A contract must be in writing to be enforceable unless its performance is impossible
within one year.
A mistake of fact can only be bilateral.
Any third party beneficiary to a contract who is not an intended beneficiary is
incidental.
The four broad types of damages in contract law are conciliatory, consecutive, punctual,
and nominative.
Most employees can continue the group health benefits provided by their employers for
a limited period of time after the loss of employment.
A “sale” of software generally involves a right to use the software and a passage of
ownership rights in the software to the buyer.
Whether a contract’s limitation-of-liability clause will be enforced depends on the type
of breach that the clause excuses.
Damages are designed to punish a breaching party and deter others from similar
conduct.
At a criminal trial, the burden of proof is on an accused person to prove his or her
innocence.
Sales of securities must occur within five days of registration.
An accountant is not liable for a misstatement to a purchaser of securities who knew of
the misstatement but invested anyway.
When an instrument has a forged indorsement, the loss usually falls on the first party to
take the instrument.
Under rules of professional misconduct, an attorney should not engage in conduct
involving deceit.
Real estate sales contract are often made contingent on the buyer obtaining financing.
A contract may include a clause stating that no damages can be recovered for a certain
type of breach.
For purposes of establishing negligence, causation in fact exists if an injury would have
occurred even without the defendant’s act.
A free-writing prospectus may be used before the Securities and Exchange Commission
completes its review of a related registration statement.
Under the “danger invites rescue” doctrine, a person who tries to rescue another
individual from harm is liable for any injuries to the individual.
An e-contract must meet the same basic requirements as a paper contract.
A trademark must be registered to support a trademark infringement action.
If goods identified to a contract are destroyed through no fault of either party, both
parties are excused from performance.
The First Amendment requires a complete separation of church and state.
Generally, a corporation that purchases the assets of another corporation is
automatically responsible for the liabilities of the selling corporation.
If a buyer wrongfully refuses to accept goods that conform to a contract, the seller may
recover damages.
The possession of land without right is a tenancy at will.
Forbearance is a process that allows a lender to legally repossess and auction off the
property securing a loan.
Professionals are obligated to adhere to standards of performance generally accepted
within their profession.
Express authority is authority declared in clear, direct, definite terms.
Common law is a term for the law that is known to most of us.
Limited liability companies (LLCs) are governed by state LLC statutes.
A sole proprietor has unlimited liability for all obligations that arise in doing business.
A security interest is enforceable only if the collateral is in the secured party’s
possession.
Computer fraud is a state, not a federal, crime.
To be enforceable, a memorandum evidencing an oral contract that would otherwise be
unenforceable must include all essential terms.
A guarantor can be required to pay an obligation only after the principal debtor defaults.
Under the Sarbanes-Oxley Act of 2002, accountants must retain working papers
relating to an audit or review for a certain period of time.
Criminal law focuses on duties that exist between persons.
Express warranties displace all inconsistent implied warranties.
Delia refuses to pay Ewing $500 in cash on their contract to repair certain theater sets,
which Ewing still possesses. Ewing’s lien on the sets will terminate
A.if Ewing continues to maintain possession.
B.if Ewing does not file a written notice of lien within thirty days.
C.if Ewing voluntarily surrenders possession.
D.within thirty days.
Orin claims that a Pennsylvania state statute infringes on his “substantive due process”
rights. This claim focuses on
A.procedures used to make decisions to take life, liberty, or property.
B.the content of the statute.
C.the similarity of the treatment of similarly situated individuals.
D.the steps to be taken to protect Orin’s privacy.
In Harley’s suit against Irma, the parties meet before going to trial, and each party’s
attorney argues the party’s case before the other party. A third party renders an opinion
as to how a court would likely decide the dispute. This is
A.a mini-trial.
B.arbitration.
C.a summary jury trial.
D.early neutral case evaluation.
