Ramona has received a discharge in bankruptcy, but wants to reaffirm a debt to her
sister. To be valid, the reaffirmation:
a. will be scrutinized by the court to make sure her sister has not unfairly pressured
Ramona.
b. will be automatically disallowed because allowing Ramona to promise to pay a
discharged debt would be contrary to the goals of the bankruptcy proceedings.
c. will be automatically allowed if Ramona voluntarily chooses to make it.
d. must clearly disclose that Ramona has the right to rescind at any time since the debt
was already discharged.
Sharon fell while making an inspection of a machine at work and in the fall, she broke
her arm. Can she collect workers’ compensation for the time she had to be away from
work as she recovered?
a. Yes, since the injury occurred while she was engaged in her job at work.
b. Yes, if she can prove that the injury was caused by a fellow employee.
c. No, she can only receive compensation for her medical expenses.
d. No, since she should have been using a safety harness.
Which of the following is NOT a standard provision frequently found in contracts?
a. choice of forum.
b. choice of law.
c. choice of compensation..
d. arbitration.
As a general rule, employers have a legal obligation to disclose information about
former employees to potential future employers.
a. True
b. False
Why do many major corporations actively encourage ethical behavior?
a. Unethical behavior always damages a business.
b. Unethical behavior can quickly destroy a business.
c. Unethical acts are always illegal.
d. All of these are reasons that corporations actively encourage ethical behavior.
Laura intends to file a Title VII lawsuit against her employer. Which of the following is
true?
a. Laura is required to first submit her claim to the Equal Employment Opportunity
Commission.
b. Laura must first submit her claim to a state civil rights commission before she may
proceed with her lawsuit.
c. If the EEOC determines Laura has no case against her employer, she may not file a
lawsuit.
d. Laura may initiate a lawsuit or file with the EEOC as she so elects.
From tax returns, the Internal Revenue Service (IRS) has information concerning
Elizabeth Jones. Generally, the IRS may not divulge this information to the Federal
Bureau of Investigation unless Elizabeth has given written consent.
a. True
b. False
In the Schauer v. Mandarin Gems of California, Inc. case, the court held:
a. the plaintiff was entitled to proceed with her contract claim against the jeweler
because the jeweler must have understood that she was an intended beneficiary of the
sales contract.
b. both of the contracting parties must intend to benefit the third party to create a right
to sue in the third party.
c. a specific manifestation by the promisor of an intent to benefit the third person is
required to create a third party beneficiary contract.
d. the plaintiff was a donee beneficiary and, as such, she had no right to sue.
The notion of civil disobedience is founded on what principle?
a. Legal Positivism.
b. Natural Law.
c. Legal Realism.
d. Foreseeability.
To simplify, clarify, and modernize the law governing commercial transactions, the
UCC permits the use of “open terms” in sales contracts. In the use of “open terms,”
which of the following is true?
a. The court will use market value and other comparable sales to determine what a
reasonable price would have been at the time of delivery if the parties have not settled
the price in the contract.
b. If time of payment is not mentioned in the contract, payment within a commercially
reasonable time is presumed.
c. If the contract permits the buyer or seller to determine the price during contract
performance, the UCC requires the party to do so in good faith.
d. All of the above are true.
The Supreme Court has held that parody of copyrighted material is a per se violation of
copyright law.
a. True
b. False
When may an employer require an employee to submit to a lie detector test?
a. When the employee has been hired for less than 90 days
b. When the test is part of an on-going investigation into crimes that have occurred.
c. When the employer has reason to believe the employee is using illegal drugs on the
job.
d. When all employees are being questioned using a lie detector.
A Chapter 7 debtor’s agreement to pay a creditor on a debt after receiving a discharge in
bankruptcy is called a:
a. voidable preference.
b. reaffirmation.
c. fresh start.
d. redemption.
Pat’s Pen Co. manufacturers and sells an inexpensive ball-point pen. Salley’s Stationery
purchases the pens for $.25 each in quantities of 1,000. Salley’s discovered that a
national chain, a competitor of Salley’s, buys the pen at $.20 for 1,000. If Salley’s
Stationery sues Pat’s Pen Co. for price discrimination:
a. Pat’s Pen Co. will win if it can prove that it has been selling to the national chain
continuously at the cheaper rate.
b. Pat’s Pen Co. will win if it can prove that it did not intend to economically harm
Salley’s Stationery.
c. Salley’s Stationery will win unless Pat’s Pen Co. can justify the price differential.
d. Salley’s Stationery will win since price discrimination is a per se violation with no
real defenses.
