Kevin, the owner of Livestock Ranch Corporation, signs an instrument that includes the
phrase “payment for this note will be made from the proceeds of next years stock sale.
This instrument is
a. negotiable.
b. nonnegotiable, because payment can be made only out of a particular source.
c. nonnegotiable, because it states an express condition to payment.
d. nonnegotiable, because the reasons for the note are not clear on its face.
Ridgeline Bank provides Stanley with a mortgage to buy a home. The rate of interest is
fixed for three years and then adjusts annually. This is
a. a fixed-rate mortgage.
b. an adjustable-rate mortgage.
c. an interest-only mortgage.
d. a violation of the law.
Boutique Corporation would like to change its corporate status to avoid income taxes at
the corporate level. To qualify, the shareholders must not be
a. corporations.
b. estates.
c. individuals.
d. partnerships.
Modern Clothing, Inc., and National Denim Corporation use the mark “Made by
Members of the U.S. Textile Workers Union on the tags of their products to indicate the
participation of the union in the manufacture. Modern and National are not in business
together and do not own this mark. The mark is
a. a certification mark.
b. a collective mark.
c. a service mark.
d. trade dress.
ReadIt, Inc., develops an internationally popular Web site, tailoring its features to the
censorship requirements of various governments. Critics charge ReadIt with
“decapitating the voice of dissent. Ethically, the best argument in favor of ReadIts
policy is
a. ReadIt is merely following the lead of governments everywhere.
b. ReadIt is only seeking profits in lucrative markets.
c. ReadIts action is a common international practice.
d. ReadIts approach is a move toward more open access in the future.
Dallas and Ellyn operate Freestyle Riders, a bicycle shop, as a partnership. Taxes on the
businesss income are paid by
a. Dallas and Ellyn.
b. no one.
c. the state or federal government.
d. the business.
Keris will states, “I give to my sister Liz my condominium in Malibu, California. This
is
a. a general legacy.
b. a residuary.
c. a specific bequest.
d. a specific devise.
Granite Golfballs, Inc., has the power to control the market for its product. Antitrust law
regulates
a. how Granite acquired its power and what it does with it.
b. how Granite makes its product and who buys it.
c. the degree of trust Granite has with its customers and suppliers.
d. the size of Granites market.
Courtney promises to buy illegal digital copies of music and movies from Devin, who
promises to deliver on August 15. These promises are most likely
a. enforceable.
b. valid.
c. void.
d. voidable.
Like other manufacturers and sellers, Real-Built Tools Company packages its products
with labels. Under federal law, such labels must be
a. accurate and use easily understood words.
b. bright and feature eye-catching colors.
c. graphically distinctive and well-designed.
d. interesting and revealing to the average consumer.
Laptop Assembly Company gives a $3,000 promissory note to My-T-Fast Delivery
Service to deliver a load of computer chips to Laptops plant. The chips are contami-
nated during transit, and are useless to Laptop on delivery. If My-T-Fast presents the
note for payment
a. Laptops best defense would be breach of warranty.
b. Laptop must pay the note.
c. Laptops best defense would be nondelivery of an instrument.
d. Laptops best defense would be failure of consideration.
To adjust debt and institute a repayment plan, Charliewho is not a corporation, a
partnership, or a family farmer or fishermanmay file a petition in bankruptcy for relief
through
a. a liquidation.
b. a reorganization.
c. a repayment plan.
d. a family-farmer bankruptcy plan.
Wheels & Deals Corporation is subject to the Truth-in-Lending Act, which is a key
statute regulating the credit and credit-card industries and concerns
a. the credit-worthiness of financial institutions.
b. the disclosure of credit terms.
c. the limits on types of credit.
d. the limits on types of debt.
Chita owns the land on which Downwind Farm is situated, plus the farmhouse, barn,
and other structures permanently attached to the land. Chitas brother Elmo owns
everything else on the farmimplements, seed, and so on. The real property is owned by
a. Chita and Elmo.
b. Chita only.
c. Downwind Farm.
d. Elmo only.
Gas Up, Inc., designs and makes a fuel injection system that copies parts of Hybrid
Corporations designs without Hybrids permission. This is most likely
a. copyright infringement.
b. patent infringement.
c. trademark infringement.
d. none of the choices.
April posts a defamatory note about Brad in an online newsgroup maintained by Comp
Online, Inc., an Internet service provider. Most likely to be held liable for the remark is
a. April and Comp USA.
b. April only.
c. Comp USA only.
d. neither April nor Comp USA.
Jill introduces Kelly to her friends as “my associate. Kelly purports to act as Jills agent
in several business transactions with those friends. If Jill is liable for Kellys actions, it
will be under
a. the doctrine of estoppel.
b. the equal dignity rule.
c. the fiduciary principle.
d. the good faith statute.
May is a stockbroker. Due to Mays statements, Nora believes that the price of OK
Goods, Inc. (OKGI), a widely traded stock, is going to increase substantially. Nora buys
500 shares of OKGI at $10 per share, but the price soon drops to $2. Nora can
successfully recover
a. nothing.
b. the amount of the purchase price.
c. the amount of the purchase price plus the expected increase.
d. the amount of the purchase price plus the unexpected decrease.
Fact Pattern 28-1A
Dollar Value Motors asks Estimable Bank for a loan to increase its vehicle inventory.