Fact Pattern 10-3
Odell and Paula sign a contract for the sale of Odell’s Pizza Parlor to Paula. The parties
intend their written contract to be a final statement of most, but not all, of the terms of
their agreement-Odell must first buy the building from Quin, after which Odell and
Paula will negotiate a final price.
Refer to Fact Pattern 10-3. The writing that Odell and Paula signed is
A.a completely integrated contract.
B.a conditionally integrated contract.
C.a partially integrated contract.
D.a supplementally integrated contract.
Arnie posts online a note that “I have good pix of child & me” with a link to several
pictures of minors engaged in sex. Arnie is charged with violating a statute that makes it
a crime to distribute material intended to make others believe it is child pornography.
He argues that the statute is unconstitutional. The court is most likely to hold that the
statute is
A.unconstitutional because it criminalizes speech.
B.unconstitutional because it is overbroad.
C.unconstitutional because it is impermissibly vague.
D.valid because it does not prohibit a substantial amount of protected speech.
Copy Products, Inc., uses, in its ads, a trademark that is similar, but not identical, to the
famous, registered mark of Imitated Goods, Inc. Copy’s unauthorized use of the mark
constitutes trademark dilution provided
A.consumers are confused.
B.Copy and Imitated are competitors.
C.Copy’s use is intentional.
D.Copy’s use reduces the value of Imitated’s mark.
Noah and Orin do business as Pest Control Partners. In most states, for the purposes of
suing and being sued, Pest Control Partners would be treated as
A.an aggregate of the individual partners.
B.a natural person.
C.an entity.
D.a non-existent party.
Emil wants to initiate a suit against Fast Credit Company by filing a complaint. The
complaint should include
A.an explanation of the proof to be offered at trial.
B.a motion for judgment n.o.v.
C.a motion for judgment on the pleadings.
D.a statement of the grounds for the court to exercise jurisdiction.
Rural Development Corporation (RDC) and Smike enter into a contract for the
clear-cutting of RDC’s fifty-acre tract for which RDC agrees to pay Smike. Smike
transfers his duty to log the tract under the contract to Timber Logging Company.
Timber is
A.a delegatee.
B.an assignee.
C.an obligee.
D.a prohibitee.
Ewa is a shareholder of Farm Fresh Foods, Inc., whose management is considering a
tender offer by Growers Market Corporation. Ewa elects appraisal rights. This affects
A.Farm Fresh’s consideration of the offer.
B.Ewa’s shareholder status.
C.Growers Market’s offer.
D.nothing.
Standard Corporation can not claim a trademark in the phrase “Quality Is Standard” if
the phrase
A.has a secondary meaning.
B.is descriptive.
C.is generic.
D.means nothing.
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.
Fact Pattern 28-1
Nika owns land in Ohio. Her ownership rights include the right to sell or give away the
property without restriction, and the right to commit waste, if she chooses.
Refer to Fact Pattern 28-1. Nika deeds some of her land to Polly. The deed states, “To
Polly, for life, then to Quay.” Nika has given Polly
A.a fee simple absolute.
B.a leasehold estate.
C.a life estate.
D.an easement.
Ike pushes Joan, who falls and breaks her arm. Ike is liable for the injury
A.if Ike intended to push Joan.
B.only if Ike did not intend to break Joan’s arm.
C.only if Ike had a bad motive for pushing Joan.
D.only if Ike intended to break Joan’s arm.
Delta, Inc., agrees to assume a debt of Excel Company to First State Bank. The
agreement is not in writing. To be enforceable, the promise must be for the benefit of
A.any party.
B.Delta.
C.Excel.
D.First State.
Fact Pattern 24-2
Bertram, Claudia, and Dynah form Eat Local, Inc., a closely held corporation, and agree
to restrict the transfer of its stock to anyone else. The agreement provides that if one of
the shareholders dies, his or her shares of stock in Eat Local will be divided to maintain
the proportionate control of the survivors.
Refer to Fact Pattern 24-2. A reasonable purpose for a stock transfer restriction in a
closely held corporation, like the agreement between Bertram, Claudia, and Dynah, is
A.a desire to limit the participation of outsiders in the firm.
