The payment of Edens debt to Flem is guaranteed by Edens personal property. This
property is
a. a secured party.
b. a secured transaction.
c. a security interest.
d. collateral.
Fact Pattern 20-1
Northeast Bank makes mortgage loans to consumers, including Mai, to buy homes.
Refer to Fact Pattern 20-1. For Mais loan, Northeast provides all required disclosures.
Mai has a right to rescind the mortgage
a. at any time.
b. under no circumstances.
c. within three business days.
d. within whatever period is most rational and appropriate.
Quin, an accountant, prepares for Reddy, Inc., a financial statement that omits a
material fact. The statement is included in Reddys registration statement with the
Securities and Exchange Commission. Timor, who reads the statement, and Ubi, who
does not, each buy Reddy stock. Velma reads the statement but does not buy the stock.
Under Section 11 of the Securities Act of 1933, Quin may be liable to
a. no one.
b. Timor and Ubi.
c. Timor, Ubi, and Velma.
d. Ubi only.
Nikita operates a sole proprietorship, a corporation, and a partnership. Nikita wants to
obtain relief for her individual debts and the debts of her corporation and partnership.
For each of these, Nikita may file a petition in bankruptcy for relief through
a. a liquidation.
b. a reorganization.
c. a repayment plan.
d. a family-farmer bankruptcy plan.
Beans Coffee & Cocoa Company makes and sells a chocolate-flavored coffee drink
under the name “CoCoCafe. Darkroast Java, Inc., later markets a similar tasting drink
under the name “KoKoKafe. This is most likely
a. copyright infringement.
b. patent infringement.
c. trademark infringement.
d. a theft of trade secrets.
Riley, a State Bank employee, deposits into his account checks that are given to him by
bank customers to deposit into their accounts. This is
a. embezzlement.
b. larceny.
c. money laundering.
d. no crime.
Commercial Shipping, Inc., and Dock Services Corporation enter into a contract for
Dock to load Commercials trucks for which Commercial agrees to pay Dock. Dock
transfers its duty to load the trucks to East Harbor Transport Company. Dock is
a. a delegator.
b. an assignor.
c. a payor.
d. a righter.
The brakes on a Coastal Railroad train malfunction and it rolls towards maintenance
workers on the tracks. Everyone gets out of the way except Dick, who wants to show
off. The train hits Dick, who sues Everest, Inc., the brakes manufacturer. Everest can
raise the defense of
a. a component-part manufacturer.
b. assumption of risk.
c. consumer participation.
d. product misuse.
Double D Ranch and Esau enter into a contract on August 1 for the sale of 200 cattle.
Esau cancels the contract ten days later. Double D is unable to sell the cattle to another
buyer. Double D is entitled to
a. force Esau to accept the cattle and recover the contract price.
b. keep the cattle and recover the contract price from Esau.
c. keep the cattle only.
d. recover the contract price from Esau but must destroy the cattle.
Pharma Company, Oral Meds Corporation, and Narco, Inc., are drug makers. Medico
Company and Lab Source, Inc., are drug distributors. In a suit against all of these
parties in which market-share liability is imposed, most likely to be liable are
a. neither the distributors nor the manufacturers.
b. the distributors and the manufacturers.
c. the distributors only.
d. the manufacturers only.
Flo-Thru Corporation is poised to issue securities that, under the Securities Act of 1933,
are “exempt. This means that the securities can be sold
a. on the basis of a material omission or misrepresentation.
b. on the basis of nonpublic information.
c. within any six-month period by certain insiders.
d. without being registered.
Mix-It Concrete Company has the right to enter Nims land and remove the rock from
Nims quarry. This is
a. a fee simple absolute.
b. a license.
c. an easement.
d. a profit.
Fact Pattern 11-2
Bell Medical Education Service enters into a contract to employ Chris as an instructor
for two years to begin May 1. One month before the term begins, Bell is underbid by a
competitor and loses a major client, Delta Hospital Center. Bell now refuses to hire
Chris.