Estimable requires Flair, Dollar Values president, sign a personal guaranty to pay the
debt if Dollar Value defaults. Meanwhile, to buy a pick-up truck from Dollar Value,
Gina asks Harper to co-sign a credit application.
Refer to Fact Pattern 28-1A. If Harper signs the application but fails to condition her
signature on Dollar Values agreement to pursue its legal remedies against Gina before
looking to her, then Harper is
a. a surety.
b. a lienor.
c. a guarantor.
d. a creditor.
The Federal Aviation Administration uses notice-and-comment rulemaking. The final
rule in such a proceeding has binding legal effect
a. after a court affirms it.
b. until the next presidential election.
c. once Congress approves it.
d. unless a court overturns it.
Call Center Corporation, a U.S. firm, owns property in India. The government of India
seizes the property for a proper public purpose and pays Call Center just compensation.
This is
a. confiscation.
b. defalcation.
c. dumping.
d. expropriation.
Whit is a director of Vids Corporation. With respect to policymaking decisions
necessary to the management of corporate affairs, Whit and the other Vids directors
have responsibility for
a. all of the decisions.
b. only the decisions referred to them by the shareholders.
c. only the decisions referred to them by the officers.
d. none of the decisions.
The operations of Metal Refining Industries, Inc., are major sources of air pollution.
These operations must use
a. the absolutely cleanest air technology.
b. the best available filter technology.
c. the maximum achievable control technology.
d. the most affordable scrubbing technology.
Craig is an accountant whose clients include Digby National Corporation. Elbert is
Craigs attorney. Working papers that Craig develops when preparing financial reports
for Digby are owned by
a. Craig.
b. Digby.
c. Elbert.
d. no onethe papers must be destroyed immediately after use.
Fact Pattern 27-1A
Mike loses his National Bank access card. He realizes his loss the next day but waits a
week to call National. Meanwhile, Opal finds and uses Mikes card to withdraw $3,000
from Mikes account.
Refer to Fact Pattern 27-1A. When Mike receives his National statement, he demands
that the bank investigate the matter and recredit his account. The bank
a. has no duty to investigate.
b. must investigate and, if the dispute is not resolved within ten days, recredit Mikes
account (at least until the dispute is resolved).
c. must investigate and immediately recredit Mikes account (at least until the dispute is
resolved).
d. must investigate but need not recredit Mikes account.
Fresh Harvest, Inc., agrees to sell to Ginas Bed & Breakfast Inn a certain amount of
locally grown produce each week but no mention is made of where the goods are to be
delivered. In general, the UCC requires that the delivery take place at
a. a neutral place of business halfway between the parties locations.
b. a “reasonable place of delivery.
c. Fresh Harvests place of business.
d. Ginas place of business.
Cole issues a note “payable to the order of Cole, forges Dylans signature as the maker,
and indorses the note “pay to Eton. Cole sells the note to Eton, who negotiates it by
indorsement and delivery to Franz. Franz negotiates the note to Gert. On this note, Gert
can extend liability to
a. no one.
b. only Cole, Eton, or Franz.
c. only Eton or Franz.
d. only Franz.
Idaho Farms mistakenly puts its potatoes in Jackson Co-ops storage bin, which already
contains Kelly Spud Farms potatoes. It is impossible to tell which potatoes originally
belonged to which party. This is
a. a bailment.
b. accession.
c. confusion.
d. production.
Digitech is a foreign corporation, which means that Digitech
a. is an alien corporation.
b. is chartered in a foreign country.
c. may be required to obtain a certificate of authority to do business.
d. may do business only in foreign countries.
To adjust debt and institute a repayment plan, Norman, a family fisherman, may file a
petition in bankruptcy for relief under the Bankruptcy Codes Chapter
a. (1)
b. (3)
c. (5)
d. (12)
A party who knowingly accepts defective performance of a contract waives the breach.
An accountant who performs an audit is liable for failing to detect misconduct even if a
normal audit would not have revealed it.
A buyer or lessee who has accepted nonconforming goods may keep the goods and
recover for any loss resulting in the ordinary course of events.
In most bailments, the bailee can retain the goods given by the bailor and return
equivalent property.
A contract with an unlicensed professional is never enforceable.
Steering and targeting occur when a lender manipulates a borrower into accepting a
loan product that benefits the lender but is not the best loan for the borrower.
Procedural due process requires that any government decision to take a persons
property must be made fairly.
A mistake of fact cannot be unilateral.
Acting in good faith gives a business firm a better chance of defending its actions in
court.
The crime of theft does not require that the perpetrator know whatever is taken
belonged to another.
When there is a direct conflict between a federal and a state law, the state law is
rendered invalid.
Any breach allows the nonbreaching party to cancel the contract.
Courts in many jurisdictions will consider the negligent actions of both the plaintiff and
the defendant when apportioning liability in a product liability action.
A foreign state is immune from the jurisdiction of U.S. courts unless the state is
involved in commercial activity within the United States.
A partys oral agreement to pay anothers debt is never enforceable.
If the parties to a sales contract state that a certain remedy is exclusive, then it is the
sole remedy.
Diversity of citizenship cases are only those arising between citizens of different states.
Every contract involves at least three parties.
Ethical codes of conduct can set the ethical tone of a firm.