Shelly offers to sell Jane goods both parties know are stolen. Jane accepts the offer, and
agrees to pay for the goods. Later, Jane refuses to accept or pay for the goods. If Shelly
sues Jane for breach of contract, what is the probable result?
a. The law would enforce this valid, enforceable contract.
b. Jane would win as this is a voidable contract.
c. Shelly would win as this is a unilateral contract.
d. The law would not enforce Jane’s promise, as it does not have a lawful purpose.
Randi, a resident of Oregon, was involved in an auto accident while in Idaho. The other
party lives in Wyoming. Randi wishes to recover the $11,000 cost to repair her car. The
most appropriate court for her to file her lawsuit is in a:
a. federal court in Idaho.
b. state court in Idaho.
c. federal court in Wyoming.
d. federal court in Oregon.
Generally, neither a “time is of the essence” clause nor a “force majeure” clause will be
recognized by the courts because these types of clauses are seen as a violation of public
policy.
a. True
b. False
Per se violations are subject to both civil and criminal penalties.
a. True
b. False
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.
Such a provision within the credit card contract is:
a. unconscionable.
b. an illegal contract of adhesion.
c. not binding, as a person cannot waive the statutory rights granted to him by federal
credit card legislation.
d. valid unless state legislation prohibits such clauses.
The UCC requires consideration for agreements modifying contracts for the sale of
goods.
a. True
b. False
Regarding Title VII, the Supreme Court ruled that an employer may only discriminate
against a woman if the position she is seeking has been historically occupied by a male
more than 75 percent of the time.
a. True
b. False
If a court awards nominal damages it will generally:
a. award compensatory damages as well.
b. not make a determination as to whether there has been a breach of the contract.
c. award punitive damages for the intentional breach of the contract.
d. award a very small amount of money.
An accommodation party on a negotiable instrument:
a. must receive consideration.
b. is secondarily liable on the instrument.
c. is the same as a “guarantor under the UCC.
d. has the same liability to a holder as the person for whom he signed.
Lian contracted for financial services from E-wise. This contract is governed by Article
2 of the UCC.
a. True
b. False
The most accurate statement regarding economic duress is:
a. it is never grounds for rescission.
b. it is always grounds for rescission.
c. it is a UCC concept only.
d. it may be grounds for rescission.
In order for a plaintiff to win a case involving intentional infliction of emotional
distress, she must prove the defendant acted in an extreme and outrageous manner.
a. True
b. False
Chance is a traveling marketing representative for a publishing company. He is an
independent contractor. One afternoon while driving to a meeting, he negligently runs a
stop sign and causes an accident. Judy is injured. Judy can:
a. hold both Chance and his company liable for her injury.
b. hold the company but not Chance liable.
c. hold Chance but not the company liable.
d. not hold Chance or his company liable for her injury.
Laurie is incorporating her business. Lauries home state is Wisconsin. Business will be
conducted in California, Michigan, Pennsylvania, and Virginia. Laurie:
a. must incorporate the business in Wisconsin, the home state.
b. must incorporate the business in Wisconsin, California, Michigan, Pennsylvania and
Virginia.
c. must incorporate in Delaware.
d. can incorporate the business in any state.
Which of the following is an example of a purchase money security interest in
consumer goods?
a. A doctor purchasing a computer on credit to create a Webpage to make services and
information available to her patients.
b. A doctor purchasing on credit a blood glucose monitor to check his own blood sugar
levels.
c. A doctor purchasing a TV/VCR unit on credit to place in her office waiting room.
d. A doctor purchasing an exercise bike for his employees to use over the lunch hour.
Creditors of Northern Hydraulics file an involuntary bankruptcy petition against it.
Northern continues to operate its business until the court officially acknowledges that
Northern is under the jurisdiction of the court. Any expenses Northern incurs in the
ordinary course of business during this gap period are:
a. priority claims.
b. administrative expenses of the bankruptcy.
c. unsecured claims.
d. secured claims.
Solomon breaches his contract with Neal to purchase the 500 pairs of socks he had
promised to buy. Neal is able to sell the 500 pairs to Renny for a much lower amount.
Neal then sues Solomon for damages. Neal will be able to recover:
a. the amount in the liquidated damages clause.
b. the difference between Solomon’s contract price and the amount paid by Renny.
c. Solomon’s contract price.
d. an amount which depends on whether Solomon intentionally breached because he
found cheaper socks somewhere else.
