Rikki sells shares in Sparkling Spa Company to Telsa. Rikki does not deliver the actual
possession of the shares to Telsa, but gives her the key to a safety-deposit box in Unity
Bank in which the stock certificates are locked. Presenting the key is
a. accession.
b. constructive delivery.
c. confusion.
d. conversion.
Roald writes a check for $700 to Savannah. Savannah indorses the check in blank and
transfers it to Twitchell, who alters the check to read $7,000 and presents it to Union
Bank, the drawee, for payment. The bank cashes it. Roald discovers the alteration and
files a suit against the bank. Roald can recover
a. $7,000.
b. $6,300.
c. $700.
d. 0.
Jean Paul and Hermosa enter into a contract under which Jean Paul agrees to provide
greensward services for Hermosas Golf Links. Under an antidelegation clause, their
contract can prohibit and prevent the transfer of
a. duties that are personal in nature.
b. duties that are impersonal in nature.
c. no duties under the contract.
d. all duties under the contract.
McCoy enters into a contract to operate a Tasty Yogurt franchise, which Tasty agrees to
support as long as McCoy maintains his business license. Tastys duty to perform is
a. absolute.
b. conditional.
c. licentious.
d. operational.
Elise goes through an involuntary bankruptcy proceeding. An involuntary bankruptcy
occurs when
a. creditors are forced to accept a discharge of a debtors debts.
b. a debtor is unable to pay his or her debts as they come due.
c. a debtors creditors force the debtor into bankruptcy proceedings.
d. a debtors debts exceed the fair market value of his or her assets.
Fact Pattern 3-A3
Liz files a suit against Moe in a state court. The case proceeds to trial, after which the
court renders a verdict.
If Moe decides to appeal to a state appellate court, Moes attorney must file, with the
clerk of the trial court within a prescribed period of time
a. a formal refusal to abide by the verdict.
b. a notice of appeal.
c. a transcript of the trial and copies of the exhibits.
d. the judgment order from which the appeal is taken.
Genos Café orders five gallons of PureMaid-brand transfat-free olive oil from Chefs
Supply, Inc. Chefs mistakenly ships soy oil, which Genos keeps, despite the
nonconformity. The oil is destroyed in a fire. The loss is suffered by
a. all of the parties as tenants in common in equal measure.
b. PureMaid.
c. Genos.
d. Chefs.
Heidi and Ian are directors and shareholders of Globe Software, Inc. Heidis written
authorization to Ian to vote Heidis shares at a Globe shareholders meeting is
a. a violation of the duty of loyalty.
b. a preemptive right.
c. a proxy.
d. a quorum.
Payroll Services Company is a small business with ten employees. The regulations of
the Occupational Safety and Health Administration exempts
a. all small businesses.
b. businesses for whom penalties would be difficult to absorb.
c. businesses with fewer than fifteen employees.
d. no small businesses.
Drew tells his Excel Company coworkers that Fiona, Excels office manager, is stealing
from their employer. The statement is defamatory only if
a. a coworker believes it.
b. Fiona suffers emotional distress.
c. the statement is true.
d. the statement is false.
Agro Co-op, Inc., and Bio Feed Corporation are exporting firms that join together to
export a line of products. Agro Co-op and Bio Feed apply to Charter Bank for a loan to
fund their effort. Under federal law, Charter and other U.S. banks are
a. encouraged by credit guaranties to lend such funds.
b. discouraged by administrative rules to make such loans.
c. asked by enforcement agencies to report such requests.
d. banned by statute from opening such credit lines.
Suchins debt to Trixie is past due. Trixie obtains a judgment against Suchin to collect
the debt, but Suchin refuses to pay. Trixie asks the court to order the seizure and sale of
Suchins property. This is a request for
a. a guaranty (or suretyship) contract.
b. an order that would violate most states laws.
c. an order of receivership.
d. a writ of execution.
Childs Play, Inc., sells a toy with a dangerous defect. Drew buys the toy for his son but
discovers the defect before the child is injured. Drew files a suit against Childs Play.
The firms best ground for dismissal of the suit is that Drew does not have
a. certiorari.
b. jurisdiction.
c. standing to sue.
d. sufficient minimum contacts.
Begin Anew Enterprise, Inc., completes its registration process and issues a free-writing
prospectus. This tells prospective investors
a. about investing freely.
b. how to write their own prospectus.
c. that they can “freely write their own ticket to buy Begins securities.
d. that they may obtain the prospectus at the SECs Web site.
