Rona and Savannah do business as Treasure Island Traders. Acting in good faith on the
firms behalf in a deal with Unlimited Potential, Inc., Rona makes an honest error in
overestimating the profit. To her firm, Rona 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.
Gena borrows $350,000 from Fish Island Bank to buy a home, which secures the
mortgage. In the seventh year of the loan, Gena stops making payments. After the bank
repossesses the property but before it is sold, Gena may buy it by paying
a. an amount that equals the potential proceeds from the propertys sale.
b an amount that exceeds the potential proceeds from the propertys sale.
c. the amount of the missed payments, but not more.
d. the full amount of the debt, plus any interest and costs.
Jeri is indicted. Before she is arrested, she confesses to the crime in a conversation with
Kelly, the arresting officer. Kelly then arrests Jeri and advises her of the right to
counsel. Later, Jeri claims that her statement should be excluded as evidence from her
trial. The statement will most likely be
a. admitted because Jeri knew she did the crime and confessed.
b. admitted because Jeri made it before being advised of her rights.
c. excluded because a confession is not admissible in a criminal trial.
d. excluded because it was elicited before Jeri was advised of her rights.
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.
Yoko, Ltd., and Zeno, S.A., transact an international sale of goods. For these parties,
and other international buyers and sellers, the United Nations Convention on Contracts
for the International Sale of Goods spells out the duties that apply
a. if Article 2 of the Uniform Commercial Code does not apply.
b. if a dispute is submitted to the International Court of Justice.
c. if the parties have not agreed otherwise in their contracts.
d. under all circumstances.
Flo tells Gregor that she will buy his textbook from last semester for $65. Gregor
agrees. Flo and Gregor have
a. an executed contract.
b. an express contract.
c. an implied contract.
d. a quasi contract.
Quibble Game Companys liabilities exceed its assets. Quibble hires Roo & Slay, an
accounting firm, to prepare a balance sheet. Through Roo & Slays negligent omissions,
the sheet shows a positive net worth. Town Bank relies on the balance sheet to make a
loan to Quibble. When Quibble defaults, Town files a suit against Roo & Slay. Under
the Restatement rule, Roo & Slay is most likely
a. liable because Roo & Slay owed a duty of care to Quibble.
b. liable because Roo & Slay owed a duty to any foreseeable user.
c. liable if Roo & Slay knew that Town would rely on the balance sheet.
d. not liable because Roo & Slay and Town were not in privity.
Fact Pattern 1-1
The Texas Supreme Court decides the case of Livewire Co. v. Power Corp. Of nine
justices, five believe the judgment should be in Livewires favor. Justice Bellamy, one of
the five, writes a separate opinion. The four justices who believe the judgment should
be in Powers favor join in a third separate opinion.
Refer to Fact Pattern 1-1. Bellamys opinion is
a. a concurring opinion.
b. a dissenting opinion.
c. a majority opinion.
d. a per curiam opinion.
The assets in Hongs estate, including the value of his home on Elm Street and its
contents, are insufficient to pay in full all of the gifts provided for in his will. His heirs
will receive
a. full payment in order of seniority until the assets are exhausted.
b. nothingthe assets will descend to the state.
c. reduced benefits.
d. the option of distributing the assets according to their wishes.
Cecilias Day Spa, LLC, is a member-managed limited liability company. If the law in
Cecilias state is like the law in most states, unless the members have agreed otherwise,
voting rights are apportioned according to
a. capital contributions.
b. participation in management.
c. the number of members.
d. transactions with the firm.
Fact Pattern 11-3
Haruko, who owns and operates Garden Orchard, agrees to sell Fresh Produce
Cooperative ten bushels of apples.
Refer to Fact Pattern 11-3. When the market price for apples exceeds the price in the
contract with Fresh Produce, Haruko decides not to deliver the apples. This
a. breaches the contract.
b. discharges the contract.
c. has no effect on the contract.
d. suspends the contract.
Kerin obtains a property insurance policy for her art collection from Lawton Insurance
Company. Kerin can cancel the policy
a. at any time.
b. only at the end of a period for which a premium has been paid.
c. only if Kerin no longer has an insurable interest in the property.
d. only on advance written notice.
