Home equity is the portion of a home’s value that is “paid off.”
The UCC imposes the same rules of conduct on all parties in all circumstances.
A principal is not liable to a third party for any contract made by the agent acting
outside the scope of his or her authority.
A person who in good faith acquires a negotiable instrument from a thief cannot
become an HDC.
A license permits the use of intellectual property for certain limited purposes.
A gift causa mortis is effective only if the donor dies and the donee lives.
Building subcontractors are not independent contractors.
A seller can terminate a contract on the basis of commercial impracticability if increases
in the seller’s costs threaten to undercut its profits.
In the United States, a patent is given to the first person to invent a product or process.
For an agent’s implied authority to be effective, a principal must confirm it in writing.
An auction-“we ask you to bid on this item”-is an offer.
Before a principal can ratify a contract, the principal must know all of the material facts
involved in the deal.
All directors must be present before a board can transact business.
A corporation cannot refuse a shareholder’s request to inspect corporate records.
If a price quotation contains a mistake in the adding of a number of figures, the contract
may not be enforceable.
The last security interest to be perfected is the first in priority over any other perfected
security interests.
The most common reason that ethical problems occur in business is an overemphasis on
long-run profit maximization.
The simplest form of business is a sole proprietorship.
If it can be shown that a trespass to land was warranted, a complete defense exists.
According to utilitarianism, it does not matter how many people suffer a negative effect
from an act.
A short-form merger is the legal combination of two or more corporations online.
A buyer in the ordinary course of business has priority over any security interest created
by the seller.
The assignment of the same contract right to two different parties results in their
“splitting the difference.”
Privity of contract between the plaintiff and the defendant is required to bring a product
liability suit based on negligence.
Nominal damages normally establish that the defendant acted wrongly.
A promise to do something that one has a prior legal duty to do is not consideration.
Intermittent advances against a line of credit can be subject to the same collateral.
The bank on which a check is drawn is the payor bank.
The intent to return the embezzled property is a defense to the crime of embezzlement.
An insurance application is part of the insurance contract.
A lender’s failure to comply with federal mortgage disclosure requirements extends the
borrower’s right to rescind the loan to no more than seven days.
A design defect is not the sort of product defect that will support the imposition of
liability on a strict product liability basis.
The intention to enter into a contract is judged by objective facts as interpreted by a
reasonable person.
One guideline to evaluating the ethics of a particular action is to “let your conscience be
your guide.”
An electronic symbol, adopted by a person with the intent to sign an e-record, is an
e-signature.
If a seller is not a merchant, and the seller holds the goods, the risk of loss cannot pass
to a buyer.
Once an employee receives workers’ compensation, he or she can maintain a suit
against the employer for negligence.
The average prime offer rate is the rate offered to the least qualified borrowers as
established by a survey of potential borrowers.
A registration statement must include a financial statement certified by an independent
public accounting firm.
Mariah works in the public relations department of New Trends Sales Company. Her
job includes portraying New Trends’s activities in their best light. In this context, ethics
consist of
A.a different set of principles from those that apply to other activities.
B.the same moral principles that apply to non-business activities.
C.those principles that produce the most favorable financial outcome.
D.whatever saves New Trends’s “face.”
Over the course of a year, Retail Marketers, Inc., sells goods from its inventory and one
of its warehouses. In exchange, Retail receives checks and other items that substitute
for cash, which Retail uses to repay a loan from Savings Bank. Article 2 of the UCC
governs
A.the checks.
B.the payment of the loan.
C.the sale of the buildings.
D.the sale of the goods.
In the facts of the previous question, according to the reasoning of the dissent in Dole
Food Co. v. Patrickson, parties who would be potentially subject to suit in U.S. courts
would include
A.Amigos and Bueno.
B.neither Amigos nor Bueno.
C.only Amigos.
D.only Bueno.
Leather Products Stores, Inc., rejects a shipment of goods that does not conform to its
contract with Manufactured Cowhide Corporation, but is unable to obtain instructions
from the seller. Leather Products may
A.resell or return the goods only.
B.resell or store the goods only.
C.return or store the goods only.
D.resell, return, or store the goods.
