Holly obtains an insurance policy from Inviolable Insurance Corporation (IIC). IIC may
cancel, or refuse to renew, the policy because of
a. Holly’s appearance as a witness against IIC.
b. Holly’s national origin.
c. Holly’s race.
d. none of the choices.
Call Center Corporation, a U.S. firm, owns property in India. The government of India
seizes the property for a proper public purpose and pays Call Center just compensation.
This is
a. confiscation.
b. defalcation.
c. dumping.
d. expropriation.
Craft Engineering, Inc., contracts for a sale of technical instruments to Detail Design
Company. Before the date on which performance is due, Craft notifies Detail that it will
not perform. This is
a. anticipatory repudiation.
b. perfect tender.
c. rejection of performance.
d. revocation of acceptance.
Cordial Drinks, Inc., markets alcoholic beverages. A federal regulation bans the
disclosure of the alcohol content of liquor on Cordial’s labels and those of other
marketers. A court would likely hold this regulation to be
a. an unconstitutional restriction of speech.
b. constitutional under the First Amendment.
c. justified by the need to protect individual rights.
d. necessary to protect national interests.
Uri and Vicky orally agree on the sale of Uri’s Nite Club to Vicky and note terms on a
pair of the Club’s napkins, which they both sign. A written memorandum evidencing an
oral contract that would otherwise be unenforceable must contain
a. every term.
b. the essential terms.
c. the preliminary terms.
d. the qualitative terms.
Stable Foundation Construction Corporation’s articles list an incorrect address for its
incorporator. Under this circumstance, Stable is most likely
a. a corporation by estoppel.
b. a de facto corporation.
c. a de jure corporation.
d. ultra vires.
Tory borrows $10,000 from USA National Bank to remodel a room in her home. This
transaction is subject to
a. no federal law.
b. the Consumer Leasing Act.
c. the Consumer Product Safety Act.
d. the Truth-in-Lending Act.
Penny Stock Company faxes ads to Quality Personnel Corporation and other businesses
without the recipients’ permission. This is
a. illegal.
b. legal and smart because such ads are generally cheap.
c. legal but not smart because such ads are generally ineffective.
d. legal but only potentially smart, depending on the response rate.
Bret defaults on a loan owed to City Bank. As a creditor, City Bank may attempt to
place liens on all of Bret’s property except
a. motor vehicles that Bret uses to commute to work.
b. personal property that consists of stock in various corporations.
c. property that Bret elects to exempt.
d. real property on which Bret plans to open a retail store.
Metro City and Nu Hi-way Construction Company enter into a construction contract
that includes six pages of detailed estimates. Later Metro, whose engineer compiled the
figures, discovers that some numbers were added incorrectly, but Nu refuses to make
changes. Metro may
a. not rescind the contract.
b. rescind the contract on the basis of fraud.
c. rescind the contract on the basis of mistake.
d. rescind the contract on the basis of economic duress.
Eton files a suit in a federal district court against Florida, alleging employment
discrimination under the Age Discrimination in Employment Act of 1967. The state
asks the court to dismiss the suit. The court is most likely to rule that
a. the state is immune from the suit.
b. the suit can proceed.
c. Eton is immune from any defense the state might offer.
d. the court is immune from such request.
Hillside Homes, Inc., and Ideal Builders, Inc., enter into a construction contract that
includes six pages of detailed calculations. Later Hillside, whose project manager
compiled the figures, discovers that some numbers were multiplied incorrectly, but
Ideal refuses to make changes. A court would most likely
a. allow the parties to rescind the contract.
b. award damages to Hillside for the mistakes.
c. award damages to Ideal for the mistakes.
d. enforce the contract without requiring changes.
Ryan, the owner of SuperMart Stores, Inc., adheres to the “principle of rights” theory.
Under this theory, a key factor in determining whether a business decision is ethical is
how that decision affects
a. the right determination under a cost-benefit analysis.
b. the rights of others.
c. the “right” thing to do.
d. the right to make a profit.
