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When a corporation is dissolved voluntarily, the corporation must notify its creditors of
the dissolution.
Voir dire is a process for presenting evidence in a case.
One of the requirements of a valid contract is a fair price.
A limited liability company is not a citizen of any state.
A buyer may reject a seller's goods under any circumstances.
Land includes the artificial structures attached to it.
Political speech that would otherwise be protected by the First Amendment is
prohibited if its source is a corporation.
A corporate takeover is the process of acquiring control over a corporation by the
purchase of a substantial number of the voting shares of its stock.
If a lender fails to provide certain material disclosures, a borrower has up to seven years
to rescind the mortgage.
The doctrine of promissory estoppel requires a clear and definite promise.
Expropriation occurs when a government seizes private property for an illegal purpose
and awards just compensation.
A debtor wishing to file for bankruptcy must complete the means test to determine
whether he or she qualifies.
A person who does not know about a reward can still claim it.
An alteration of an instrument is material if it changes the terms between two parties in
any way.
A business takes a risk by electronically storing its customers' credit account numbers.
An installment contract is breached if a buyer accepts any nonconforming goods.
Scienter exists if a party makes a statement that he or she does not believe is TRUE.
Simply obeying the law does not fulfill all ethical obligations.
Under the doctrine of respondeat superior, an agent is liable for the principal's
negligence.
A dividend may be paid from undistributed net corporate profits.
All employees are entitled to overtime pay.
A lessee is a party who transfers a right to the possession and use of goods under a
lease.
To rescind a contract, each party essentially advances to the position he or she would
have been in if the contract had been fully executed.
A professional can be liable for fraud whether or not he or she acted with fraudulent
intent.
A product liability action may be based on warranty theory.
An assumption of risk defense does not require that a risk be voluntarily assumed.
A generic term is not protected under trademark law unless it acquires a secondary
meaning.
In many corporations, the directors are also the chief corporate officers.
Quasi contracts allow the courts to act as if a contract exists when there is no contract.
The United States Supreme Court cannot review a decision by a state's highest court.
Cory enters into a contract with Dian to act as her personal sports trainer. If they later
dispute the meaning, and the contract contains unclear terms, the rules of contract
interpretation will give effect to
A.the parties' intent as expressed in their contract.
B.what the defendant claims was the parties' intent.
C.what the plaintiff claims was the parties' intent.
D.what the parties now agree they intended.
Fact Pattern 28-1
Nika owns land in Ohio. Her ownership rights include the right to sell or give away the
property without restriction, and the right to commit waste, if she chooses.
Refer to Fact Pattern 28-1. Nika conveys some of her land to Reggie with the right to
possess and use the property for a certain period of time. Nika has given Reggie
A.a fee simple absolute.
B.a leasehold estate.
C.a life estate.
D.an easement.
Flo-Thru Corporation is poised to issue securities that, under the Securities Act of 1933,
are "exempt." This means that the securities can be sold
A.on the basis of a material omission or misrepresentation.
B.on the basis of nonpublic information.
C.within any six-month period by certain insiders.
D.without being registered.
Doral, Eduard, and Francesca are co-sureties of Glenda's debt to Hi-Credit Company.
Doral pays Glenda's entire debt. Doral's right to seek proportionate payments from
Eduard and Francesca is the right of
A.contribution.
B.redemption.
C.reimbursement.
D.subrogation.
Summit Supply Company contracts for a sale of medical equipment to Valley
Immediate Care Corporation. Summit can enforce its right to payment
A.only after Valley has actually inspected the goods.
B.only after Valley has had an opportunity to inspect the goods.
C.only before Valley has inspected the goods.
D.whether or not Valley has had the chance to inspect the goods.
According to the court in Case 14.1, Maple Farms, Inc. v. City School District of
Elmira, the defense of commercial impracticability will not excuse the performance of a
contractual obligation when there is an increase in the seller's costs while the contract is
in force
A.unless the increase in the seller's costs is substantial.
B.under any circumstances.
C.unless the increase in the seller's costs makes it impossible for the seller to perform
without losing money.
D.unless the increase in the seller's costs was not foreseeable at the time the contract
was formed.