The Idaho Supreme Court rules against Jiffy Mart in a case against Kwik Stop Stores,
Inc. Jiffy Mart files an appeal with the United States Supreme Court. The Court does
not hear the case. This
a. is a decision on the merits with value as a precedent.
b. indicates agreement with the Idaho courts decision.
c. means nothing.
d. means that the Idaho courts decision is the law in Idaho.
Jim, an attorney, allows a statute of limitations to lapse on a claim by Midwest
Manufacturing Company, a client. Jim
a. can be held liable for malpractice.
b. has violated an ethical standard but cannot be held liable.
c. is subject to criminal penalties under the statute of limitations.
d. will be automatically disbarred.
Daisy writes a check to Elvita on her account at First Savings Bank. The bank dishonors
the check even though Daisy has sufficient funds in her account. The bank is
a. liable to Daisy.
b. liable to itself.
c. liable to the next payee on one of Daisys checks.
d. not liable.
Fact Pattern 25-1B
Belle obtains a check payable to her order from Charmayne. Belle signs the back and
adds the notation “without recourse.
Refer to Fact Pattern 25-1B. By writing “without recourse with her signature, Belle
a. avoids the risk of loss from theft of the instrument.
b. relieves herself from liability on the instrument.
c. converts the check into a nonnegotiable instrument.
d. locks the instrument into the bank collection process.
Kris transfers a note, on which Liu is the maker, to Mia, who takes it for value and in
good faith. Mia knows that Kris breached the contract underlying the note, giving Liu a
defense against payment. With respect to this note, Mia is
a. a knowledgeable holder in due course.
b. an ordinary holder.
c. an ordinary holder in due course.
d. an ordinary note taker.
Trina and Uri do business as Value Gems. In acting on the firms behalf in a deal with
World Diamond Exchange, Trina recklessly exceeds what Value Gems can afford to
pay, causing damage to the firm. Trina 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.
The payment of Dagmars debt to Evander is guaranteed by Dagmars personal property.
This is
a. a lien.
b. a secured transaction.
c. a real property mortgage.
d. a violation of most state laws.
Applied Business Corporation makes and markets its products nationwide. Under the
stakeholder approach, to be considered socially responsible when making a business
decision, Applied must take into account the needs of
a. its consumers, the community, and society only.
b. its employees and owners only.
c. its employees, owners, consumers, the community, and society.
d. no one.
Screen Perfect, Inc., and Vibrant View Stores enter into a contract for a sale of 3D HD
TVs with certain specifications. Screen Perfect ships TVs that are not 3D but otherwise
meet the specifications. Vibrant View
a. cannot reject the entire shipment.
b. can reject the entire shipment.
c. must accept the entire shipment.
d. must reject the entire shipment.
The idea for “On Your Mark, a computer game featuring racing cars, is protected by
a. copyright law.
b. patent law.
c. trademark law.
d. trade secrets law.
International Diversified Corporation (IDC) owns assets in Tagistan, a new country in
Asia. The government of Tagistan wants to nationalize all assets owned by foreign
firms and investors. What can IDC do? Can it at least obtain payment for the assets?
Dorothy eats a candy bar made and sold by Eastwich Candy Corporation and becomes
ill. Dorothy files a suit against Eastwich, alleging that the candy bar was not
merchantable. Merchantable food is food that is fit to eat on the basis of
a. consumer expectations.
b. what constitutes a perfect condition.
c. its makers intentions.
d. its producers experience.
Reba and Sly enter into a contract by which Reba promises to deliver newly printed
marketing brochures to Sly. Reba later transfers her duty under the contract to Troy.
Reba is
a. a delegator and an obligor.
b. a delegator only.
c. an obligor only.
d. neither a delegator nor an obligor.
The five shareholders of Orthopedic Ease, Inc., a medical equipment firm, want to
prevent each other from selling the shares to third parties without first being given the
opportunity to buy them. This can be provided for in
a. a shareholder agreement.
b. key-person insurance.
c. a private offering.
d. a public offering.
Mei writes a check to Nat in an amount that represents half of her debt to him. On the
back of the check, Mei includes the words “payment in full. Nat cashes the check. This
discharges the entire debt
a. if the debt is liquidated.
b. if the debt is past due.
c. if the debt is unliquidated.
d. under no circumstances.