Refer to Fact Pattern 11-2. Bells repudiation is most likely
a. a material breach.
b. a minor breach.
c. Chriss breach.
d. no breach.
Ralph, a van driver for Speedy Delivery Company, causes a multi-vehicle accident on a
city street. Ralph and Speedy are liable to
a. all those who were injured.
b. only those who were uninsured.
c. only those whose injuries could have been reasonably foreseen.
d. only those whose vehicles were closest to Ralphs van.
To assist in detecting illegal bribes, Cut Rite Contractors, Inc., and all U.S. companies,
must
a. conceal financial records that reveal past bribes.
b. keep records that “accurately and fairly reflect financial activities.
c. make bribes through third parties rather than directly to officials.
d. permit payments to foreign officials that are unlawful in that country.
Rig Heli-Pads, Inc., enters into a contract to employ Scott as an on-site project manager
for two years. If Rig breaches the contract, Scott has a duty to
a. do nothing.
b. reduce the damages that Scott might otherwise suffer.
c. rescind the contract with Rig.
d. punish Rig and set an example to deter others from similar acts.
Orin owns Pilots Landing Office Park. His ownership rights include the right to sell or
give away the property without restriction, as well as the right to commit waste, if she
chooses. Orins ownership interest is
a. a fee simple absolute.
b. a leasehold estate.
c. a life estate.
d. the power of eminent domain.
Before undergoing surgery that could cause death, Donnelly, a guitarist, gives his of
guitars to Cathy. The surgery is successful, and Donnelly does not die. The gift of the
guitars is
a. not revoked because it was a gift causa mortis.
b. not revoked because it was a gift inter vivos.
c. revoked because it was a gift causa mortis.
d. not revoked because it was a gift largesse.
Todos Ltd. agrees to supply United Steel, Inc., with minerals from Venezuela. When the
government is unexpectedly overthrown in a revolution, Todos can obtain the goods
only at a much higher price. United agrees to pay but later files a suit to recover the
difference. The court will most likely rule that
a. a change in government is a risk ordinarily assumed in business.
b. an unforeseen difficulty supported the contract modification.
c. Todos engaged in extortion or the so-called holdup game.
d. Todos had a preexisting duty to supply the goods at the initial price.
The payment of Joses debt to Klint is guaranteed by Joses personal property. The
process by which Klint can protect himself against the claims of third parties to this
property is
a. attachment.
b. communication.
c. perfection.
d. search and seizure.
According to the terms of Diegos will, specific gifts are made, and taxes and other es-
tate expenses and debts are paid. The assets of Diegos estate that remain are most likely
to be distributed
a. by codicil.
b. holographically.
c. per capita.
d. through a residuary clause.
Webline Retail Sales, Inc., promises its salaried employees a bonus at the end of the
year if management thinks it is warranted. This promise is
a. enforceable.
b. unenforceable because it is not supported by consideration.
c. unenforceable because the dollar amount is missing.
d. unenforceable because the employees are paid salaries.
Consumer Mortgage Loans provides Demi with a mortgage to buy a home. Under the
terms, Demi can choose to pay only the interest portion of the monthly payments and
forgo paying of the principal for five years. This is
a. a fixed-rate mortgage.
b. an adjustable-rate mortgage.
c. an interest-only mortgage.
d. a violation of the law.
Global Investments Corporation buys and sells securities. Section 10(b) of the
Securities Exchange Act of 1934 applies to
a. only the purchase or sale of a security involving misappropriation.
b. only the purchase or sale of a security involving short-swing profits.
c. only the purchase or sale of a security involving a tipper and tippee.
d. the purchase or sale of any security.
Pings debt to Oak Furniture Warehouse is past due. Oak obtains a judgment against
Ping, but Ping refuses to pay it. Oak asks the court for an order that directs the sheriff to
seize and sell any of Pings nonexempt real or personal property that is within the courts
geographic jurisdiction. This is a request for
a. a writ of execution.
b. a composition agreement.
c. an order that would violate most state laws.
d. an order of garnishment.