Kip, a representative for Lite-Weight Shipping Company, delivers a bill of lading to
Meg, the owner of Capacity Storage Warehouse. A bill of lading is
A.an invoice for payment for loading and carting.
B.an order to ship goods by carrier to a certain destination.
C.a receipt for goods signed by a carrier.
D.a receipt issued by a warehouser for goods in a warehouse.
Belle enters into a contract to subdivide and sell housing lots in Cole's hillside field if
Dell City annexes the property within the next year. Belle's duty to perform is
A.absolute.
B.conditional.
C.illusional.
D.irresolute.
The legislature of the state of Missouri enacts a new statute that sets standards for the
liability of businesses selling defective products. This statute applies
A.only in Missouri.
B.only in Missouri and its border states.
C.in all states.
D.in all states but only to matters not covered by other states' laws.
Bobbie claims that Carl breached their contract. Carl responds that he never intended to
enter into a contract with Bobbie. The intent to enter into a contract is determined with
reference to
A.the conscious theory of contracts.
B.the objective theory of contracts.
C.the personal theory of contracts.
D.the subjective theory of contracts.
Outbound Travel Agency agrees to hire Petra for one year at a salary of $1,000 per
week. When Outbound cancels the contract, Petra spends $2,000 to obtain a similar job
that pays $750 per week for a year. Petra is entitled to recover
A.the amount of the wages that Outbound promised only.
B.the difference between the wages at the two jobs only.
C.the difference between the wages at the two jobs plus $2,000.
D.$2,000 only.
Thelma signs a check "pay to the order of Uri" drawn on Thelma's account in Verity
Bank. Thelma has $400 in her account but the amount of the check is $500, which the
bank pays. This is
A.a dishonored check.
B.an overdraft.
C.a postdated check.
D.a stale check.
Hi-Tech Company contracts to sell fiber optic cable to Internet Services, Inc. Hi-Tech
may bring an action to recover the purchase price and incidental damages if Internet
A.accepts the cable and pays for it.
B.accepts the cable but does not pay for it.
C.rejects the cable.
D.revokes acceptance of the cable.
Citrus Groves contracts with four food companies to sell its entire crop of oranges.
When half of the crop is lost to an unexpected insect infestation, Citrus must
A.apportion its surviving crop fairly among its customers.
B.breach some of its contracts.
C.buy elsewhere as many oranges as needed to satisfy its contracts.
D.substitute other fruit for the oranges.
Ross e-mails Super Snowboard Company's marketing campaign to Winter Sports
Corporation, Super's competitor, without its permission. This is
A.copyright infringement.
B.patent infringement.
C.trademark infringement.
D.a theft of trade secrets.
Rocco gives Sequoia a computer as a gift. Using the computer, Sequoia develops a new
computer game, for which she obtains intellectual property protection, and forms Titan
Games, LLC, to make and market the game. Sequoia's acquisition of the game is by
A.gift.
B.accession.
C.confusion.
D.production.
Fact Pattern 31-1
First State Bank issues a letter of credit in favor of Oboe Company, an American firm,
to facilitate an international sales contract to buy resources from Lapland Mining, Ltd.,
a Finnish company.
Refer to Fact Pattern 31-1. First State Bank
A.is responsible for making sure that the parties perform the contract.
B.will make payment once the transaction has been completed.
C.will make payment when Lapland presents the proper documents.
D.none of these choices.
Patsy possesses twenty-four acres of remote, rugged land. Patsy has the right to use the
property, including extracting silver from an existing mine, for life. Patsy also has the
right to lease the land for a period not to exceed her life. Patsy's ownership interest is
A.a fee simple absolute.
B.a leasehold estate.
C.a life estate.
D.the power of eminent domain.
The process behind the production of "Fast Pace," a racecar video game, is protected by
A.copyright law.
B.patent law.
C.trademark law.
D.trade secrets law.
Superior Home Products, Inc., is a corporation. Superior's implied powers enable it to
A.amend the articles of incorporation.
B.bring a derivative suit.
C.declare dividends.
D.perform all acts reasonably appropriate and necessary to accomplish its corporate
purposes.
