David has worked as a CPA for Accountants R Us for about eight months. When his
wife had a baby, he requested to take some time off. He believes he is allowed to do so
pursuant to the Family and Medical Leave Act.
Abbott provided evidence of fraudulent financial reporting about his employer, a
publicly traded company, to federal securities investigators. Abbott receives
whistleblower protection under:
a. the U.S. Constitution.
b. The Sarbanes-Oxley Act.
c. The Civil Service Reform Act.
d. None of the above.
Bob, a weak swimmer, ignored warning signs in a recreational swimming area and went
into deep water. He soon grew tired and realized that he could not make it back to
shore. Seeing Kelly, he cried out for help. Kelly, however, ignored the pleas. Bob was
finally saved by Dorothy, but suffered brain damage from being submerged during the
ordeal. Bob now sues Kelly for negligence for failing to try to save him. Bob will:
a. prevail because society places a duty on people to help each other and Kelly breached
this duty, resulting in Bob’s injury.
b. lose because Kelly had no legal duty to rescue him.
c. lose even though Kelly had a legal duty to save him, since Bob will not be able to
prove that Kelly’s failure to act was the proximate cause of his injuries.
d. lose because a reasonable person could not have foreseen that someone in a
recreation area could not swim well.
In which of the following situations is the seller a merchant under Article 2 of the
UCC?
a. Paul, a full-time college student, sold his textbooks to State Bookstore.
b. Randall, a part-time college student and full-time father, sold his textbooks to a
friend.
c. Zompa Inc., a toy manufacturer, contracted to sell dolls to TonTon Department Store.
d. In all of the above situations the seller is a merchant.
A contract most likely will be declared unconscionable if:
a. it is unbalanced, making it unfair to one party.
b. it contains a cancellation clause.
c. it is oppressive and the weaker party did not fully understand the consequences of the
agreement.
d. it is signed by a minor for an item of luxury.
The European Union
a. Eliminated travel restrictions between member nations
b. Sets union wide standards for trade restrictions.
c. Has a common currency that not all countries have adopted.
d. All of these answers are true
The United States v. Lopez case demonstrates which of the following?
a. There are no limitations on the federal government’s power pursuant to the Interstate
Commerce Clause.
b. The extensive power of the states to regulate interstate commerce.
c. Limitations on federal power.
d. Gun ownership cannot be regulated.
For the purposes of the statute of frauds, an interest in land includes:
a. a house.
b. a real estate mortgage.
c. an easement.
d. All of the above.
Under the doctrine of commercial impracticability, which situation would not excuse
the seller’s performance?
a. The seller forgot to include the cost of freight in a C&F contract.
b. The seller’s source of supply is no longer available because of a governmental
embargo prohibiting an export from another country.
c. The seller cannot deliver because severe flooding wiped out three-fourths of the
state’s produce.
d. The seller’s workforce is out on an unexpected strike.
Garth’s Imports sold a car to Wally on credit for $30,000. Garth assigned to Cassandra
all of his rights to receive money from Wally. Cassandra did not inform Wally of the
assignment. Therefore, Wally continued to make the next three payments directly to
Garth. Shortly thereafter, Garth left the country with the money. If Cassandra sues
Wally for the missing three payments:
a. Cassandra will not be able to collect the money from Wally.
b. Wally is not liable for the three payments because an assignment is not valid unless
the obligor is notified.
c. Wally is liable for the three payments because Cassandra paid consideration for the
assignment rights.
d. Wally cannot raise the defense of previous payment.
For manufactured goods, the United States and European Union impose an average
tariff of ________ percent, and major trading partners around the world impose tariffs
of ________ percent for identical items.
a. 10; 5
b. less than 4; 10 to 30
c. 25; 39 to 70
d. 10 to 30; less than 4
Kayla and Marshall formed a partnership. Marshall incurred a debt in the ordinary
course of the partnership business. If the debt is not paid, the creditor may sue:
a. only Marshall.
b. only the partnership.
c. the partnership and the partners together or in separate lawsuits or in any
combination.
d. only Marshall and the partnership in a lawsuit together or the creditor loses any right
to sue the partnership.