Global Distribution Corporation suggests that its employees apply the “categorical
imperative to ethical issues that arise at work. This requires that the employees
a. categorize the issues according to legality, morality, and profitability.
b. consider only the benefits that would accrue to them personally.
c. look only at the result, regardless of the means to attain it.
d. weigh the consequences that would follow if everyone acted the same.
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.
Agnes borrows $110,000 from Bay Harbor Bank to buy a home under a mortgage with
an acceleration clause. After eighteen payments, Agnes stops making payments on the
mortgage. Bay Harbor
a. can foreclose once on the entire amount of the loan.
b. may seek only the amount of the missed payments, not the entire loan.
c. must foreclose on small amounts over time as each payment comes due.
d must notify Agnes to accelerate the steps to cure the default.
Delacroix discovers a boat adrift, and retrieves and anchors it. The boat features a
number on its side and other evidence pointing to its owner, Elvira. This is
a. an involuntary bailment.
b. a voluntary bailment.
c. an express bailment.
d. no bailment.
Raul is chairman of the board of Swif-Vac Corporation. Pinky, a consumer, is injured
while using a Swif-Vac product. Pinky sues Swif-Vac, and Raul individually. Swif-Vac
may pay Rauls legal fees under
a. the directors right to certification.
b. the directors right to compensation.
c. the directors right to indemnification.
d. no circumstances.
Hoppy, who works as an employee for Imperial Power Corporation, suffers an injury in
an accident. Hoppy will be compensated under state workers compensation laws
a. only if the injury occurred during working hours.
b. only if the injury occurred off the job.
c. only if the injury occurred on the job.
d. whenever and wherever the injury occurred.
Business Credit Company files a suit against City Developers, Inc., and seeks, as part of
discovery, certain electronic documents in City Developerss possession. City
Developers did not preserve the requested datae-mail messages among employees. The
court is not likely to sanction City Developers if
a. the data was not saved because there was no reasonable anticipation of litigation.
b. the e-documents were destroyed when the suit was filed.
c. the e-mail messages were trashed when the discovery request was made.
d. the e-mail system was wiped clean to avoid revealing incriminating evidence.
Nina and Owen enter into an oral contract for Ninas sale to Owen of a laser printer for
$400. Before Owen takes possession of the printer, the contract is enforceable by
a. either party.
b. Nina only.
c. neither party.
d. Owen only.
Home Development Company employs llya to buy property for a future residential
development. Ilya secretly buys some of the property and sells it to Home Development
at a profit. Ilya has breached
a. no duty.
b. the duty of accounting.
c. the duty of loyalty.
d. the duty of notification.
Reno is the beneficiary of a life insurance policy on Sulas life obtained from Thayer
Insurance Company. The underwriter of this policy is
a. Reno.
b. Sula.
c. Thayer.
d. the agent or broker through whom the policy was obtained.
Dian, a clerk at an Entertainment Unlimited store, takes a DVD player from the store
without permission. Dian is liable for
a. appropriation.
b. benefiting an employee.
c. conversion.
d. wrongful interference with a business relationship.
Bob rents a golf cart at Country Club Golf Course. The brakes are worn, and while Bob
is driving the cart, they fail. The cart crashes into a tree, and Bob is injured. Country
Club could have discovered, with reasonable diligence, that the brakes were worn.
Liability for Bobs injuries most likely rests with
a. Bob and Country Club.
b. Bob only.
c. Country Club only.
d. neither Bob nor Country Club.
Melba and Leon are directors of Fresh Foods, Inc. The right of Melba and Leon to be
notified of special meetings of the board is the right to
a. compensation.
b. indemnification.
c. participation.
d. self-dealing.
Mace copies Nicks book, Off the Beaten Path, in its entirety and sells it to Parkland
Books, Inc., without Nicks permission. Parkland publishes it under Maces name. This is
a. copyright infringement.
b. fair use.
c. licensing.
d. protected expression.