Pharma Company, Oral Meds Corporation, and Narco, Inc., are drug makers. Medico
Company and Lab Source, Inc., are drug distributors. In a suit against all of these
parties in which market-share liability is imposed, most likely to be liable are
A.neither the distributors nor the manufacturers.
B.the distributors and the manufacturers.
C.the distributors only.
D.the manufacturers only.
Hillside Homes, Inc., and Ideal Builders, Inc., enter into a construction contract that
includes six pages of detailed calculations. Later Hillside, whose project manager
compiled the figures, discovers that some numbers were multiplied incorrectly, but
Ideal refuses to make changes. A court would most likely
A.allow the parties to rescind the contract.
B.award damages to Hillside for the mistakes.
C.award damages to Ideal for the mistakes.
D.enforce the contract without requiring changes.
Ray signs a promissory note for $10,000 in favor of State University (SU). The note
does not specify the date of its payment. Ray defaults. In SU's suit to collect on the
note, the court will most likely rule in favor of
A.Ray, because SU assumed the risk that the note would not be paid.
B.Ray, because the note is not payable at a definite time or on demand.
C.SU, because the note is an unconditional promise to pay the holder.
D.SU, because there is a uniform "default time" for repayment when a date is not
specified.
On behalf of Premier Shipbuilding Corporation (PSC), Rita orders 1,000 cases of
1/4-inch nuts from Steel Parts Company's 10,000-case lot. Steel Parts separates 1,000
cases from the lot. Title and risk of loss
A.remain with Steel Parts until PSC acknowledges tender of delivery.
B.remain with Steel Parts until PSC accepts 1,000 cases.
C.shift to PSC after it accepts the nuts and inspects them for defects.
D.shift to PSC when Steel Parts separates the cases.
Lara induces Moe to enter into a contract for the sale of an apartment about which Lara
fraudulently misrepresents a number of material facts. Lara tells Moe that her
commission is 6 percent, but their signed, written contract states "12 percent." The
Statute of Frauds governs
A.contracts that are induced by fraud.
B.contracts that must be in writing to be enforceable.
C.the admissibility in court of oral evidence.
D.the merging of oral and written statements into one contract.
Realty Credit Company and Security Mortgage Corporation plan to consolidate. Most
likely, the articles of consolidation will be filed with
A.the county recording office.
B.the local realtors' association.
C.the state's secretary of state.
D.the federal Bureau of Land Management.
Fact Pattern 23-1
Desi starts up eSites, an Internet service, and leases office space in a building owned by
Fred. The lease requires Desi to pay Fred a base rental of $1,250, plus 10 percent of
eSites' profits, each month. The term is two years. Desi hires Gwen to work at eSites'
tech support desk at an hourly wage of $12.50, plus a commission of 10 percent of the
profits. The term is also two years.
Refer to Fact Pattern 23-1. Desi and Gwen are
A.not partners, because Gwen does not have an ownership interest or management
rights in eSites.
B.not partners, because the pay includes an hourly wage.
C.not partners, because the pay includes only 10 percent of the profits.
D.partners in a partnership for two years.
To finance the purchase of a car from Giant Auto Sales, Hoppy signs an instrument
promising to pay to "Ideal Credit Union" $18,000 with interest in installments with the
final payment due May 15, 2014. To be negotiable, this instrument must include on its
face
A.any conditions on the sale of the car.
B.any conditions to the disbursement of the funds.
C.any conditions to the repayment of the loan.
D.no conditions.
The idea for "On Your Mark," a computer game featuring racing cars, is protected by
A.copyright law.
B.patent law.
C.trademark law.
D.trade secrets law.
Everyday Loans, Inc., takes possession of Ferbie's stock in Glade Electronics
Corporation to perfect Everyday's security interest in the stock. This is
A.after-acquired property.
B.a pledge.
C.a purchase-money security interest.
D.proceeds.
Longway Trucking, Inc., files a suit against Midge, an accountant, under the antifraud
provisions of the Securities Exchange Act of 1934 and Rule 10b-5 of the Securities and
Exchange Commission. To succeed in recovering damages, Longway must show that
Midge
A.acted with scienter.
B.bought or sold a security.
C.is incompetent.
D.knows nothing about securities.