Ted and Alice own their recreational vehicle subject to a security agreement to Third
U.S. Bank to secure the repayment of the purchase money loan. Ted and Alice sell their
RV to Bob and Carol, who agree to take over the loan payments to the bank. There is no
novation with the bank. Under these facts, if Bob and Carol do not make the loan
payments, Third U.S. Bank:
a. can sue Bob and Carol only.
b. can sue Ted and Alice only.
c. can sue Bob, Carol, Ted, and Alice.
d. cannot sue anyone but can repossess the RV.
Congress revised and reauthorized the Patriot Act, but the secret national security letter
provisions were later limited by a federal appeals court.
a. True
b. False
A woman wishes to attend an all-male, publicly supported college. She claims the
college is violating the Equal Protection Clause of the Constitution. What level of
scrutiny will the court use when deciding this case?
a. Minimal scrutiny
b. Intermediate scrutiny
c. Strict scrutiny
d. Compelling interest scrutiny
What is a major argument against the GATT Treaty?
a. The United States will have to compete against countries with unlimited pools of
exploited labor.
b. The United States will lose millions of jobs involving low-end employment and these
types of workers are least capable of finding other employment.
c. Both a and b above are major arguments against GATT.
d. Neither a nor b above is a major argument against GATT.
When a judge orders a criminal defendant to reimburse the victim, it is called:
a. reimbursement.
b. restitution.
c. restraint.
d. reformation.
Ollie leased a building in Old Town. Ollie installed a washer and dryer unit and a new
furnace in the basement of the building with new duct work throughout the building.
Upon expiration of the lease, Ollie intends to remove the washer and dryer, but not the
furnace. The washer and dryer can easily be removed without harming anything.
Removal of the furnace, however, will damage the building. Are the washer, dryer, and
furnace fixtures?
a. The washer, dryer, and furnace are all fixtures.
b. The furnace is a fixture, but the washer and dryer are not.
c. The washer and dryer are fixtures, but the furnace is not.
d. The furnace and the washer are fixtures, but the dryer is not.
Matson agrees to purchase 500 wooden chairs from Woodcarvers, Inc. After
Woodcarvers sets the chairs aside in its warehouse, but before the risk of loss passes to
Matson, the chairs are destroyed in a fire, which was not the fault of Woodcarvers. The
contract between Matson and Woodcarvers is void.
a. True
b. False
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.
Consumers have a right to:
a. exclude as obsolete information about a bankruptcy discharge seven years previously.
b. know the name of anyone to whom credit information has been supplied by a
consumer reporting agency within the last three years.
c. have their own version of a disputed credit situation included in their credit file.
d. have their credit rating reviewed at least once a year.
Software clickwrap and shrinkwrap agreements limiting the manufacturers maximum
responsibility to a refund of the purchase price even if the software destroys your hard
drive have generally been found to be binding against consumers.
a. True
b. False
Which of the following parties can defeat a perfected security interest?
a. A “buyer in ordinary course of business.”
b. A buyer of consumer goods if the buyer is not aware of the security interest, gives
value for the goods, will continue to use the goods as consumer goods, and the secured
party has not filed a financing statement.
c. A buyer who purchases chattel paper or an instrument in the ordinary course of
business, and then takes possession.
d. All of the above are correct.
Does ethical behavior maximize profitability?
a. Yes, there is concrete evidence that ethical behavior maximizes profitability.
b. No, there is concrete evidence that unethical companies outperform ethical
companies.
c. Although there is no guarantee that ethical behavior pays in the short or long run,
there is evidence that the ethical company is more likely to win financially.
d. There is strong evidence that ethical behavior pays financially in the long run, but not
in the short run.
A college professor copies seven chapters from a book called “How to Get Better
GradesA Creative Approach to College Success!” There are ten chapters in the book.
She incorporates this material into a packet of material that is printed in her college’s
copy center. The packet is then placed in the local book store and is placed on the
required materials list for students to purchase. The author of the book on getting better
grades believes the professor has violated his copyright.
a. The author is right. The professor should not have copied the chapters and placed
them for sale in the bookstore.
b. The author is technically correct. However, even though an infringement occurred, he
cannot sue the professor since educational personnel are exempt from liability under
copyright law.
c. The author is not correct. Under the “fair use doctrine” a college professor can copy
material and distribute it to students for educational purposes.
d. The author is not correct. It does not appear that the professor actually made any
money from the alleged copyright infringement.
In the case of Worldwide Insurance v. Klopp, the Supreme Court of Delaware found
that:
a. a contract provision requiring arbitration and then permitting appeal by either party
was void as unconscionable.
b. the contract provision requiring arbitration was clear, unambiguous, and fair to both
parties.
c. the arbitration clause in Klopps auto insurance contract was valid because it furthered
the state policy favoring the use of arbitration to resolve disputes.
d. the automobile insurance policy was governed by UCC, Article 3.