When a judge orders a criminal defendant to reimburse the victim, it is called:
a. reimbursement.
b. restitution.
c. restraint.
d. reformation.
The evening news was full of stories about how Levine sold fraudulent negotiable
instruments to investors around the country. Two days later, Brighty, who did not hear
the news reports, bought some of the fraudulent negotiable instruments from a swindled
investor. Can Brighty claim the position of a holder in due course considering the
publicity of the scam?
a. Brighty is presumed to have knowledge of the scam and therefore did not purchase
the instruments in good faith.
b. Although Brighty passes the subjective test of good faith, he fails the objective test
and therefore cannot claim to have purchased the instruments in good faith.
c. Brighty can claim to have purchased the instruments in good faith if he subjectively
believed the instruments were valid and if objectively his purchase of the instruments
was commercially reasonable.
d. None of the above are correct.
Oxtren, Inc. is a tools wholesaler. Oxtren sent M&E Tools a purchase order offering to
buy 200 Model 308 milling & drilling machines with R-8 spindles. The purchase order
stated the credit term to be 2% discount if payment was made in 10 days, with the full
amount due in 30 days. It did not include a forum selection clause. M&E responded
with an acceptance form accepting the offer. The acceptance form, however, stated that
full payment was due on delivery and that disputes under the contract would be settled
by arbitration.
(A) Do the parties have an agreement?
(B) What is the payment term?
(C) Is the arbitration clause part of the agreement?
Which statement most accurately describes third party beneficiary rights?
a. A beneficiary may enforce a contract if the parties intended to benefit him and if
enforcing the promise will satisfy a duty of the promisee to the beneficiary.
b. If a promisee intended to make a gift to the beneficiary, the beneficiary may not
enforce the contract.
c. An intended third party beneficiary has no enforceable rights in a contract.
d. Incidental beneficiaries have enforceable rights against both contracting parties.
The Plaza Hotel contracts with EZ Lawn to have EZ mow the grass on the Plaza
grounds for the next 10 years. However, there is a clause in the contract that states if the
hotel chooses, the contract may be terminated provided Plaza pays EZ $2,000 on
termination. Which of the following is correct?
a. The contract is unenforceable because the option to cancel clause makes the contract
an illusory promise.
b. The contract is unenforceable because the $2,000 is past consideration.
c. The contract is unenforceable because only one party has the option to cancel.
d. The contract is enforceable because the option to cancel clause is supported by
consideration.
The title of a contract should be:
a. general, like “Memorandum of Agreement..
b. written like a sentence, with only the first letter capitalized.
c. short — no more than five words.
d. descriptive of the agreement, and typed in all capital letters.
Theft is to the criminal law as ____ is to the civil law.
a. stealing
b. appropriating
c. conversion
d. trespass
Bob, a house builder, contracts with Ollie to build a house on Ollie’s lot. The total price
of the construction is $100,000, $20,000 of which will be Bob’s profit. After Bob has
put $10,000 worth of materials into the house, Ollie wrongfully refuses to let him finish
the house. If Bob sues for damages, he will be able to collect:
a. $10,000.
b. $20,000.
c. $30,000.
d. $100,000.
Intellectual property:
a. producers are likely to be adequately paid in the free market.
b. production is not subsidized by the government.
c. typically is expensive to produce but cheap to reproduce and transmit.
d. typically is expensive to produce, copy, and transmit.
Which of the following statements regarding a negligence case is correct?
a. A plaintiff must show that the defendant’s act was both the factual cause of her injury
as well as a foreseeable injury.
b. A plaintiff must show that the defendant’s act was the factual cause of her injury even
if the injury was not foreseeable.
c. A plaintiff must show that the defendant’s act created a foreseeable danger even if it
was not the factual cause of her injury.
d. A plaintiff does not have to show that the defendant’s act either created a foreseeable
danger or that the act was the factual cause of her injury.