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.
What federal law applies to this particular situation?
a. Truth in Lending Act.
b. Fair Credit Billing Act.
c. Fair Credit Reporting Act.
d. Equal Credit Opportunity Act.
Resale pricemaintenance (RPM), also called vertical price fixing is not always illegal. It
is a rule of reason violation.
a. True
b. False
Under the Model Act, who has the right to call a special meeting of the shareholders to
vote on an emergency issue that cannot wait until the next annual meeting?
a. Shareholders who own at least 10 percent of a company’s stock.
b. The board of directors.
c. Both of the above.
d. None of the above.
Ethical companies:
a. tend to earn higher returns than companies that engage in wrong-doing.
b. tend to have more creative employees than companies that engage in wrong-doing.
c. are guaranteed to be more profitable in the long run than companies that engage in
wrong-doing.
d. All of these.
e. Both (a) and (b).
If Jane persuades Linda to buy her horse by telling Linda that the horse runs “like the
wind,” then Jane’s statement is:
a. fraud.
b. misrepresentation.
c. a unilateral mistake.
d. puffery.
When Mohammed was hired by Pomico, Inc., he signed the following agreement,
“Upon termination of my employment with Pomico, I agree not to work for a
competing company within 30 miles of Pomico’s headquarters for one year.” This
agreement, important to protecting secret information developed in the employer’s
business, is:
a. an unenforceable exculpatory agreement.
b. an unenforceable usurious agreement.
c. an enforceable bailment agreement.
d. an enforceable agreement not to compete.
It is unethical to use your lawyer as an excuse for a provision of a contract, such as,
“My lawyer insists that I have a liquidated damages clause…
a. True
b. False
Mabel is a single 40-year-old who has borrowed money on numerous occasions. Her
payment record has been good, except she has been delinquent in paying a few bills.
Which of the following is true regarding credit information gathered on Mabel?
a. Since Mabel has been delinquent, she waives her right to see the credit files.
b. If Mabel is rejected for a loan because of the consumer report, the lender must tell
her the source of the report.
c. Mabel has a right to have the information regarding her delinquency in paying a few
loans stricken from her credit record because her record has generally been good.
d. Mabel’s only legal remedy, if there is erroneous information in her credit file, is to
report the problem to the FTC for enforcement.
A “holder” of order paper can be described as:
a. the payee.
b. any person in possession of the instrument.
c. any person in possession of the instrument if it is payable to or indorsed to him.
d. the first party to come in contact with a negotiable instrument.
If employees wish to organize a union, the employer is prohibited from distributing
written notices to employees stating it is opposed to union activity within the company.
a. True
b. False
In Marubeni America Corp. v. United States, the federal appellate court ruled that the
Nissan Pathfinder was, for tariff classification purposes a motor vehicle for the
transport of passengers. The classification of goods is significant because:
a. the tariffs will vary depending on the classification.
b. the fair value will vary depending on the classification.
c. the subsidy will vary depending on the classification.
d. the dumping duty will vary depending on the classification.
West Virginia passed a statute regulating working conditions in its mines. If the statute
is challenged in court on substantive due process grounds:
a. it would be presumed invalid and would be struck down since it involves a
fundamental right to work.
b. it would be presumed invalid but would be struck down only if it is not necessary to
achieve a compelling government interest.
c. it would be presumed valid since it regulates economic or social conditions.
d. it carries no presumptions, but must be evaluated based on the procedures involved.
Sanco contracted to sell 1,000 cases of oil to AMF. The oil is located in a public
warehouse, which has issued a warehouse receipt for it. Which of the following is
correct?
a. The risk of loss passes to the buyer when the contract is made.
b. The risk of loss passes to the buyer when the goods are tendered to him.
c. The risk of loss passes to the buyer when the warehouse receipt is delivered to the
buyer.
d. The risk of loss passes to the buyer when the buyer gets the oil to its final destination.
Which of the following would be a reasonable accommodation under the ADA?
a. modifying a job description and job duties to accommodate the disabled worker
b. assigning a shadow employee to work with the disabled worker
c. providing part-time schedules to accommodate the disabled worker
d. creating a new job that the disabled worker can perform
McDonald’s famous golden arches and other marks used by the company illustrate a:
a. suggestive mark.
b. service mark.
c. certification mark.
d. collective mark.
