Motor Parts Corporation offers to buy the stock of NASCAR Products Corporation
(NPC). NPC’s directors oppose the offer. Orin and other NPC shareholders file a suit,
alleging a breach of the directors’ fiduciary duties. Most likely, the court will
a. apply the business judgment rule to analyze the directors’ acts.
b. dismiss the suit as a non-judicial dispute over “fair value.”
c. evaluate the terms of the deal on the basis of antitrust law.
d. order that the shareholders be paid a “premium” for their stock.
Thor Power Products Corporation permits its directors to be elected by cumulative
voting. This
a. allows minority shareholders to be represented on the board.
b. assures directors that they will be selected by their peers.
c. guarantees Thor’s executive officers of the final choice.
d. ensures against persons who may “cloud” the corporate direction.
Fernando obtains a consumer loan from Greater Regional Credit Union at an interest
rate that exceeds the state’s maximum. Greater Regional has
a. created a risk for the purpose of assuming it.
b engaged in a restraint of trade.
c. violated a licensing statute.
d. committed usury.
George promises to repair Ford’s boat dock in exchange for Efrem’s promise to plant
trees on George’s property. This is
a. a delegation.
b. an assignment.
c. a third party beneficiary contract.
d. an alienation.
Nero and Oona negotiate a contract. Nero prints out a hard copy to review before both
parties sign the electronic form of the contract. Neither party signs the hard copy. Under
the Electronic Signatures in Global and National Commerce Act (E-SIGN Act), the
signatures can
a. be denied effect because they are in electronic form.
b. be denied effect because Nero has not signed a hard copy.
c. be denied effect because Oona has not signed a hard copy.
d. not be denied effect because they are in electronic form.
Ezra, an accountant, intentionally misstates a material fact to mislead Fruit Packing
Industries, Inc., a client. Fruit Packing justifiably relies on the misstatement to its
detriment. Ezra is most likely liable for
a. actual fraud.
b. constructive fraud.
c. destructive fraud.
d. virtual fraud.
Like other corporations, Biopesticide Corporation can extend its operations through
a. a share exchange.
b. a dissolution.
c. a termination.
d. a winding up.
Uri sells 100 cases of vitamins to Wanda, but before she takes physical possession, the
cases are lost. Under the UCC, the parties’ rights and obligations with respect to the loss
depend on the concept of
a. physical possession.
b. product liability.
c. risk of loss.
d. title.
The Federal Emergency Management Agency (FEMA) discovers that Goodnuff
Trailers, Inc., is violating a FEMA regulation. If this situation is resolved like most such
disputes, the outcome will be
a. a negotiated settlement.
b. a trial and a fine.
c. a trial and an appeal to a higher authority.
d. a trial and the dissolution of the business.
Chloe files a suit against Digital Consultants, Inc. (DCI), to enforce a contract. The only
written evidence of the contract is a memo in DCI’s files written on DCI’s letterhead
and signed by a DCI officer. The contract can be enforced if the memo includes
a. a correct title, such as “Chloe-DCI Contract.”
b. all essential terms.
c. a statement of the consideration.
d. the parties’ addresses.
During the trial phase of Fuel Corporation’s suit against Gas Stations, Inc., their
attorneys engage in voir dire. This is
a. the assessment of the arguments on the issues.
b. the determination of the issues to be argued.
c. the litigation of the issues and arguments.
d. the selection of jurors.
Cole is a shareholder of Donut Holes, Inc. Cole will be deemed to have a fiduciary duty
to Donut Holes and its minority shareholders if he has
a. a restriction on the transferability of his shares.
b. a right of first refusal.
c. a sufficient number of shares to exercise de facto control.
d. watered stock.
Sam, a citizen of Tennessee, files a suit in a Tennessee state court against United Sales
Corporation, a Wyoming company that does business in Tennessee. The court has
original jurisdiction, which means that
a. the case is being heard for the first time.
b. the court does not have concurrent jurisdiction.
c. the court has standing.
d. the court has venue.
Sid borrows Tony’s paint sprayer to paint his house. Uma allows Vic to store his
posthole digger in her shed. The party with a right to use the bailed property is
a. neither Sid nor Uma.
b. Sid and Uma.
c. Sid only.
d. Uma only.
Mayfair Company offers to sell a certain mall to Galleria Stores, Inc., for a certain price
if it accepts before 10 a.m. Monday. A contract is formed if Galleria’s acceptance is
received
a. before 10 a.m. Monday.
b. before midnight Monday.
c. before twenty-four hours of 10 a.m. Monday.
d. within a reasonable time of 10 a.m. Monday.
Rosa and Sean are directors of Tech, Inc. The right of Rosa and Sam to be notified of
special meetings of the board is the right to
a. compensation.
b. indemnification.
c. participation.
d. preemption.
John steals an old, battered bicycle that is parked, unlocked, in front of a convenience
store. He repairs, paints, and replaces parts on the bike until it is like new. The original
owner, Kim, claims the bike. The bike belongs to
a. John and Kim as tenants in common.
b. John because he made substantial improvements to it.
c. John because Kim claimed it only after John improved it.
d. Kim because John stole it.
Odell, Prince, and Quinn are shareholders of Rite Corporation. Before a shareholders’
meeting, they agree in writing to vote their shares together in a certain manner. Usually,
such agreements are held to be
a. invalid and unenforceable.
b. oppressive and irresponsible.
c. suspect and voidable.
d. valid and enforceable.
Musical, Inc., sells fifty MP3 players to Noise Stores, Inc. To avoid liability for most
implied warranties, in some states Musical could simply state in writing that the players
are sold
a. as is.
b. by a merchant.
c. in perfect condition.
d. with no known defects.
HVAC Parts Company charges different buyers different prices for identical goods.
