Fact Pattern 19-1
Echo takes her car to Fix-It, Inc., which repairs the car and bills Echo for $500. Echo
writes out a check drawn on Capital Bank, but later, believing that Fix-It did not repair
the car properly, issues a stop-payment order.
Refer to Fact Pattern 19-1. Capital Bank
a. is liable to Fix-It for the amount of the check.
b. must stop payment if Capital has a reasonable time to act.
c. need not stop payment unless Echo had a valid reason to act.
d. need not follow Echo’s order unless the check was certified.
Jayson and MaryElise enter into a contract. Jayson agrees to mow MaryElise’s yard
every week for the summer. MaryElise is the
a. obligor.
b. obligee.
c. assignee.
d. assignor.
Skyler dies after having made a valid will. Skyler has died
a. in escheat.
b. in probate.
c. intestate.
d. testate.
Ron signs an instrument using an “R” with a circle around it. With this mark for a
signature, the instrument is
a. negotiable.
b. nonnegotiable, because an initial does not state the signer’s name.
c. nonnegotiable, because an initial is not a signature.
d. nonnegotiable, because a simple initial implies a lack of binding intent.
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.
Ginny obtains a health-insurance policy for her family from Hope Insurance Company.
The policy includes an incontestability clause. Under such a clause, after a policy has
been in force for a specified period or time, such as two or three years
a. Ginny cannot contest Hope’s insurable interest.
b. Ginny cannot contest Hope’s refusal to pay a claim under the policy.
c. Hope cannot contest Ginny’s eligibility for continued coverage.
d. Hope cannot contest Ginny’s statements in the application.
Dylan enters into a contract to manage the operations of Cash’s accounting office for
one year, renewable for subsequent one-year terms. If this contract is discharged like
most contracts, it will be
a. breached.
b. rescinded.
c. altered.
d. performed.
Jamal signs a lease with Kelvin to occupy a house on Leech Lake in Minnesota for the
summer. Jamal’s tenancy is
a. a fixed-term tenancy.
b. a periodic tenancy.
c. a tenancy at sufferance.
d. a tenancy at will.
William owns a field where he grows cotton. When William sells the field to Grace, he
includes the cotton that is growing in the field. This sale is governed by
a. the Uniform Commercial Code.
b. common law.
c. real property law.
d. personal property law.
Mackenzie, an agent for Lindsay, signs an agreement with Kirk on Lindsay’s behalf but
neglects to tell her that the agreement requires the payment of a certain tax. The
government prosecutes Lindsay for failing to pay the tax. She is
a. liable, because notice to Mackenzie is notice to Lindsay.
b. liable, because notice to Kirk is notice to Lindsay.
c. not liable, because Mackenzie did not tell Lindsay about the tax.
d. not liable, because Kirk did not tell Lindsay about the tax.
Carol is married to Andy. Carol buys food for their children’s lunches and charges the
cost to Andy’s account. This is
a. an agency by operation of law.
b. an agency by estoppel.
c. an agency by ratification.
d. not the creation of an agency relationship.
Garth owns two all-terrain vehicles (ATVs), worth $1,000 and $500, respectively. Helen
agrees to buy “Garth’s ATV” for $750. Garth believes, in good faith, that he is selling
the $500 ATV. Helen believes, in good faith, that she is buying the $1,000 ATV. In this
situation
a. Garth is entitled to $750 for the $500 ATV.
b. Helen is entitled to the $1,000 ATV for $750.
c. Helen must buy both ATVs for $1,500.
d. there is no contract.
Lora files a suit in Michigan against Ned over the ownership of a boat docked in a
Michigan harbor. Lora and Ned are residents of Ohio. Ned could ask for a change of
venue on the ground that Ohio
a. has a sufficient stake in the matter.
b. has jurisdiction.
c. has sufficient minimum contacts with the parties.
d. is a more convenient location to hold the trial.
Shane’s Auto Parts orders twenty tires from Tough Tires, Inc. The truck delivering the
tires to Shane’s is in an accident and ten of the tires are damaged. Shane’s Auto Parts
a. cannot reject the entire shipment.
b. must still pay for all twenty tires at the original contract price.
c. may inspect the tires and accept the shipment with a reduction in price.
d. must reject the entire shipment.
Grace applies for a homeowner’ insurance policy on her house with Heroic Insurance
Company through Ian, a broker. In this transaction, Ian is
a. an agent for both parties.
b. Grace’s agent, and not Heroic’s agent.
c. Heroic’s agent, and not Grace’s agent.
d. not an agent.
Phil owns a farm in South Dakota. He does not like it when planes from the local
airport fly over his property. Phil is unlikely to win a case claiming that airplanes flying
over his land violate his property rights unless
a. the planes fly over more than twice a day.
b. he can prove there are more efficient routes for the planes to take.
c. the flights are low and frequent and cause direct interference with Phil’s enjoyment of
the land.
d. the planes belong to private individuals.
Filtration Products, Inc., files a suit against Emmett, its former accountant, alleging
constructive fraud. Emmett may be held liable
a. if Filtration cannot prove actual fraud.
b. if Emmett was grossly negligent in the performance of his duties.
c. only if Emmett acted with fraudulent intent.
d. only if Emmett impersonated someone else who could be liable for fraud.