Jai owns an orchard behind Key's house and property. The only access to the orchard is
Key's driveway, which Jai uses to get to her orchard. Jai sells the orchard to Laurentz.
Can Laurentz use the right-of-way across Key's property?
Mitch is a director and officer of Numero Uno, Inc. Mitch makes a marketing decision
that results in a dramatic decrease in profits for Numero Uno and its shareholders. The
shareholders accuse Mitch of breaching his fiduciary duty to the corporation. What is
Mitch's best defense against this accusation? Later, the Numero Uno board considers a
resolution for the firm to compete with One-of-a-Kind Corporation. Mitch is a director
and shareholder of One-of-a-Kind. What is Mitch's responsibility in this situation?
The management of Sport Shoes Corporation, a U.S. firm, wants to expand into foreign
investment and employment markets. They are considering either opening their own
production facility in a foreign country or entering into a licensing agreement with a
foreign firm. What are the advantages and disadvantages of each of these courses of
action?
Dominique, a certified public accountant, provides accounting services to Eagle
Corporation. The services include preparing Eagle's financial reports and issuing
opinion letters based on the reports. In 2008, Eagle falls into serious financial trouble,
but neither Dominique's reports nor her opinion letters indicate this situation. Relying
on Dominique's portrayal of Eagle's financial situation, Eagle borrows a large sum of
money to build a new shipping facility. In lending Eagle the money, First National Bank
relies on Dominique's opinion letter. Dominique is aware of this reliance. If Dominique
did not engage in intentional fraud but was negligent, what is her potential liability?
On May 1, Brand Name Industries, Inc. (BNI), sent Carol a letter, via overnight
delivery, offering to employ her to audit BNI's financial statements for the current year
for $10,000. In the letter, BNI stated that Carol had ten days to accept. On May 5, Carol
sent BNI a fax that stated, "The price for the audit seems too low. Would you consider
paying $12,000?" BNI received the fax. The next day, Dan offered to conduct the audit
for $8,000. On learning of Dan's offer, Carol immediately e-mailed BNI, agreeing to do
the work for $10,000. BNI received this e-mail on May 7. Explain why BNI and Carol
do, or do not, have a contract.
Colby contracts in writing to sell his 2005 Dodge-brand pick-up truck to Efrem for
$10,500. Colby agrees to deliver the truck on Friday, and Efrem promises to pay the
$10,500 on the following Monday. On Thursday, Efrem tells Colby that he changed his
mind and will not buy the truck. Over the weekend, Efrem changes his mind again and
tenders $10,500 to Colby on Monday. Colby has not sold the truck to another party but
refuses the tender and refuses to deliver. Efrem claims that Colby has breached their
contract. Colby contends that Efrem's repudiation released him from his duty to perform
under the contract. Who is correct, and why?
Hoppy steals two checks from Eagle Retail Stores, Inc.: a blank check and a check
payable to the order of General Supplies Company (GSC), drawn on Eagle's account
with First National Bank. Hoppy forges Eagle's signature on the blank check and makes
it payable to himself. Hoppy forges GSC's indorsement on the back of the check
payable to GSC, and adds "Pay to the order of Hoppy." At Friendly Credit, Inc., Hoppy
indorses the back of both checks with his own name and gives them to Friendly for
cash. Friendly does not know about the theft or the forged signatures and presents the
checks to First National, which pays them. Eagle, which was not negligent, discovers
the forgeries and asks First National to recredit its account. Who suffers the loss on
each check?
Multi Investments, Inc., offers to buy Nano Toy Corporation. On May 1, Nano provides
copies of its financial statements for the previous year, showing an inventory of $10
million. On May 15, Nano discovers that the previous year's inventory is overstated by
$5 million, but does not inform Multi. On June 1, Multi, relying on the financial
statements, buys Nano. On June 10, the buyer discovers the inventory overstatement.
Can Multi succeed in a suit against Nano for fraud?
Jen operates Jen's Fruits & Vegetables, a small market stocked entirely with produce
grown on her adjacent farm. Under what clause of the Constitution can the federal
government regulate Jen's activities? What is Jen's best argument against federal
regulation of her farm and business?