Everyday Loans, Inc., takes possession of Ferbies stock in Glade Electronics
Corporation to perfect Everydays security interest in the stock. This is
a. after-acquired property.
b. a pledge.
c. a purchase-money security interest.
d. proceeds.
Virgil borrows $175,000 from United Finance Bank to buy a home. Federal law
regulates primarily
a. mortgage terms that must be disclosed in writing.
b. oral representations with respect to the terms of a loan.
c. the lowest prices for which real property can be sold.
d. who can buy real property, where they can buy it, and why.
GR8 Stuf Company files a registration statement with the SEC before making an
offering to the general public. The registration contains false, immaterial statements of
which the investors are unaware. GR8 Stuf is charged with violating the Securities Act
of 1933. GR8 Stufs best defense is
a. the investors were not aware of the misrepresentations.
b. the issuer reasonably believed the misstatements were true.
c. the offering was made available to the general public.
d. the untrue statements were not material.
Fabiola, or any foreign citizen, can bring a civil suit in a U.S. court for
a. a violation of a treaty of the United States only.
b. a violation of a treaty of the United States or of the law of nations.
c. a violation of the law of nations only.
d. no purpose.
Dhani signs a check “pay to the order of Etan drawn on Dhanis account in First State
Bank and dates the check “May 1. Etan presents the check to the bank for payment on
December 15. This is
a. a dishonored check.
b. an overdraft.
c. a postdated check.
d. a stale check.
Philomena dies without a will. A court appoints Quigley to handle the probate of
Philomenas estate. The administrator of the estate is
a. Philomenas closest blood relative.
b. Philomena.
c. Quigley.
d. the court.
Mona lives in New Jersey, but she works in New York. Mona borrows $1,000 from
National Bank, using her motorcycle as collateral. To perfect its security interest, the
bank must file its financing statement in at least
a. every state.
b. New Jersey.
c. New Jersey and New York.
d. New York.
Estes, an accountant, contracts to perform services for Frasier. In performing those
services, Estes uncovers a suspicious financial transaction. Estes is most likely not
liable if he
a. acted negligently in failing to discover the transaction sooner.
b. conceals the discovery and otherwise finishes the work.
c. investigates and reports the discovery to Frasier.
d. obtains restitution from the perpetrator without Frasiers knowledge.
Precise Engineering Corporation has a contract with Quik Mart Stores to provide
customized software for Quiks inventory control system. Retail Outlets, Inc, Quiks
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, Precises delivery of
the software is delayed, and Quik sustains $500,000 in lost profits. On what ground
could Quik recover damages from Retail Outlets?
A homestead exemption allows a debtor to subtract the value of the family home from
the amount of a debt.
A warranty deed provides the most protection against defects of title.
Adhesion contracts are often held to be contrary to public policy.
Generally, a cash deposit is not available for withdrawal until the next business day.
Discount Mart, Inc., files a suit in a state court against Elements Computer Corporation,
alleging that Elements breached a contract to sell 500 notebook computers to Discount.
During the course of the suit, Discount files a motion for judgment on the pleadings,
Elements files a motion for a directed verdict, and both parties file motions for
summary judgment. When and for what purpose are each of these motions made?
When a buyer breaches a contract, the risk of loss immediately shifts to the buyer.
Corporations can be good citizens by promoting goals that society deems worthwhile.
A principal is not liable for an agents fraud unless the agent has the apparent authority
to commit torts.
Under the doctrine of strict liability, liability is imposed strictly according to fault.
In Case 5.1, Coca-Cola Co. v. The Koke Co. of America, the United States Supreme
Court upheld an injunction prohibiting competing beverage companies from calling
their products “Koke.
A treaty is a contract or other agreement between two or more nations that must be
ratified by the United Nations to take effect.
A contract between parties residing in different countries is subject to Article 2A of the
UCC.
If a third party will be affected by a contract, the parties to the contract are in privity
with the third party.
When a landlord sells leased premises to a third party, any existing leases terminate
automatically.
In an auction, the auctioneer is an offeree.
Under the Statute of Frauds, all contracts induced by fraud must be in writing to be
enforceable.
A finder acquires title to lost property good against the whole world, except the original
owner.
A divorce necessarily revokes an entire will.