Fresh Air Filter & Purification Company and Big Box Commercial Storage Company
enter into a long-term lease for a warehouse. To be enforceable, the lease must be in
writing if the amount of the rent payment is
a. more than $500.
b. more than $5,000.
c. more than $50,000.
d. any price.
Bob applies to City Insurance Company for homeowners insurance. City issues a pol-
icy, but later discovers that Bobs application includes several misstatements. Most
likely, these misstatements can
a. affect the coverage under the policy but cannot void the policy.
b. bind Bob but cannot affect the coverage.
c. not bind Bob or affect the policy.
d. void the policy.
E-Shopping Corporation inserts Fiesta Mall, Inc.s trademark as a meta tag in
E-Shoppings Web sites key-words field without Fiestas permission in a manner that
suggests Fiesta authorized the use. This is
a. copyright infringement.
b. patent infringement.
c. trademark infringement.
d. none of the choices.
Roc buys a farm from Steve, who claims that it would be a prime site for a housing
subdivision. Roc later learns that the law does not permit the land to be used for
housing. Roc may
a. not rescind the contract.
b. rescind the contract only if Roc did not know the law before the deal.
c. rescind the contract only if Steve knew about the law before the deal.
d. rescind the contract only if the law is not common knowledge.
Fact Patter 41-2A
Petro Drilling Corporation combines its assets and debts with those of Oil Refining
Company to form New Energy, Inc.
Refer to Fact Pattern 41-2A. The formation of New Energy is
a. a consolidation.
b. a share exchange.
c. a liquidation.
d. a merger.
International Exports, L.P., is a limited partnership, with $100,000 in declared but
unpaid profits. Internationals creditors include Friendly Credit Corporation for $5,000
and Gwen, one of Internationals limited partners, also for $5,000. When Harry, one of
Internationals general partners, decides to retire, the other general partners vote to
liquidate and dissolve the firm. The limited partners, who are not asked their opinions,
want International to continue in business and file a suit against the general partners to
compel this result. Can the court order International to continue? If not, what is the
priority of the distribution of Internationals assets on its dissolution?
Directors are entitled to use corporate funds for their personal advantage.
Every sale or lease by a merchant who deals in goods of the kind sold or leased
automatically gives rise to an implied warranty of merchantability.
A penalty provision specifies a certain amount to be paid in the event of a default or
breach of contract.
Dividends are distributed on the basis of possession of a stock certificate.
Restricting the bonuses that are paid to executives is unethical.
State agency regulations take precedence over conflicting federal agency regulations.
With a couple of new ideas regarding software design, Carol and Ray start a partnership
that, with business success, becomes Pacific Applications Company. The company
grows to include a staff of twenty-one employees. Over time, Pacific develops a new
computer operating system. The firm signs licensing contracts with several computer
manufacturers, but needs to double the number of its employees to fulfill those con-
tracts. Is Pacific subject to federal antidiscrimination laws? If so, what should it
consider in hiring new employees?
Expenses that are caused directly by a breach of contractsuch as those incurred to
obtain performance from another sourceare incidental damages.
When there is no surviving spouse or child, the next in the order of inheritance are the
grandchildren.
A reasonable, lawful, and effective meaning will normally be given to all of a contracts
terms.
In some states, in the absence of privity, a party cannot recover from am accountant.
If, before the time for contract performance, one party clearly communicates to the
other the intention not to perform, such an action is a breach of the contract.
Frenchys Fast Fries (3F) requires that its employees wear uniforms and protective
clothing while on the job. 3F provides a locker room for the employees to leave their
street clothes and personal items while working. A sign on the back of the locker room
door states, “Frenchys is not responsible for the loss of any property in the locker room.
Grant, a 3F employee, changes his clothes in the locker room before starting work and
leaves his wallet and watch in a pocket of his jacket hanging in his locker. When he
returns after his shift, the wallet and watch are gone. Does Grants leaving personal
items in the locker room constitute a bailment? If so, what type of bailment? If not,
what legal relationship is it? Does 3Fs sign exculpate the company for Grants loss?
Why or why not?
Under the UCC, the risk of los necessarily passes with title.
In a sale on approval, a buyer takes goods primarily for resale, with a right to return any
goods that fail to sell.
Negotiation traditionally involves just the parties to a dispute without their attorneys.
Apparent authority arises from what the principal makes clear to the agent.
Rescission is the substitution of one party to a contract for a third party, who agrees to
assume the contractual duties.
In most appealed cases, a trial courts decision is affirmed.