Cold Stuf, Inc., makes snowboards, which it sells to Deep Freeze Sports Store (DFS).
DFS sells Cold Stuf boards to consumers, including Ed. Ed is injured while using the
board. In a product liability suit based on strict liability, Ed may recover from
a. Cold Stuf only.
b. Cold Stuf or DFS.
c. DFS only.
d. no one.
Trek Transport Company uses a mark associated with its name to distinguish its
services from those of other trucking firms. This mark is
a. a certification mark.
b. a collective mark.
c. a service mark.
d. a trade name.
Like the bylaws of other corporations, the bylaws of Retail Sales, Inc.,
a. establish the operating name of the corporation.
b. establish the value and classes of corporate stock.
c. were adopted at its first organizational meeting.
d. were submitted for approval to the public official in charge.
Cluckee Chickn Corporation provides its prospective franchisees with projected
earnings figures based on actual data. Cluckee Chickn must also disclose
a. the number and percentage of franchisees that achieved the figures.
b. hypothetical examples of potential earnings.
c. an answer to the entrepreneur’s question, “How much will I make?”
d. none of the choices.
Marco and Fred enter into a contract for the sale of Marco’s apartment for which Fred
agrees to pay him $100,000. Marco cannot prohibit Fred from transfering his right to
the ownership of the apartment because such a prohibition is
a. against public policy.
b. immoral.
c. unconscionable.
d. a crime.
Jonah tells Levi he will give him an Xbox if Levi does Jonah’s chores for a month. Levi
promises to do the chores. Jonah and Levi have formed a
a. bilateral contract.
b. unilateral contract.
c. void contract.
d. unenforceable contract.
Geoff serves in a representative capacity for Huck. To accomplish the objectives of this
relationship, Geoff’s authority can be implied
a. by contradiction.
b. by custom.
c. by lack of reason.
d. under no circumstances.
Bruno is an accountant. Under the Sarbanes-Oxley Act, the degree of government
oversight over the public accounting practices of Bruno and other accountants was
a. decreased.
b. increased.
c. eliminated.
d. unchanged.
Dani is considering forms of business organization for her financial advisory firm. Like
most states, Dani’s state requires that to form a limited liability company, she must file
with a central state agency
a. articles of certification.
b. articles of formation.
c. articles of organization.
d. no specific documents.
Instead of setting up a business to market her own products, Krissy considers entering
into a distributorship franchise with Little Breweries Corporation. This involves the
transfer of
a. a license.
b. a trade name.
c. the formula to make a certain product.
d. the ownership of the business.
Jean buys a bike from Mike’s Bike Shop. She wants to make sure that there is a
warranty of title. Jean
a. does not need to do anything because warranties of title arise automatically in most
sales contracts.
b. must request a written warranty of title.
c. must request an oral warranty of title.
d. must request both a written and an oral warranty of title.
Jane develops a new color of lipstick. To market her lipstick, Jane uses a computer
design program to show a famous model using Jane’s lipstick. Jane does not ask the
model’s permission. The model can sue Jane for
a. battery.
b. fraudulent misrepresentation.
c. defamation.
d. appropriation.
The government of Japan sets a limit on the amount of rice that can be imported from
the United States. This is
a. a dumping duty.
b. an antidumping duty.
c. a quota.
d. a tariff.
The legality of an action is always clear.
Odiferous Waste Company is a subsidiary of Precarious Investments, Inc. Odiferous op-
erates a hazardous waste disposal site. QuikChem Corporation is one of many parties
who generate waste disposed of at the site. Odiferous borrows money from Regal Bank,
which takes over the site when Odiferous goes bankrupt. The Environmental Protection
Agency discovers a leak at the site. Can any of these private parties be forced to pay for
the clean up? If so, who?
The duration of a franchise is a matter to be determined between the parties.
A forged indorsement does not transfer title.
A limited liability company must be managed by its members.
An agency relationship can only be formed with a written agreement.
According to German philosopher Immanuel Kant, individuals should evaluate their
actions in light of the consequences that would follow if they were the only members of
society that acted in that way.
In most situations involving sales, rights and liabilities are determined by who has the
title to the goods.
If a buyer breaches a contract while the seller is still in possession of the goods, the
seller can resell the goods and hold the buyer liable for any loss.
An employer may avoid laws regulating monitoring activities by informing employees
that they are subject to monitoring.
A party seeking to recover compensatory damages cannot also recover incidental
damages.
Under the Electronic Signatures in Global and National Commerce Act, a signature may
not be denied legal effect solely because it is in electronic form.
Accountants and other professionals may not be held liable for negligence in the
performance of their service.
The mirror image rule requires an acceptance to adhere exactly to an offer to create a
contract.
Real estate brokers are independent contractors.
In most cases, an offeror can revoke an offer as long as the revocation is communicated
before the offeree accepts.
The public disclosure of private facts about a person is an invasion of privacy.
A franchisee normally pays an initial lump sum for a franchise license.