HVAC’s prices are subject to evaluation under
a. the Clayton Act.
b. the Federal Trade Commission Act.
c. the Sherman Act.
d. no antitrust law.
Fact Pattern 43-1
Town Transport Company (TTC) agrees to pick up two containers for Unlimited Sales,
Inc., and store their contents, to be delivered later. While TTC unloads one container,
the other disappears from TTC’s loading dock.
Refer to Fact Pattern 43-1. These facts give rise to
a. a presumption of intentional or negligent conversion by TTC.
b. a presumption of theft by a third party.
c. a presumption of theft by TTC.
d. Unlimited Sales’s liability for the container’s loss.
Fact Pattern 16-1
Estelle enters into a contract to buy 132 acres from Desmond to subdivide and sell in
quarter-acre lots for Country Acres, a residential development.
Refer to Fact Pattern 16-1. If Estelle breaches the contract, Desmond’s remedy would
most likely be
a. a certain ratio of the amount that Estelle has in liquid funds.
b. a percentage of Estelle’s unrealized profit.
c. the difference between the land’s contract and market prices.
d. specific performance.
Dion, an accountant for Entertainment Sports, Inc., attempts to apply a duty-based
approach to ethical reasoning in conflicts that occur on the job. This approach is based
on the idea that a person must
a. achieve the greatest good for the most people.
b. avoid unethical behavior regardless of the consequences.
c. conform to society’s ethical standards.
d. place his or her employer’s interest first.
Lou and Mira want to rescind their contract under which Lou sold an MP3 player to
Mira for $50. To rescind the contract
a. Lou must return the $50 and Mira must return the player.
b. Lou must return the $50 only.
c. Mira must return the player only.
d. the parties can keep the “benefits” of their bargain.
New Apps Company develops “Browser Lite,” software to speed the display of graphics
on Web sites. Browser Lite has the most copyright protection under
a. the Berne Convention.
b. the Paris Convention
c. the TRIPS Agreement.
d. the Madrid Protocol.
Dyan executes her will to give “to my nephew Esau my stock in Fargo, Inc.” Later,
Dyan writes separately, with the same formalities required for a will, to leave the stock
to her niece Ginny and cash to Esau. This writing
a. does not affect the will’s gift of the stock to Esau.
b. requires a gift of the stock in equal shares to Esau and Ginny.
c. revokes the whole will, which must be redrafted.
d. revokes the will’s gift of the stock to Esau.
Dante, a popular performer, dies. His spouse Caitlin sells their house to Buck. Unknown
to Caitlin or Buck, in one of the closets is the master recording of an unreleased album.
With respect to this recording, Buck can
a. keep it because Caitlin should have known about it.
b. keep it because the sale of a house includes everything in it.
c. not keep it because there was no voluntary consent to its sale.
d. not keep it because the sale of a house includes nothing in it.
Juli types onto a computer what she intends to be “My Will” and prints it out. Juli has
capacity. “My Will” is
a. invalid.
b. valid if Juli signs it.
c. valid if Juli signs it and has three witnesses sign it.
d. valid if Juli signs it, has three witnesses sign it, and files it in a certain state office.
Sierra digitally copies “Rampage” and other recent films without the authorization of
the owners and transfers those copies freely to others via file-sharing Web sites. This is
a. piracy.
b. spamming.
c. phishing.
d. vishing.
To resolve a dispute, Amy in Boston and Chris in Denver utilize E-Solution, an online
dispute resolution (ODR) service. This limits these parties’ recourse to the courts
a. not at all.
b. until the ODR service has issued a decision.
c. with respect to any dispute arising between them.
d. with respect to this dispute only.
To pay for a new desk bought at Office Outlet, Pete makes a check payable to “Offs
Outlet.” A proper indorsement of the check is
a. “Office Outlet” only.
b. “Offs Outlet” only.
c. “Office Outlet” or “Offs Outlet.”
d. “Pete” only.
Ben and Ivy enter into a contract under which Ben agrees to cater Ivy’s wedding in
exchange for a cash down payment. The contract expressly prohibits any transfer of
rights. A contract right may be transferred, however, if the transfer involves
a. a right to receive payment.
b. a right to Ben’s services.
c. rights under Ivy’s insurance policy against Ben’s failing to perform.
d. a right whose transfer is otherwise expressly prohibited by statute.
Financial Innovations, Inc., issues bonds, which are also known as
a. cumulative investments.
b. debt securities.
c. equity securities.
d. preferred stock.
A limited liability company is a legal entity apart from its owners.
An offer to form a bilateral contract is accepted only by completing the contract
performance.
A security interest is not enforceable after the creditor’s rights have attached to the
collateral.
A contract involving a sale is the only contract relating to an interest in land that must
be in writing to be enforceable.
Evidence of prior agreements that differ from the written terms of a contract can be
introduced in court to alter the contract.
Vague generalities and obvious exaggerations constitute deceptive advertising.
Incorporators appoint a corporation’s first board of directors.
A fixed-term tenancy terminates automatically when its terms ends.
Under the mirror image rule, an offer must be accepted in its entirety without
modification or reservation, or no contract is formed.
Equity is a branch of unwritten law that seeks to supply remedies of equal measure to
the parties in a legal dispute.
A promise to perform under a contract may be absolute.
A time draft is payable at a definite future time.
According to utilitarianism, it does not matter how many people suffer a negative effect
from an act.
The UETA does not require that an agreement to conduct a transaction electronically be
made electronically.
The UCC treats a consignment as a sale on approval.
A famous trademark may be diluted only by the unauthorized use of an identical mark.
In a chain-style business operation, a franchise operates under a franchisor’s trade name.
A limited liability company is operated in compliance with state law.
In most states, a director cannot be removed from a corporate board without cause.