B.a goal to restrain insiders from taking advantage of their position.
C.an attempt to restrain the free flow of commerce among investors.
D.a wish to restrict the transfer of the shareholders’ physical assets.
Rita believes that Shady Grove Apartments, Inc., her landlord, has violated the law in a
way that entitles her to withhold the rent. This remedy is generally associated with
A.breach of the covenant of quiet enjoyment.
B.breach of the implied warranty of habitability.
C.discrimination.
D.failure to provide security against crimes in common areas.
Office Company and Keen Company wish to combine all assets, stock, and personnel
into a new firm to be called OK Corporation. This is
A.a consolidation.
B.a merger.
C.a share exchange.
D.a takeover.
Under Ohio’s state constitution, the Ohio Environmental Protection Agency issues a
new rule, the Polk County Commission approves a new property tax measure, and the
professors and students at Ohio Law School publish the results of their most recent
legal research. Sources of law do not include
A.the measures approved by local governing bodies.
B.the results of legal scholars’ research.
C.the rules issued by state administrative agencies.
D.the states’ constitutions.
Clay offers to pay Dot $50 for a golf lesson for Eula. They agree to meet the day after
tomorrow to exchange the cash for the lesson. These parties have
A.a bilateral contract.
B.a trilateral contract.
C.a unilateral contract.
D.no contract.
Mona contracts to repair a computer for NuData, Inc. (NDI). Mona knows that without
the computer, NDI will lose a sale. Mona does not perform as promised. NDI files a suit
against Mona. As consequential damages, NDI can recover
A.the cost of a new computer.
B.the difference between Mona’s price and the actual cost of repair.
C.the loss of profit from the lost sale.
D.nothing.
KupaJava hires Lola to manage one of KupaJava’s seven drive-through coffee stands.
KupaJava agrees to pay Lola a salary, plus commission. KupaJava stipulates the
standards that should be observed, the goals that should be attained, and the methods
that should be used. Lola is most likely KupaJava’s
A.employee.
B.independent contractor.
C.principal.
D.work for hire.
In the facts in the previous question, if the CDs are seen as the property of Heidi and
Irene, the sisters are most likely
A.joint tenants.
B.tenants at sufferance.
C.tenants by the entirety.
D.tenants in common.
Whit is a director of Vids Corporation. With respect to policymaking decisions
necessary to the management of corporate affairs, Whit and the other Vids directors
have responsibility for
A.all of the decisions.
B.only the decisions referred to them by the shareholders.
C.only the decisions referred to them by the officers.
D.none of the decisions.
Kailin owns a farm near Manhattan, Kansas, with a farmhouse, barn, and other
structures permanently attached. Kailin grows soybeans on the property. A pond lies
within the boundaries. Land includes
A.the pond, the soil, and the structures.
B.the pond and the soil only.
C.the soil only.
D.the structures and the soil only.
Dwayne can be described as “a reasonably competent general practitioner of ordinary
skill, experience, and capacity.” This is the normal standard for judging the performance
of
A.a client.
B.an accountant.
C.an attorney.
D.a tax preparer.
Through fraudulent means, Fred induces Gail to sign a contract to build resort cabins on
land that Fred does not own. Gail performs, but Fred does not pay. When Gail learns the
truth, she may
A.do nothing with respect to the contract.
B.recover for the performance or its value.
C.recover for the performance only.
D.recover the value of the performance only.
Curtis enters into a contract with Drive-Away Lease Company for a three-year lease of
a car. This contract is subject to
A.Article 2 of UCC.
B.Article 2A of the UCC.
C.Article 11 of the CISG.
D.the common law only.
Sudan seizes the assets of Triage Medical, Inc., a U.S. firm. Triage’s recovery from
Sudan in a U.S. court may be prevented by
A.the act of state doctrine.
B.the doctrine of sovereign immunity.