Virginia borrowed money from G & L Lending at 35% interest per year. The state
maximum interest rate is 20% per year. Virginia defaulted on the loan. What amount
can G& L collect from Virginia?
a. G & L will be able to collect the principal plus 20% interest per year.
b. G & L will be able to collect the principal but not any interest.
c. G & L will not be able to collect either the principal or interest.
d. Any one of the above may be correct. The answer depends on the particular state law.
Anyone who presents a check for payment warrants all EXCEPT:
a. he or she is a holder.
b. he or she has no reason to believe the drawer is insolvent.
c. he or she has no reason to believe the drawer’s signature is forged.
d. the check has not been altered.
TriColor, Inc. is doing business in Minnesota, West Virginia, and Oklahoma. TriColor
must register in all three of these states.
You go to a theater to see a play one Saturday evening. You have:
a. purchased an interest called a “profit.
b. an easement by reservation.
c. a license to enter the theater.
d. no property right in the theater just by purchasing the ticket for the play.
The start of the bankruptcy process is:
a. the submission of a plan of repayment.
b. the bankruptcy courts issuance of an order for relief.
c. a meeting of creditors.
d. the appointment of a trustee.
Stanziano Construction needs a backhoe to complete a project. If it pays Hofmann
Rentals for temporary use of the equipment, the transaction will be governed by:
a. Article 2 of UCC.
b. Article 2A of the UCC.
c. Article 3 of the UCC.
d. bulk transfer law.
Jose and Juanita are first cousins. Jose lives in San Francisco, California; Juanita lives
in Toronto, Canada. The two have met only once in life, and may never meet again.
Nonetheless, because they are blood relatives, Juanita has an insurable interest in Jose’s
life.
A contract clause which specifies the amount of damages to be paid in the event of a
breach is called:
a. a covenant of damages clause.
b. a reliance interest of damages clause.
c. a liquidated damages clause.
d. an incidental damages clause.
Lois is running for political office. She trails the incumbent and decides to start running
a series of “attack ads.” The attack ads are very effective and one week before the
election it appears that she has drawn even with her opponent. Lois admits that the
attack ads were exaggerations and contained some distortions. Which statement is
correct?
a. Lois has engaged in unethical behavior.
b. Lois has engaged in ethical behavior since she has an obligation to her supporters to
run a campaign that will help her get elected.
c. It is not possible to determine whether Lois’s attack ads were ethical or unethical.
d. Assuming Lois’s attack ads were unethical, her conduct is justified and proper if she
to gets elected.
Jessup asks the union to file a grievance against his employer. The union believes the
grievance is without merit and refuses to file it. Jessup claims the union has violated its
duty to him as a card-carrying, dues-paying union member. Is he right?
a. Yes.
b. Yes, but only if it is later proven that Jessup had a valid claim.
c. No, provided the union acted in good faith.
d. No. A union never has an affirmative duty to file a grievance if it does not wish to do
so.
A rock group assigns its payment under a performance contract to the Costume Shop, a
business that has supplied the group with outrageous stage outfits, and to which the
group owes a great sum of money. This is:
a. a valid assignment because of the rule of freedom to contract.
b. a valid assignment because this is a simple transfer of the right to receive money.
c. an invalid assignment because it increases the burden of the payor.
d. an invalid assignment because this is a personal service contract.
An assignment is valid and enforceable against all parties:
a. from the moment it is made.
b. from the moment the assignor notifies the obligor.
c. from the moment the assignee notifies the obligor.
d. from the moment the obligor is notified from any source.
Under the Uniform Commercial Code, an agreement modifying a contract:
a. always requires consideration.
b. requires consideration only when the sale of goods is involved.
c. may not require consideration.
d. requires consideration only when one of the parties is incompetent.