Edie files a suit against Frank. If this suit is like most cases, it will be
A.dismissed during a trial.
B.dismissed or settled before a trial.
C.resolved only after a trial.
D.settled at a trial.
GR8 Skates Company makes and sells a pair of skates to Hugh. GR8 fails to exercise
“due care” to make the skates safe, and Hugh is injured as a result. GR8 is most likely
liable for
A.assumption of risk.
B.knowledgeable use.
C.negligence.
D.product misuse.
Jill loans her laptop to Kyle. This is a bailment for
A.neither party’s benefit.
B.the parties’ mutual benefit.
C.the sole benefit of the bailee.
D.the sole benefit of the bailor.
Catalina promises high returns to Darby and other investors, who then agree to trust
their funds to Catalina. She uses these funds to pay previous investors. This is
A.a Ponzi scheme.
B.a stock option.
C.an accredited investor.
D.a tombstone ad.
Frawsty Corporation distributes beverages in the greater Northwest. Frawsty’s board of
directors can delegate some of its functions to
A.Frawsty’s incorporators.
B.Frawsty’s officers.
C.Frawsty’s shareholders.
D.no one.
Final Foto, Inc., makes photo and video editing software, which includes a shrink-wrap
agreement. Gert buys a package of the software. With respect to the contract for the
software’s purchase, the shrink-wrap agreement may not be enforced if
A.Gert does not read it.
B.Gert learns of it after contracting.
C.Gert learns of it before contracting.
D.the quality of the software is poor.
Mountain Mining Company, a U.S. firm, owns property in Bolivia. The government of
Bolivia seizes the property for an illegal purpose without paying just compensation.
This is
A.confiscation.
B.defalcation.
C.dumping.
D.expropriation.
Sam, or any U.S. citizen, can bring a civil suit in a U.S. court against a foreign entity
for
A.a tort allegedly committed in the United States only.
B.a tort allegedly committed in the United States or overseas.
C.a tort allegedly committed overseas only.
D.no purpose.
Mountain Bikes, Inc. (MBI), and Nero enter into a contract for a sale of a mountain
bike. MBI, a merchant who deals in goods of the kind sold, makes implied and express
warranties in connection with the sale. The Magnuson-Moss Warranty Act attempts to
prevent deception in warranties by
A.displacing the UCC as the primary source of warranty rules.
B.making warranties easier to understand.
C.prohibiting disclaimers of warranties.
D.requiring sellers to give written warranties for consumer goods.
Bakri owns a house. In the house, on a tile floor is a throw rug. Most likely to meet the
definition of a fixture is
A.the house.
B.the throw rug.
C.the tile floor.
D.none of these choices.
Kim sends an offer to Leo to cut down and remove a tree for $200. Kim says, “If you
say nothing, I will consider you to have accepted my offer.” If Leo does not respond, he
will be deemed to
A.accept the offer.
B.make a counteroffer.
C.reject the offer.
D.none of the choices.
Quibble Game Company’s liabilities exceed its assets. Quibble hires Roo & Slay, an
accounting firm, to prepare a balance sheet. Through Roo & Slay’s negligent omissions,
the sheet shows a positive net worth. Town Bank relies on the balance sheet to make a
loan to Quibble. When Quibble defaults, Town files a suit against Roo & Slay. Under
the Restatement rule, Roo & Slay is most likely
A.liable because Roo & Slay owed a duty of care to Quibble.
B.liable because Roo & Slay owed a duty to any foreseeable user.
C.liable if Roo & Slay knew that Town would rely on the balance sheet.
D.not liable because Roo & Slay and Town were not in privity.
Tire Manufacturing Company employs Uri as an agent. To terminate Uri’s authority,
Tire Manufacturing must notify
A.only third parties who are aware of the agency relationship.
B.the public generally.
C.Uri and any third parties who are aware of the agency relationship.
D.Uri only.
Fact Pattern 1-1
The Texas Supreme Court decides the case of Livewire Co. v. Power Corp. Of nine
justices, five believe the judgment should be in Livewire’s favor. Justice Bellamy, one
of the five, writes a separate opinion. The four justices who believe the judgment should
be in Power’s favor join in a third separate opinion.
