Ramblin” Country Stables contracts to buy 1,000 horseshoes from Blacksmith, Inc., for
$1 per shoe. When the market price decreases to 50 cents per shoe, Ramblin” refuses to
go through with the deal. Blacksmith can recover
a. $1,500.
b. $1,000.
c. $500.
d. $0.
Will and Jay form Northwest Air Express, a general partnership. The essential elements
of this partnership do not include
a. a sharing of profits and losses.
b. a joint ownership of the business.
c. an equal right to management in the business.
d. goodwill.
Tracy borrows $30,000 from Secure State Bank. The lender accepts Tracy’s equity in
her home as collateral, which can be seized if the loan is not repaid on time. With
respect to any proceeding that occurs if Tracy fails to make the payments, this loan is
subordinated. This means that it
a. takes a higher priority.
b. takes a lower priority.
c. has the same priority as the primary mortgage.
d. fluctuates with the market value of the property.
Phil agrees to work for Vacation Resorts, Inc., as a chef. In determining whether a
contract has been formed, an element of prime importance is
a. the parties’ intent.
b. Phil’s rate of pay.
c. Phil’s education.
d. the terms of Phil’s employment.
KO Marketing Company, a U.S. firm, signs a contract with Librador Corporacion, a
Chilean firm, to give Librador the right to use Innovative’s animation techniques and
characters in product promotions. This is
a. a distribution agreement.
b. a joint venture.
c. direct exporting.
d. licensing.
Ralph, a van driver for Speedy Delivery Company, causes a multi-vehicle accident on a
city street. Ralph and Speedy are liable to
a. all those who were injured.
b. only those who were uninsured.
c. only those whose injuries could have been reasonably foreseen.
d. only those whose vehicles were closest to Ralph’s van.
DeFazio’s Italian Restaurants, Inc., holds a shareholders’ meeting. Corporate business
matters are presented at the meeting in the form of
a. resolutions.
b. proxies.
c. articles of incorporation.
d. bylaws.
Andy knows nothing about horses. Peter, an expert horse trainer, knows that a certain
horse has no talent and is not likely to win any competitions. Peter convinces Andy to
buy the horse for $500,000 by assuring him that it has great talent. The horse turns out
to have no talent and never wins any competitions. Andy can most likely recover
damages based on
a. fraud.
b. mistake.
c. undue influence.
d. duress.
Liberty Bank provides Michelle with a standard mortgage with an unchanging rate of
interest to buy a home. Payments on the loan remain the same for the duration of the
mortgage. This is
a. a fixed-rate mortgage.
b. an adjustable-rate mortgage.
c. an interest-only mortgage.
d. a violation of the law.
A trade association
a. is always a per se violation of Section 1 of the Sherman Act.
b. may be legal if it is sufficiently beneficial to both the association and the public.
c. is an innovative, legally efficient approach to doing business.
d. always creates illegal territorial or customer restrictions.
Willy deposits $5,000 with Home State Bank on July 1, 2012. Home State Bank
promises to repay Willy the $5,000 plus 3 percent annual interest on July 1, 2017.
Home State Bank has issued Willy a
a. certificate of deposit.
b. cashier’s check.
c. trade acceptance.
d. draft.
Lyla is a common shareholder in Norman’s Nutty Nuts Corporation. As a common
shareholder, Lyla is
a. guaranteed regular payments of dividends.
b. not guaranteed any payments of dividends.
c. not given any voting rights.
d. liable for all of Norman’s Nutty Nuts’s debts.
Big Drill Oil Company employees one hundred workers. Big Drill must do all of the
following except
a. keep occupational injury and illness records for each employee.
b. report any work-related diseases directly to OSHA.
c. report any employee death due to a work-related incident to OSHA within eight
hours.
d. pay employees higher wages for working in more dangerous areas.