C.the Foreign Corrupt Practices Act.
D.the principle of comity.
Fanny buys clay to throw pottery, which is glazed and fired in a kiln. The finished
products are sold to Gifte Shoppe, which sells these items and others to customers who
often present them as gifts. Thus, property can be acquired in various ways. The most
common way to acquire personal property, however, is to
A.buy it.
B.commingle it.
C.produce it.
D.receive it as a gift.
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.
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.
Kelly, Lars, and Mona agree to be partners in Neighborhood Delivery Service (NDS),
splitting the profits equally. Kelly contributes 67 percent of the capital. When NDS is
dissolved, its liabilities are greater than its assets. The losses are paid by
A.all of the partners in proportion to their capital contributions.
B.all of the partners in proportion to their shares of the profits.
C.Kelly because she contributed most of the capital.
D.Lars and Mona because they contributed the least of the capital.
Drew contracts to sell a residential duplex to Evan. The contract provides that if Drew
does not close the deal by September 15, he must pay Evan one-half of the contract
price. This provision is not enforceable because it is
A.a liquidated damages clause.
B.a mitigation clause.
C.a nominal damages clause.
D.a penalty clause.
Ewa, the owner of Face-2-Face Enterprises, is a sole proprietor. What are the chief
characteristics, advantages, and disadvantages of this form of business organization?
Ewa wants to obtain additional capital to expand Face-2-Face, but she does not want to
lose control of the firm. As a sole proprietor, what is her best option to attain these
goals?
Incredible eSales Corporation is a new Internet business. How can Incredible eSales
obtain capital to finance its operations?
Precise Engineering Corporation has a contract with Quik Mart Stores to provide
customized software for Quik’s inventory control system. Retail Outlets, Inc, Quik’s
competitor, induces Sam, a Precise subcontractor who is writing code for the Quik
software, to delay delivery of the code for one week. As a result, Precise’s delivery of
the software is delayed, and Quik sustains $500,000 in lost profits. On what ground
could Quik recover damages from Retail Outlets?
Current City (CC) is a retail seller of television sets. CC sells Dhani a $5,000
large-screen, high-definition, plasma set on a retail installment security agreement in
which he pays $100 down and agrees to pay the balance in equal installments. CC
retains a security interest in the set, and perfects that interest by filing a financing
statement centrally. Two months later, Dhani is in default on the payments to CC and is
involuntarily petitioned into bankruptcy by other creditors. Discuss CC’s right to
repossess the TV set and whether CC has priority over the trustee in bankruptcy to any
proceeds from the disposal of the set.
Brie is a student at Collegiate University. In need of funds to pay for tuition and books,
Brie asks Dependable Bank for a short-term loan. The bank agrees to make a loan if
Brie will have someone who is financially responsible guarantee the loan payments.
Esperanza, a well-known businessperson and a friend of Brie’s family, calls the bank
and agrees to pay the loan if Brie cannot. Because of Esperanza’s reputation, the loan is
made. Brie is making the payments, but because of illness she is unable to work for one
month. She asks Dependable extend the loan for three months. The bank agrees, raising
the interest rate for the extended period. Esperanza is not notified of the extension (and
thus does not consent to it). One month later, Brie drops out of school. All attempts to
collect the remainder of the loan from Brie fail. Can Dependable assert a claim against
Esperanza on the debt?
Signal Sets Company contracts to deliver one hundred 52-inch plasma high-definition
television sets to a new retail customer, Tuner TV Store, on May 1, with payment to be
made on delivery. Signal tenders delivery in its own truck. Tuner’s manager notices that
some of the cartons have scrape marks. Tuner’s owner phones Signal’s office and asks
whether the sets might have been damaged as they were being loaded. Signal assures
Tuner that the sets are in perfect condition. Tuner tenders Signal a check, which Signal
refuses, claiming that the first delivery to new customers is always for cash. Tuner
promises to pay the cash within two days. Signal leaves the sets with Tuner, which
stores them in its warehouse pending its “Grand Opening Sale” on May 15. Two days
later, Tuner’s stocker opens some of the cartons and discovers that a number of the sets
are damaged beyond ordinary repair. Signal claims Tuner has accepted the sets and is in
breach by not paying on delivery. Will Signal succeed on these claims? Explain.
