, because there is no fair way to divide the
property, the court will order the real estate sold, and the proceeds equally divided.
Generally, ethical managers have happier, more satisfying lives.
A spouse is entitled to a forced share of a decedent’s estate.
A salesclerk at Braybon’s Department Store observed a customer remove a ring from a
display case and put it in her purse. In most states, Braybon’s will be able to detain the
customer for suspicion of shoplifting.
Aubry purchased a washing machine, a freezer, and a refrigerator from Gateway
Appliances on credit, giving Gateway a security interest in the appliances. The
appliances were for Aubry’s household use. Gateway did not file a financing statement.
Six months later, Aubry had a garage sale and sold the appliances to Tam. Tam bought
the appliances for her student rental property. Aubry left town owing money on the
appliances. If Gateway can trace the appliances to Tam, can Gateway repossess the
appliances? Explain in detail.
If an employee is an employee at will, the common law allows the employer to fire the
employee for a good reason, a bad reason, or no reason at all.