Fact Pattern 21-1
Fresh Cream, Inc., wants to make an initial public offering of securities. Fresh believes
that it qualifies for an exemption under Regulation A from the full registration
requirement of the federal Securities Act of 1933.
Refer to Fact Pattern 21-1. Fresh decides to sell its new securities via the Internet. This
offering
a. will avoid the payment of commissions to brokers or underwriters.
b. is an investment scam.
c. is a Ponzi scheme.
d. constitutes insider trading.
Cal sells “DownSize,” a weight-reduction program, from a Web site, in competition
with Eat-Less Inc.’s product “Fit “n Trim.” Eat-Less files a suit against Cal, alleging in
part that he is a sole proprietor, but his enterprise should be deemed a different form of
business. Cal’s enterprise should most likely be considered
a. a corporation because DownSize is sold online.
b. a franchisee because DownSize is sold in competition to Fit “n Trim.
c. a sole proprietorship because Cal is a sole proprietor.
d. no form of business entity because Cal has no formal organization.
Global Services Corporation engages in trade practices that may violate antitrust law.
The Federal Trade Commission has the power to act against unfair trade practices under
a. the Clayton Act.
b. the Federal Trade Commission Act.
c. the Sherman Act.
d. no law.
Fun Toyz Corporation makes skateboards, which it sells to consumers, including Holly
and Ira. Due to a defect, Holly is injured while using her new board. Ira’s board has the
same defect, but he is not injured. In a product liability suit based on strict product
liability, Fun Toyz may be liable to
a. Holly and Ira.
b. Holly only.
c. Ira only.
d. no one.
Rally Speedboat Corporation refuses to sell its products to Super Weekends, Inc., a
recreational water products dealership. This is
a. an exclusive-dealing contract.
b. a horizontal market division.
c. attempted monopolization.
d. a unilateral refusal to deal.
Thelma is an employee at Foreign Food Mart. Thelma is called for jury duty and as a
result cannot work her scheduled shift at Foreign Food Mart. Foreign Food Mart fires
Thelma. This is a violation of
a. an example of the doctrine.
b. an exception based on contract theory.
c. an exception based on public policy.
d. an exception based on tort theory.
Perfect Tone Phones, Inc., is a corporation. Perfect Tone’s implied powers enable it to
a. amend the articles of incorporation.
b. bring a derivative suit.
c. declare dividends.
d. borrow funds, lend funds, and extend credit.
Duran applies to EZ Credit Mortgage Company for $100,000 to buy a home. EZ Credit
steers Duran toward an adjustable-rate mortgage even though he qualifies for a
fixed-rate mortgage. This is
a. a short sale.
b a subprime mortgage.
c. loan flipping.
d. steering and targeting.
Big U.S. Oil Company joins with a foreign cartel to control the price of oil. If the cartel
has a substantial effect on U.S. commerce
a. both Big U.S. Oil and the foreign cartel can be sued for violation of U.S. antitrust
laws.
b. neither Big U.S. Oil nor the foreign cartel can be sued for violation of U.S. antitrust
laws.
c. only Big U.S. Oil can be sued for violation of U.S. antitrust laws.
d. only the foreign cartel can be sued for violation of U.S. antitrust laws
Lightning Cycles, Inc., makes Lightning-brand motorcycles and accessories, which are
distributed to authorized dealers, including Macho Motors, Inc. Macho operates
dealerships in several locations. Lightning imposes restrictions on Macho to limit the
areas in which they sell the bikes and insulate other dealers from direct competition.
This is
a. a territorial restriction.
b. a resale price maintenance agreement.
c. a refusal to deal.
d. a price-fixing agreement.
Mona offers Ned, a building inspector, $5,000 to overlook the violations in her new
warehouse. Ned accepts the cash and overlooks the violations. Mona is charged with
the crime of bribery. The crime occurred when
a. Mona decided to offer the bribe.
b. Mona offered the bribe.
c. Ned accepted the bribe.
d. Ned overlooked the violations.