Sierra borrows $175,000 from Regional Home Finance Corporation to buy a home. The
loan is a twenty-year, 3/1, adjustable-rate mortgage, with an initial interest rate of 4.0
percent for three years and potential increases of up to 3.0 percent to a cap of 11.0
percent. Before the loan is completed, the lender discloses the amount of the loan
principal, the initial interest rate, the initial annual percentage rate, and associated fees
and costs. Not disclosed are material details about the amounts of the payments when
the interest rate changes. Before the first increase takes effect, Sierra decides that she
wants to rescind the loan. What is a “twenty-year, 3/1, adjustable-rate mortgage”? Can
Sierra rescind this loan? Why or why not?
After two years of research and an investment of a substantial amount of money,
Coast-to-Coast Company (CC) develops a new product that it hopes will produce
substantial profits. CC learns that a competitor, National Sales, Inc., has made and
begun to sell a nearly identical product. CC learns from a reliable source that National
paid a CC employee to obtain the plans for CC’s product when it was in development.
What legal recourse does CC have against National?
Bowie, a certified public accountant, prepares and certifies Candy Products
Corporation’s financial statements. These statements are included in Candy’s
registration statement filed with the Securities and Exchange Commission before
Candy’s offering of securities. Dona buys a security covered by the registration
statement. Based on this transaction, Dona files a suit against Bowie under Section 11
of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934.
To succeed in the suit, what must Dona prove? Bowie responds that Dona was not in
privity with him and that even if she had been in privity, she cannot prove his lack of
due diligence. Can Bowie prevail on these grounds? Why or why not?
Cody signs and returns a letter from Dora, referring to Dora’s Double-D Ranch and its
price. When Cody attempts to complete the deal, Dora refuses, claiming that they have
no contract. Cody claims they do. What standard determines whether these parties have
a contract?
Andy leases to Burgertown Franchise Corporation a 10,000 square-foot building under
a written lease with a twenty-year term, rent payable annually. The lease includes a
clause stating that Burgertown is responsible for making all necessary repairs, including
rebuilding the structure after its destruction by any cause beyond Andy’s control. The
lease does not include a clause concerning its assignment. One day after the tenth rental
payment, Burgertown, without Andy’s knowledge or consent, assigns its interest in the
lease to Chicken Hut Restaurants, Inc. Meanwhile, Andy dies and Dotty inherits Andy’s
interest in the building. Without the knowledge or consent of either Burgertown or
Chicken Hut, Dotty sells the building to Earnest Investments, Inc. The next month, the
building is destroyed in the flood of a nearby river. Burgertown rebuilds it and files a
suit against Earnest for the expense. Earnest responds that the lease has terminated. Is
Earnest correct? If so, when did the lease terminate? If not, is Earnest liable for the cost
of rebuilding the structure? Why or why not?
Frenchy’s 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, “Frenchy’s 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 Grant’s leaving
personal items in the locker room constitute a bailment? If so, what type of bailment? If
not, what legal relationship is it? Does 3F’s sign exculpate the company for Grant’s
loss? Why or why not?
In State X, persons must be at least eighteen years old before they can purchase
alcoholic beverages. The state also has passed a law requiring that persons who prepare
and serve liquor in the form of drinks in commercial establishments be licensed. The
only requirement for obtaining a yearly license is that the person be at least eighteen
years old. Moffitt, aged thirty-five, is hired as a bartender for Lone Star Restaurant.
Bekins, an alumnus of State X University, brings twenty of his friends to the restaurant
to celebrate State X U’s football victory. Bekins orders four rounds of drinks, and the
bar bill exceeds $200. When Bekins learns that Moffitt has failed to renew his
bartender’s license, Bekins refuses to pay, claiming the contract is unenforceable. Is
Bekins correct? Explain.