General Packaging Corporation, a U.S. employer, may hire Hilo, a noncitizen, if Hilo is
a. a lawful permanent resident of the United States.
b. an unlawful but hopefully permanent resident in the United States.
c. an unlawful but only temporary resident in the United States.
d. any of the choices.
Fact Pattern 17-2
Tom draws a check, on his account in State Bank in New York, payable to Digital
Media, Inc., in San Francisco. Digital deposits the check in its account at First National
Bank. First National deposits the check in the Federal Reserve Bank of San Francisco,
which transfers it to the Federal Reserve Bank of New York. That Federal Reserve Bank
sends the check to State Bank.
Refer to Fact Pattern 17-2. Toms bank is
a. the cashing bank.
b. the depositary bank.
c. the intermediary bank.
d. the payor bank.
Fact Pattern 10-2
Grover contracts to sell two tracts of land to Hank. Both parties believe that the two
tracts are adjacent, but in fact they are not. Grover is still willing to sell the land, but
under these circumstances the deal would adversely affect Hank.
Refer to Fact Pattern 10-2. The parties belief about the adjacency of the property is
a. a bilateral mistake.
b. a fraudulent misrepresentation.
c. a unilateral mistake.
d. unconscionable.
Grover Nut Company files a suit against Hud, its former accountant, alleging actual
fraud. Grover must prove
a. intent to deceive.
b. misrepresentation of a non-material fact.
c. the lack of an injury.
d. unjustifiable reliance.
Based on Nans conduct, Odel reasonably believes that Poppy has the authority to act on
Nans behalf even though Poppy does not have the actual authority to do so. In this
circumstance, Poppy has
a. apparent authority.
b. express authority.
c. implied authority.
d. no authority.
Eighty-year-old Clark exhibits confusion, forgetfulness, and disorientation. Dave,
Clarks doctor, believes that the symptoms indicate dementia. Elsa, who has significant
contact with Clark, believes that he is in a state of mental decline. These facts indicate
a. an urgency that Clark distribute his assets.
b. Clarks lack of capacity.
c. Daves misdiagnosis.
d. Elsas intent to take advantage of Clark.
Herb, a computer programmer for Inventory Control Corporation, is arrested in his
employers parking lot on suspicion of larceny. Herb must be informed of his right to
a. a trial by jury.
b. punishment.
c. question witnesses.
d. remain silent.
Gelato Ice, Inc., is incorporated in the state of New Jersey and is doing business in the
state of New York. In New York, Gelato is properly referred to as
a. a domestic corporation.
b. a foreign corporation.
c. an alien corporation.
d. a de jure corporation.
In mediation, the mediator proposes a solution that includes what compromises are
necessary to reach an agreement.
An offer must be practical to be effective.
An offer may invite an acceptance to be worded in such specific terms that the contract
is made definite.
Negative amortization occurs when the monthly payments are insufficient to cover the
interest due on a loan.
In many states, the plaintiffs negligence is a defense that may be raised in a product
liability suit based on strict liability.
A collective mark distinguishes products that are likely to be of interest to collectors.
An innocent party may seek damages for a fraudulent contract.
An alteration of an instrument is material if it changes the terms between two parties in
any way.
A person can insure anything in which he or she has an insurable interest.
Setting realistic workplace goals can reduce the probability that employees will act
unethically.
Constructive delivery does not satisfy the delivery requirement for an effective
bailment.
A misdemeanor is a crime punishable only by a fine.
The UETA does not create rules for e-transactions.
Accountants may be subject to criminal penalties for violations of federal securities
laws.
Express authority is authority declared in clear, direct, definite terms.
Under the Statute of Frauds, oral contracts are void.
A future advance against a line of credit must be of the same type as the original
advance to be subject to the same collateral.
Directors are rarely compensated, but when they are, they can set their own
compensation.