During a storm on Blue Lake, a boat sinks, but its owner Cappy survives. Cappy plans
to return to the site of wreck to salvage its equipment and his possessions, but he
delays. Meanwhile, Dick, an amateur diver, discovers the wreck and strips it clean of
useful items. Cappy learns of the recovery and files a suit against Dick, claiming that
the items are his. Dick responds that the sunken boat was abandoned and therefore he
has good title to everything to which he took possession. What is the court likely to
rule, and why?
Tiny authorizes United Bank to make transfers from his account to make payments on
his debt to Vic's Auto Dealership, which sold Tiny the car that serves as collateral for
the debt. After three payments, Vic's repossesses the car and refuses to return it. Tiny
phones the bank to stop the payments and follows up with a confirming letter. The bank
fails to stop the next two payments, and Vic's refuses to refund anything. Can Tiny get
his money from the bank? Explain.
When Looking Glass Corporation wishes to issue certain securities, it must provide
sufficient information for Alice, and other unsophisticated investors, to evaluate the
financial risk involved. Specifically, the law imposes liability for making a false
statement or omission that is "material." What sort of information would Alice consider
material?
Clean Machines Company makes washing machines. Over the phone, Clean offers to
sell Dealers Appliance Outlet one hundred model EZ2000 washers at a price of $150
per unit. Clean says that it will keep the offer open for ninety days. Dealers responds
that within two or three weeks it will decide whether to accept. One week later, Clean
faxes, and Dealer receives, notice that the offer is withdrawn. Dealer immediately
phones Clean to accept the $150-per-unit offer. When Clean refuses to deliver at that
price, Dealer files a suit. Clean asserts, first, that there is no contract and, second, that if
there is a contract, it is unenforceable. Discuss Clean's assertions.
Kino sees a DVD player on the porch of Lulu's house, takes the player to his home, and
tells everyone he owns it. Maya, holding a knife, forces Nick to give her his boom box,
and runs away with it. Ollie breaks into Pam's apartment, takes a computer, and leaves.
Which of these acts are crimes, and what are the differences among them?
Cutter Company makes and sells table saws, which are designed to be safe if used
properly. Erin buys a Cutter saw and lends it to her neighbor Frank. To reach a toolbox
on a high shelf in his garage, Frank props the saw at an angle against a cabinet and
climbs onto the saw. Frank loses his footing, slips off the saw, falls on the blade, and is
injured. He files a product liability suit against Cutter, on the ground of negligence. On
what basis could the maker prevail?
Ed, a businessperson, is a friend of Fran, the owner of a candy store. Every day, Ed
spends five minutes in Fran's candy store, looking at the candy and usually buying one
or two candy bars. One afternoon, Ed goes into the store, looks at the candy, and picks
up a $1 candy bar. Ed waves the candy at Fran without saying a word and walks out. Is
there a contract? If so, how would it be classified in terms of formation, performance,
and enforceability?
Olaf, an executive with Pharma Product Distribution, Inc., has to decide whether to
market a product that might have undesirable side effects for a small percentage of
users. How should Olaf decide whether to sell the product? How does the standard of
ethics that is applied affect this answer?
Norwest Trucking Corporation files a suit in a state court against Bob's Service
Company (BSC), and wins. BSC appeals the court's decision, asserting that the
evidence presented at trial to support Norwest's claim was so scanty that no reasonable
jury could have found for the plaintiff. Therefore, argues BSC, the appellate court
should reverse the trial court's decision. Is the appellate court likely to reverse the trial
court's findings with respect to the facts? If not, why not? What are an appellate court's
options after reviewing a case?
Commercial Credit Company has in its possession an instrument dated May 1, 2009.
The instrument is payable to the order of Alpha Company "on June 1, 2009," for
$5,000. In the upper left corner is an address for Beta Corporation10 Corporate Park
Avenue, Chicago, Illinoisand in the lower right corner is the signature of "Delta, Inc.,
By Eve, President." In the lower left corner is stamped "ACCEPTED: Beta Corporation
by Frank, President, May 5, 2009." On the back is the signature of "Alpha Company by
Gail, President." What type of instrument is this? Is it negotiable? Who, if anyone, is
primarily liable on this instrument on May 1? On May 5? Who, if anyone, is
secondarily liable on this instrument?
