Sonic Board Corporation files a suit against Custom Fabricators Company, claiming
that the consideration for their contract is inadequate. The court will most likely not
examine the adequacy of the consideration if
a. there is a large disparity in the amount of consideration exchanged.
b. Sonic asserts that there is inadequate consideration.
c. something of value passed between the parties.
d. the consideration is worth less than $100.
Kirk Custodial Service and Green Energy Company enter into an oral contract under
which Kirk agrees to provide custodial service for Greens facilities for two years. This
contract is enforceable by
a. Kirk.
b. Green.
c. any interested third party, such as a janitorial supplies provider.
d. none of the choices.
Fact Pattern 39-1A
Mountaintop Clearview Corporation authorizes Niles, its employee, to oversee its
timber operation. In the course of his employment, Niles disposes of the operations
waste illegally. Orson is a Mountaintop shareholder.
Refer to Fact Pattern 39-1A. Liability for Niless act most likely rests with Orson to
a. no extent.
b. the proportionate extent of the number of shares Orson owns.
c. the amount of Orsons investment in the firm.
d. the full extent.
Frida hires Gert, a real estate broker, to act as her agent to sell her house. The house
burns down before being sold. The agency agreement is likely
a. still in force if Frida gives Gert additional consideration.
b. still in force if Gert does not tell prospective customers.
c. terminated by mutual consent of the parties.
d. terminated by operation of law.
Dirk is the maker of a note, on which Erv is secondarily liable. Friendly Credit
Company is the current holder of the note. Erv will be obligated to pay the note if
a. Dirk defaults on the note.
b. Friendly Credit breaches a transfer warranty.
c. Friendly Credit negotiates the note to a third party.
d. Friendly Credit presents the note for payment.
Molly shoots Norm with Opals pistol. The proximate cause of Norm being shot is most
likely attributable to
a. Molly and Opal.
b. Molly only.
c. Opal only.
d. neither Molly nor Opal.
Vidal files a suit against Spectator Sports World, Inc., to enforce a contract. The only
written evidence of the contract is a memo on Spectators letterhead signed by a
company officer. The contract can be enforced if the memo includes
a. a correct title, such as “Vidal-Spectator Contract.
b. the name and title of the person who signed the memo.
c. all essential terms.
d. a reference to the source of the funds for payment.
Niche Credit, Inc., is one of Cut-Rite Notching Corporations two major creditors. Niche
guarantees Cut-Rites debt to the firms other major creditor, Manufacturers Capital
Bank, to forestall litigation. To be enforceable, this guarantee
a. must be in writing.
b. need not be in writing if it benefits Niche Credit.
c. need not be in writing if it benefits Cut-Rite Notching.
d. need not be in writing if it benefits Manufacturers Capital Bank.
Betty pledges to donate $1,000 to the Childrens Hospital. On the basis of the pledge,
the hospital orders additional equipment. Betty reneges on the pledge. The hospital sues
Betty. If the court enforces the pledge, it will be
a. because Bettys performance is uncertain.
b. because of the unforeseen difficulties.
c. because the pledge is a gift.
d. under the doctrine of promissory estoppel.
Solar Power, Inc., files a suit against Thunder Bay Utility Company and seeks to
examine certain documents in Thunders possession. A legitimate reason for this
examination is that the documents contain
a. evidence about the case.
b. private information about Thunders operations.
c. public information about energy generation.
d. irrelevant data that can be eliminated from consideration.
Equity Company and Faye enter into a contract for Faye to cater a meeting of Equitys
shareholders. When Fayes schedule conflicts, she asks Gudren to serve Fayes coffee
and pastries at the meeting. This transfer of duties is
a. a delegation.
b. an assignment.
c. an alienation.
d. prohibited.
Shade Tree Lending Corporation advertises loans as fixed-rate loans but, in fact, their
rates or payment amounts will change. This is
a. a legal and ethicalbut morally arguablefinancial ruse.
b. a legalbut unethicalbusiness practice.
c. a necessary tactic to generate a profitable loan in todays market.
d. a violation of the law.
Reds Plumbing Service substantially performs its contract with Shady Grove
Condominiums, Inc. Shady Grove is entitled to
a. damages.
b. nothing more.
c. repudiation.
d. alteration.
Meals n More, Inc., a catering company, requires its customers to pay by check. Lyra, a
Meals n More driver, tells customers that they can pay her with cash. When Meals n
More learns of Lyras collections, it takes no action to stop it. Lyra steals some of the
cash. Meals n More may suffer the loss under the doctrine of
a. apparent authority.
b. express authority.
c. implied authority.
d. no authority.
Megan and Nicole do business as One World Realty. In acting on the firms behalf in a
deal with Property Acquisition Company, Megan fails to account for the profit. To her
firm, Megan is
a. liable for breach of the duty of care.
b. liable for breach of the duty of economic sense.
c. liable for breach of the duty of loyalty.
d. not liable.
A Fact Pattern 17-A2
Evelyn, who owns and operates Eves Farm & Garden Company, agrees to sell Hill &
Dale Produce, Inc., fifty bushels of apples.
When bad weather destroys Eves Gardens apple crop, the obligation to deliver apples to
Hill & Dale is
a. breached.
b. discharged.
c. not affected.
d. suspended.