Fact Pattern 3-1
Java Cafes, Inc., and Kaffe Import Corporation dispute a term in their contract.
Refer to Fact Pattern 3-1. The least expensive method to resolve the dispute between
Java and Kaffe may be
a. arbitration because the case will be heard by a mini-jury.
b. litigation because each party will pay its own legal fees.
c. mediation because the dispute will be resolved by a non-expert.
d. negotiation because no third parties are needed.
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.
Root & Branch Lumber Company obtains a fire insurance policy from Statistical
Insurers, Inc., on a $400,000 warehouse. The policy includes an 80-percent coinsurance
clause. Root & Branch insures the property for $320,000. In a fire, the warehouse
suffers $200,000 in damage. Root & Branch can recover
a. $400,000.
b. $320,000.
c. $200,000.
d. $80,000.
A merger between Grain Mills Corporation and Farm2Fork Distribution Inc. can be
expressed as Grain Mills + Farm2Fork =
a. Farm2Fork.
b. Harvest Dining Corporation.
c. Harvest Dining Corporation + EZ Brewing Company.
d. EZ Brewing Company.
Mabel files a petition in bankruptcy. The initial proceeding on this petition will be in
a. a federal bankruptcy court.
b. a state bankruptcy court.
c. the highest court in the state in which Mabel lives.
d. the United States Supreme Court.
Fact Pattern 23-3
Mike loses his National Bank access card. He realizes his loss the next day but waits a
week to call National. Meanwhile, Opal finds and uses Mike’s card to withdraw $3,000
from Mike’s account.
Refer to Fact Pattern 23-3. Mike is responsible for
a. $0.
b. $50.
c. $500.
d. $3,000.
Jock hires Kym to act as his agent to purchase Lifetime Gym & Fitness, Inc. Jock tells
Kym to reveal that she is buying the firm on behalf of a third party and to tell Lifetime’s
seller who that third party is. Jock is
a. a disclosed principal.
b. an apparent principal.
c. an undisclosed principal.
d. a partially disclosed principal.
The Food and Drug Administration (FDA) is investigating reports that Caplets
Pharmaceutical Corporation is putting potentially harmful additives in Doze, a new
pain-relief medication. The FDA’s demands for particular documents from Caplets
a. must be specific and adequately describe the material being sought.
b. must be non-specific so an incriminating item is not overlooked.
c. must be general so as to force an uncooperative party’s compliance.
d. may, but need not, be specific because the FDA is a federal agency.
Riki files an employment, gender-based discrimination suit against Superior
Corporation under Title VII, on a disparate-impact theory. To succeed, Riki must show
that Superior hires fewer women than the percentage of
a. qualified women in the local labor market.
b. qualified women in the United States.
c. women in Superior’s state.
d. women who apply to Imperial for work.
Inez and Jason are the shareholders and directors of Kleen Kustodial Corporation. Lily
and Moe are Kleen’s officers. As in other corporations, the responsibility for the overall
management of Kleen rests with
a. the board of directors.
b. the officers.
c. the owners.
d. the shareholders.
Coast-to-Coast Distribution, Inc., is a direct-mail distribution company. Like most
corporations, Coast-to-Coast’s employees include its
a. board of directors.
b. incorporators.
c. officers.
d. shareholders.
McCall and Teresa enter into a contract for the distribution of McCall’s produce to local
restaurants for which Teresa agrees to pay. McCall transfers his right to payment under
the contract to Midtown Bank. This transfer is
a. a delegation.
b. an assignment.
c. a novation.
d. prohibited.
Elsa, the owner of Fertile Farm, sells Gina a right to camp on Fertile land overnight.
Gina’s right is
a. a leasehold estate.
b. a license.
c. an easement.
d. a profit.
To notify the public of a proposed rule, the Food Safety and Inspection Service, like
other federal agencies, publishes the proposal in
a. the news media.
b. a trade journal available to members of the industry.
c. the Federal Register.
d. an office memo that employees are free to take home.