Samson is a government employee. Samson is limited in drug testing by the
a. First Amendment.
b. Second Amendment.
c. Fourth Amendment.
d. Eighth Amendment.
Dakota believes that Credit Services Corporation (CSC) has discriminated against her
on the basis of gender. She files a suit against CSC under the Civil Rights Act of 1964.
To establish a prima facie case of employment discrimination, Dakota must show that
a. she is a member of a protected class.
b. CSC has no legal defenses against the claim.
c. discriminatory intent motivated CSC’s act.
d. no other firm in CSC’s industry has committed a discriminatory act.
Jared downloads some video games from the Internet. There is a page indicating the
terms of use, but nothing that requires Jared to affirmatively indicate his consent before
downloading the games. These terms are
a. a click-on agreement.
b. browse-wrap terms.
c. a wrap-on agreement.
d. a shrink-wrap agreement.
Ellen pays State Bank $500 plus a service fee to draw a check on itself payable to Paul’s
Plumbing. Which of the following parties is responsible for paying the check?
a. Only Ellen
b. Both Ellen and State Bank
c. Only State Bank
d. None of the parties
A Massachusetts state statute imposes a prison term, without a trial, on all street
performers who operate in certain areas. A court would likely review this statute under
the principles of
a. the commerce clause.
b. the equal protection clause.
c. the due process clause.
d. the First Amendment.
Cash National Bank is an HDC of a note for $1,000 on which there is the forged
signature of “Dudley.” If sued on the note by Cash
a. Dudley must pay the note.
b. Dudley’s best defense would be fraud in the execution.
c. Dudley’s best defense would be material alteration.
d. Dudley’s best defense would be forgery.
Megan, an agent for a department store, orders one hundred dresses from Sal’s Clothing
Shop for the Spring Blossom Sale. There is no specific agreement in the sale contract
indicating when title will pass to the department store. The title will pass to the
department store when
a. Megan signs the contract.
b. Megan and the Sal’s Clothing Shop agent sign the contract.
c. Sal’s Clothing Shop physically delivers the dresses to the department store.
d. Megan pays Sal’s Clothing Shop for the dresses.
Global Investments Corporation buys and sells securities. Section 10(b) of the
Securities Exchange Act of 1934 applies to
a. only the purchase or sale of a security involving an insider.
b. only the purchase or sale of a security involving short-swing profits.
c. only the purchase or sale of a security involving a tipper and tippee.
d. the purchase or sale of any security.
Lather Up Soap Products Company grants its agent Kathy an exclusive territory in
which to sell Lather Up products. The firm cannot compete with Kathy in that territory
under the principal’s duty of
a. avoidance.
b. cooperation.
c. indemnification.
d. reimbursement.
Falsifying public records is forgery.
The Federal Reserve System acts as a clearinghouse where banks exchange checks.
Misrepresentation can occur through conduct.
Creditors can agree with a debtor to discharge the debtor’s debts on payment of a sum
less than that owed.
An artisan’s lien is effective only if a creditor has possession of the property.
Statements made by in judicial proceedings are NOT privileged communications and
may be the basis for defamation.
A release does not require consideration to be legally binding.
Few securities can be resold without registration.
Bait-and-switch advertising occurs when an ad appears to be based on factual evidence
but in fact is not reasonably supported by evidence.
Bribery of foreign government officials is both an ethical and a legal issue.
The courts consider legitimate competitive behavior permissible only if it does not
result in the breaking of a contract.
A disclosed principal is a principal whose identity is not known by the third party at the
time the contract is made by the agent.
The act of state doctrine does not have important consequences for firms doing business
in other countries.
The first bank to receive a check for payment is the depositary bank.
Cooperative research by small-business firms is exempt from antitrust law.
A shipment contract requires that the seller deliver the goods to a particular location.
Under the UCC, prompt shipment of goods is considered an acceptance of an offer to
buy the goods.