Fact Pattern 32-1B
Liz and Molly work as clerks in Nias Dress Shop. Nia withholds federal taxes from
their pay, and controls the methods and details of the performance of their work. Liz
and Molly are not authorized to modify the prices or other terms of a sale at the shop.
Refer to Fact Pattern 32-1B. Nia hires OReillys Carpet Company to clean the carpets of
her shop. Nia gives OReillys instructions as to what needs to be cleaned and when.
OReillys is
a. an independent contractor.
b. Nias employee only.
c. Nias employee and agent.
d. Nias principal.
A federal statute regulates an employment practice. To resolve a dispute concerning the
practice, Paula, a judge, will most likely apply
a. a common law doctrine that applied before the statute was enacted.
b. a common law doctrine that applies to other, different practices.
c. Paulas personal philosophy of law.
d. the statute.
Mead, Nero, and Olen do business as Pipe & Stream Irrigation Services. After Meads
relationship to the firm ends, Nero and Olen agree to discontinue the business. This is
a. dissociation.
b. dissolution.
c. gross negligence.
d. simple misconduct.
The state of New York regulates private activities to protect or promote the public order,
health, safety, and general welfare under its
a. police powers.
b. taxing powers.
c. spending powers.
d. supremacy powers.
Stardust Coffee Company is a Texas-based firm that does business throughout the
world. Stardust manages retail and wholesale operations, buys and sells commercial
venues, undeveloped land, and coffee beans, and other goods. Stardust has had to deal
with employee and customer theft. With respect to these circumstances, the Uniform
Commercial Code (UCC) provides a framework for
a. commercial transactions for the sale of and payment for goods.
b. international distribution agreements.
c. domestic and foreign transactions in real estate.
d. prosecuting crimes against business interests.
Fact Pattern 37-2A
Luann and Mace are partners in Networx, a computer peripherals firm.
Refer to Fact Pattern 37-2A. Luann signs a contract with Oleo Chips, a retail
component supplier, apparently on Networxs behalf. The contract is binding on
a. Luann, Mace, and Networx.
b. Luann only.
c. Networx only.
d. Oleo only.
Matrix Material Corporation in New Jersey sells fifty tons of fabric to Natural Fit
Clothing, Inc., in Ohio, “F.O.B. New Jersey. Matrix arranges with Outbound Truckline
to transport the goods. The cost of the transport will be paid by
a. Matrix.
b. Natural Fit.
c. New Jersey.
d. Outbound.
Hopper wants to start Ice Rinx as a new business enterprise. Josh is an attorney. Hopper
most likely needs to consult Josh because
a. ignorance of the law is a defense against liability.
b. it adds credibility with potential investors and lenders.
c. keeping up with laws that govern business conduct is difficult.
d. managing accounts receivable and accounts payable is critical.
Jaime buys a home by paying part of the purchase price up front in cash and borrowing
the rest of the funds from Valley Credit Union. The part of the price paid up front in
cash is
a. a down payment.
b. a home equity loan.
c. a reverse mortgage.
d. the average prime offer rate.
Metal Smelting, Inc., operates a planta “major sourcethat emits hazardous air pollutants
for which the Environmental Protection Agency has set maximum levels of emission.
The plant does not use any equipment to reduce its emissions. Under the Clean Air Act,
this is most likely
a. a violation.
b. not a violation because a “major source is exempt.
c. not a violation because the plant does not use any equipment.
d. not a violation because the plant is not a mobile source.
Benny dies without a will, with no surviving spouse or child. Bennys survivors include
his granddaughter Callie, his nephew Doug, and his cousin Earl. In most states, his
estate would pass to
a. Callie.
b. Doug.
c. Earl.
d. the state.
Richman Manufacturing Company contracts to sell sweaters to Sweet Sweaters store.
Before the sweaters are delivered, Sweet Sweaters indicates that it will not be able to
pay. Richman can
a. force Sweet Sweaters to accept and pay for the sweaters.
b. require Sweet Sweaters to find a buyer for the sweaters.
c. resell the sweaters and recover any damages from Sweet Sweaters.
d. do nothing.
To raise capital to form Plasticity Corporation with Quinn, Rona sells bonds and stock
in other companies, and plans to register an initial public offering under the Securities
Act of 1933. SEC Rule l0b-5 covers
a. most forms of securities.
b. only bonds.
c. only securities registered under the Securities Act of 1933.
d. only stock.
Before dying from injuries suffered in a fall from a horse, Inez tells her cousin Juana
that on her death, Lysander is to be given possession of Inezs Rancho Mirage. In most
states, this oral “will would be
a. not permitted.
b. permitted.
c. solid.
d. valid.
Tariffs are taxes on exports.
A contract for a sale of software generally involves a passage of title from the seller to
the buyer.
Professionals are required to deliver competent services.
A general power of attorney permits an agent to transact all business for a principal.
A power of attorney can be special or general.
Accredited investors include banks, but not investment companies.
A failure to return personal property is conversion only if the rightful owner did not
consent to the initial taking.
To be enforceable, a contract for a sale of goods priced at $50 or more must be in
writing.
Employment laws do not apply to independent contractors.
Typically, the franchisee determines the territory to be served by the franchise.
Damages is a remedy at law.
The board of directors normally can remove a corporate officer at any time with or
without cause.
Parties are not generally free to bargain as they wish.
The Civil Rights Act of 1964 prohibits job discrimination against majority group
individuals, such as white males.
The board of directors of each corporation involved must approve a merger.