The United States is the worlds largest exporter of agricultural products.
a. True
b. False
Alex promises to pay $100 to anyone who finds his lost watch. Kate finds and returns
the watch to Alex after hearing of the reward money. Alex and Kate have an enforceable
unilateral contract.
a. True
b. False
In a consignment contract, the consignee:
a. holds title.
b. takes the goods intending to resell them, and the goods are subject to the claims of
the creditors of the consignee.
c. is the party who leaves goods with the consignor to be resold.
d. cannot transfer title since the consignor retains the title.
Outline the parts of a typical contract.
Sandra and Joe own a hobby farm as tenants in common. They also own a vacation
home as joint tenants. What is the difference between the tenancy in common and joint
tenancy?
Rick and Allan want to start a union in the small factory where they work. Outline the
basic procedures they will need to follow to get a union recognized as the exclusive
bargaining unit for the company employees.
Explain the difference between attachment and perfection.
Discuss how a corporation is terminated. Identify four circumstances that might
persuade a court to pierce the corporate veil.
Rayco entered into a contract to buy Chia Pets from We Grow Em. The contract
specified that the shipment would be “F.O.B. destination; title to pass on the date of
shipment.” The goods were destroyed in transit to Rayco. Rayco argues that the loss is
We Grow Em’s. Analyze the situation and determine who is liable for the loss.
Tim received a letter from his state college stating he had been expelled from the
school. The letter stated his finance professor reported him to the Dean’s office for
cheating and that a committee had decided to expel him. He was reminded in the letter
he had been disciplined earlier that same year for plagiarizing a term paper. Tim
believes his due process rights have been violated by the college. Discuss what factors
should be considered to determine the validity of Tim’s claim.
Name and describe the types of conditions, explain how conditions are created, and
discuss whether it is important to identify the type of condition in a contract.
What accommodations might an employer be expected to make for a disabled
employee? What standard is used to determine whether an employer would be expected
to make these accommodations?
Define these terms: usage of trade; course of dealing; and course of performance.
In 1970, Continental Airlines agreed to buy a number of DC-10 airplanes from
McDonnell Douglas Corporation (MDC). Their contract included a limited warranty in
which MDC undertook certain servicing obligations and an exculpatory clause in which
Continental waived “all other remedies” against MDC. On March 1, 1978, one of these
DC-10s was nearing takeoff at Los Angeles International Airport when the two front
tires of its left-side landing gear blew out. The pilot aborted the takeoff, but the
uncushioned landing gear tore through the tarmac and broke away from the plane. This
ruptured the left wing fuel tank, which burst into flames. The emergency escape slides
failed, apparently due to the heat of the fire. Some passengers evacuated through the
copilot’s window, others jumped from the exits. Four passengers died, and over 70
suffered injuries. The plane was destroyed. It should be noted that the exculpatory
clause did not prevent the passengers from suing Continental and/or MDC. Continental
sued MDC and MDC defended based on the exculpatory clause. Is this type of clause
enforceable? Discuss exculpatory clauses, particularly the one involved here.
Explain what a domain name is. Discuss if and how a domain name can be registered as
a trademark or if a trademark can be registered as a domain name.
Briefly discuss the enforceability of contracts by third parties.
Larson put his home on the market for sale. His good friend Bill came to look at the
home for possible purchase or rental. Bill noticed a crack in the ceiling and inquired
about it to Larson. Larson said that there had been a water leakage problem in the area
but it had been fixed two years ago and had not leaked since. Bill made a written offer
on the house which was accepted in writing by Larson the next day. On the day prior to
closing, Bill went to make a final inspection. Bill observed water leaking through
another crack in a ceiling of the house and in the garage. The next day, Bill informed
the real estate agent that he was rescinding the contract because of the leaks. Larson
subsequently rented the property to another party. A couple of months later, Larson filed
a suit seeking a court order to make Bill purchase the house or in the alternative for
money damages. Bill defended by claiming that Larson either defrauded him or there
was a mutual mistake and asked for the return of his earnest money and/or damages for
fraud. The trial court found there was no evidence to find fraud on the part of Larson
because the roof had been previously fixed and the two parties had been good friends.
What is the appropriate remedy when a court concludes that there has been a mutual
mistake of material fact?
Shelby hired Evan to drill a well on her property for $3,000. They both thought the soil
and subsoil were normal for the area, but after he started drilling, Evan found a layer of
rock that required him to purchase a special drill and required an extra ten hours of
work. Evan demanded an extra $1,000 to complete the job. Discuss whether Shelby is
liable for the additional $1,000.