Which of the following is a requirement for an involuntary Chapter 7 bankruptcy
petition?
a. The debtor must owe at least $150,000 in unsecured claims to the creditors who file.
b. The debtor must have at least three creditors join in the petition if the debtor has 12
or more creditors. If the debtor has fewer than 12 creditors, any single creditor or group
can file a petition.
c. The creditors must have tried to help the debtor overcome the financial difficulties.
d. The debtor must have a majority of the creditors file the petition.
Discuss the potential liability differences between a delegation and a novation.
Shirley Rhone suffered injuries when a truck struck the vehicle in which she was riding.
State Auto Mutual Insurance Co. was the insurer involved and provided personal injury
coverage. Shirley went to see Dr. Allen, a chiropractor who provided treatments 32
times over a 3-month period. Dr. Allen billed State Auto in three separate billings. After
paying the first two billings in full, State Auto expressed concern about whether Dr.
Allen’s charges were excessive. State Auto hired Chiropractic Consultants, Inc. to
evaluate Dr. Allen’s billings. The consultants advised that Dr. Allen’s billings were
indeed excessive. State Auto then telephoned Dr. Allen and offered a partial payment to
settle the account. After this conversation, State Auto issued and sent a check for $864
payable to Dr. Allen. On the face of the check, State Auto noted the total amount
allocated to each claim and typed ‘settlement in full.” On the reverse side it said, “The
endorsement of this draft by the payee constitutes a clear release and full settlement of
the claim or account shown on the other side.” Upon receipt of the check, Dr. Allen
cashed the check. He then sought payment of an additional $895. State Auto claims
there was an accord and satisfaction with respect to the amount due for services
rendered by Dr. Allen. What are the requirements of an accord and satisfaction? Were
those requirements met in this case?
Identify the three types of masters corporate managers serve and discuss the goals of
each.
Zach decided to incorporate his business under the name of “Zamm.” In addition to
“Zamm,” the Model Act requires that Zach include one of the following words:
“corporation,” “incorporated,” “limited,” or “company” or an abbreviation thereof.
If Lorenzo is seeking an injunction against Brenda to prevent her from selling materials
that infringe his copyright, he is entitled to a jury trial if the value of the materials is
over $100.
Maurina is an agent of Southland, and she is authorized to sign checks on Southlands
bank account. If Maurina signs a check without indicating that she is simply an agent,
Maurina will be personally liable on the check.
Assume that Jessie and Lester have formed a contract whereby Jessie agrees to deliver
10,000 dozen “Grade A Large Eggs” to be shipped in recycled paper cartons. A shortage
of paper makes paper cartons much more expensive, so Jessie uses styrofoam cartons
and ships the eggs. Lester is entitled to cancel the contract based on this deviation of
terms in the contract.
Lance indorses a promissory note to Connie in exchange for consideration. Unknown to
Lance, the note is not good because the maker’s signature was forged. Connie later
attempts to present the instrument for payment to the original alleged maker, Lilly, who
is able to deny liability for payment due to the forged signature. Connie may later sue
Lance for breach of a transfer warranty.
Smalltown has two family-owned hardware stores that have been in business for years.
Major Hardware decides that Smalltown would be a good place to build one of its
superstores. Major opens, advertising unbelievably low prices; in fact, at below cost.
Because Major owns stores nationally, it is able to keep prices extremely low until both
of the family-owned stores have to go out of business because they cannot compete.
After Major is the only hardware store in town, it raises its prices enough to make up
for its former losses and to make some additional profit. Discuss this behavior in
relation to antitrust law.
The only function of a will is to dispose of a person’s property upon death.
Tariffs are generally higher in developing countries than in developed countries.
Express warranties must be in writing so they can be proven in court.
Prior to the Industrial Revolution, the primary law of employment was that, absent an
agreement otherwise, a worker was hired for a year at a time.
Yount, Inc. is interested in expanding its business to include exporting its products to
several other countries. Discuss two federal statutes that should be considered before
making the decision to export.
Hall was arrested for burning the United States’ flag in a protest of governmental policy.
His action is protected under the First Amendments guarantee of free speech because
the flag burning is considered symbolic speech.