Waterfront Hotels Corporation in Boston offers a job to Carol, who lives in Denver.
Carol orally agrees to work for Waterfront for two years. She moves her family to
Boston and begins work. Three months later, she is fired for no stated cause. She files a
suit against the employer for reinstatement or pay. Waterfront pleads the lack of a
written contract. In whose favor is the court likely to rule, and why?
Susan is the president of United Food Corporation, a wholesale grocery company. An
inspection by Tim, a government agent, uncovers unsanitary conditions caused by Val, a
United employee, in the United warehouse. Will, a United vice president, assures Tim
that the situation will be corrected, but nothing is done, which a later inspection reveals.
Susan knows nothing about any of this. Can United be convicted of a crime in these
circumstances? Can Susan be held personally liable?
Pam borrows $5,000 from Quality Auto Sales to buy a car. When Pam does not pay the
loan or return the car, Quality wants to transfers the right to the payment to Rapid
Collection Agency. Rapid agrees to pay Quality for this right, but for a price that is less
than the amount owed. Can Quality transfer this right to Rapid without Pam’s consent?
If so, and Quality committed fraud in the deal with Pam, could Pam legitimately refuse
to pay Rapid? Explain.
Efrem owns Fans & Players, a retail sporting goods shop. When Great Hill Lodge, a
new ski resort, is built in the area, Efrem decides to expand and borrows a large sum
from Hometown Bank. The bank takes a security interest in Efrem’s present inventory
and any after-acquired inventory as collateral for the loan. The bank properly perfects
the security interest by filing a financing statement. Efrem’s business is profitable, and
he begins doubling his inventory. A year later, an avalanche destroys the ski slope and
lodge. Efrem’s business takes a turn for the worse, and he defaults on his debt to the
bank. The bank seeks possession of his entire inventory, even though the inventory is
twice as large as it was when the loan was made. Efrem claims that the bank has rights
to only half of his inventory. Is Efrem correct? Explain.
Healthy Harvest Company runs a candy and fruit processing and packaging plant. Most
of Healthy Harvest’s business is done during holiday seasons, especially between
Halloween and New Year’s Day, and in the spring. The company hires a large temporary
workforce during its busiest times. Occasionally, a position opens for an individual with
highly specialized skills, particularly to operate and maintain the company’s inventory
and sales control systems. Can Healthy Harvest hire noncitizens for its temporary,
seasonal work? Can the company hire a noncitizen with special skills for certain jobs?
If so, what procedures must the employer follow in both situations to do this hiring? If
not, how can Healthy Harvest be assured that it is hiring only citizens?
National Drilling Company ships its only pump to American Hydraulics Corporation,
the manufacturer, for repair. National hires Overland Transport, Inc., to take the pump
to American Hydraulics and to return it to National as soon as the repair is complete.
National is forced to suspend operations without a pump, but Overland does not know
this. National expects to be without the pump for five days and to lose profits of $5,000.
When the pump is not returned by the end of the fifth day, National rents a pump at a
cost of $100 per day. Overland delays five more days before returning the pump.
National files a suit against Overland, asking for compensatory, consequential, and
punitive damages. Will National recover?
Umberto and Tiara, who are married, borrow $110,000 from Sterling Credit Union to
buy a home. The loan is a fixed-rate mortgage at 5.25 percent with a thirty-year term,
subject to an acceleration clause, and secured by the home, which is their principal
residence. When Umberto and Tiara have paid off $10,000 of the mortgage-still owing
$100,000-they lose their jobs and stop making payments. Sterling Credit makes
numerous attempts to contact the couple, but they do not respond. Meanwhile, the
market value of their home has declined to $85,000. After six months, Sterling Credit
decides to take steps to recover the unpaid amount of the loan. What are the lender’s
options? Which option seems most likely? Why? What are the steps are involved?