Refer to Fact Pattern 1-1. These opinions are collected and published in volumes called
A.citations.
B.codes.
C.regulations.
D.reporters.
Mica buys “Nature,” a movie, through Open View, an online entertainment vendor.
Before completing the purchase and downloading “Nature,” Mica must review a
warning not to make and sell a copy of it. This warning is
A.a browse-wrap term.
B.a click-on agreement.
C.a shrink-wrap agreement.
D.none of the choices.
Cliff dies without a will. His survivors include his spouse Dana and his two children,
Efrem and Fay. Under applicable laws, Dana will probably receive
A.all of Cliff’s estate.
B.none of Cliff’s estate.
C.one-half of Cliff’s estate.
D.one-third of Cliff’s estate.
Oak Grove Residences, Inc., owns apartment buildings. Pedro leases one of Oak
Grove’s apartments. Pedro’s transfer of his interest in the lease to Quito for a period
shorter than the lease term is
A.an assignment.
B.an eviction.
C.a right of entry.
D.a sublease.
Ida, Jerzy, and Kit are the directors of Liberty Convenience Stores, Inc. Liberty has nine
officers and forty-six shareholders. Dividends are ordered by the firm’s
A.board of directors.
B.incorporators.
C.officers.
D.shareholders.
Hubert mistakenly pays property taxes that should have been assessed against Jesse.
Hubert can recover the amount from Jesse in quasi contract
A.even if Jesse was not aware of the error.
B.only if Jesse tried to conceal the error.
C.only if Jesse was aware of the error.
D.under no circumstances.
Kelly, the owner of Llama Farms, a sole proprietorship, wants to obtain additional
business capital but to maintain control. This can best be accomplished by
A.borrowing funds.
B.bringing in partners.
C.issuing stock.
D.selling the business.
Tour Vista, an online travel company, buys blocks of rooms from Skyview Towers, a
hotel in River City, at a wholesale rate. Tour Vista resells the rooms to consumers at a
retail rate. In recent efforts to collect taxes from e-commerce, some cities claim that
hotel occupancy taxes should be assessed and remitted directly to the cities based on
A.the dire financial straits of the cities during the latest recession.
B.the retail rates of the rooms.
C.the states of residency of the consumers who reserve the rooms.
D.the wholesale rates of the rooms.
Fact Pattern 17-3
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 Mike’s card to withdraw $3,000
from Mike’s account.
Refer to Fact Pattern 17-3. 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 Mike’s
account (at least until the dispute is resolved).
C.must investigate and immediately recredit Mike’s account (at least until the dispute is
resolved).
D.must investigate but need not recredit Mike’s account.
Phil enters into a contract with Vacation Resorts, Inc., to work as a chef. Under the plain
meaning rule, the meaning of this contract must be determined by reference to
A.any available evidence.
B.any relevant extrinsic evidence.
C.the face of the instrument.
D.the later testimony of the parties.
Housemate, Inc., makes and sells a variety of household products. With a fair amount of
certainty, Housemate’s decision makers can predict whether a given business action
would be legal in
A.all situations.
B.many situations.
C.no situations.
D.practically no situations.
A common ethical dilemma faced by the management of General Holdings Corporation
involves the effect that its decision will have on
A.one group as opposed to another.
B.the firm’s competitors.
C.the government.
D.the U.S. Chamber of Commerce.
The holding in Notz v. Everett Smith Group, Ltd. shows that majority shareholders
should
A.act ethically and legally in the best interest of their corporation.
B.always act in the best interest of minority shareholders.
C.always act in their own best interest.
D.give control of their corporation to a disinterested third party.
Rafi, a director of Super Service Station Corporation, does not attend a board meeting
for three years. During that time, Twyla, Super’s president, makes improper loans that
cost the company $100,000. Rafi is most likely
A.liable for negligence or mismanagement.
B.liable for violation of the business judgment rule.
C.not liable because missing meetings is an honest mistake.
D.not liable because missing meetings is only poor judgment.
Money Mortgage Mart makes a short-term loan to Natalie to allow her to make a down
payment on a new home before selling her current home. This is
A.a bridge loan
B.a home equity loan.
C.an equitable right of redemption.
D.a violation of federal law.