Fact Pattern 34-1
Mountaintop Clearview Corporation authorizes Niles, its employee, to oversee its
timber operation. In the course of his employment, Niles disposes of the operation’s
waste illegally. Orson is a Mountaintop shareholder.
Refer to Fact Pattern 34-1. With respect to Mountaintop and Niles, liability for this
crime most likely rests with
a. neither Mountaintop nor Niles.
b. Mountaintop and Niles.
c. Mountaintop only.
d. Niles only.
Jim files a suit against Kay. Before going to trial, the parties meet, with their attorneys
to represent them, to present their dispute to a third party who is not a judge but who
renders a legally binding decision. This is
a. arbitration.
b. litigation.
c. mediation.
d. negotiation.
Hybrid Corporation enters into a contract with Insure Service, Inc. (ISI), to obtain
health insurance for Hybrid employees. If ISI breaches the contract and Hybrid is
awarded compensatory damages, the purpose would be to
a. establish, as a matter of principle, that ISI acted wrongfully.
b. provide Hybrid with funds for a foreseeable loss beyond the contract.
c. provide Hybrid with funds for its loss of the bargain.
d. punish ISI and set an example to deter others from similar acts.
In making business decisions, Glenda, personnel manager for HVAC Maintenance, Inc.,
applies his belief that all persons have fundamental rights. This is
a. a religious rule.
b. the categorical imperative.
c. the principle of rights.
d. utilitarianism.
Fact Pattern 17-1
Bayside Construction Company enters into a contract with Clio to remodel Dewey’s
Home Store, using products from Eagle Building Supplies. Fresh Food Café is next to
Dewey’s Home Store. The remodeling is a gift from Clio to Dewey, Clio’s nephew and
the owner of Dewey’s Home Store.
Refer to Fact Pattern 17-1. Eagle will realize a profit from the sale of products to
Bayside to remodel Dewey’s store. Eagle is
a. a delegatee.
b. an assignee.
c. an incidental beneficiary.
d. an intended beneficiary.
In winding up a general partnership, creditors are paid before partners receive their
capital contributions.
Unless otherwise agreed, the participants in a joint venture have an equal voice in
controlling the enterprise.
An insurance application is usually not part of the insurance contract.
A corporation cannot be formed without a profit-making purpose.
Promises of fact made during the bargaining process are not express warranties.
A finder acquires title to lost property good against the whole world, including the
original owner.
In early neutral case evaluation, a third party’s evaluation of each party’s strengths and
weaknesses forms the basis for negotiating a settlement.
After a consolidation, there is only one surviving corporation.
A syndicate may be organized as a corporation but not as a partnership.
Even after a tenant sublets leased premises, the tenant may be obligated to pay rent.
Uniform laws apply in all states, including those in which the laws have not been
adopted.
Labels must use words that are easily understood by the ordinary marketing executive.
The dishonor of an instrument relieves secondary parties of liability.
Under no circumstances may a franchisor establish an additional franchise in a territory
allotted to a franchisee.
A customer has sixty days from the date of receipt of a statement of an electronic
transfer to notify the financial institution of any errors.
Business ethics is consistent only with short-run profit maximization.
Hoppy steals two checks from Eagle Retail Stores, Inc.: a blank check and a check
payable to the order of General Supplies Company (GSC), drawn on Eagle’s account
with First National Bank. Hoppy forges Eagle’s signature on the blank check and makes
it payable to himself. Hoppy forges GSC’s indorsement on the back of the check
payable to GSC, and adds “Pay to the order of Hoppy.” At Friendly Credit, Inc., Hoppy
indorses the back of both checks with his own name and gives them to Friendly for
cash. Friendly does not know about the theft or the forged signatures and presents the
checks to First National, which pays them. Eagle, which was not negligent, discovers
the forgeries and asks First National to recredit its account. Who suffers the loss on
each check?