Lather Up Soap Products Company grants its agent Kathy an exclusive territory in
which to sell Lather Up products. The firm cannot compete with Kathy in that territory
under the principal’s duty of
a. avoidance.
b. cooperation.
c. indemnification.
d. reimbursement.
Hemisphere Financial Corporation, a U.S. firm, files a suit against Italy in a U.S. court.
Italy claims foreign sovereign immunity. Under the Foreign Sovereign Immunities Act,
this claim is determined by
a. a neutral third-party court.
b. an international law court.
c. an Italian court.
d. the U.S. court in which the suit is filed.
Clyde issues a check payable to Discount Mart. Elle, Discount’s cashier, forges the
store’s indorsement and deposits the check in her bank account. Clyde’s bank, First
State Bank, pays the check. Clyde can recover from
a. Elle, but not First State Bank.
b. First State Bank, which cannot recover from Elle.
c. First State Bank, which can recover from Elle.
d. no one.
Venerable Company stores office furniture with Warehouse Storage, Inc. (WSI), under a
contract that limits the warehouse company’s liability for lost or damaged property to
$500. Venerable declines the option to pay a higher storage rate for an increase in the
liability limit. The furniture is lost through no fault of WSI. The loss is most likely
suffered by
a. Venerable and WSI.
b. Venerable only.
c. WSI only.
d. neither Venerable nor WSI.
Eve is a director of Fab Stuff Corporation. Without informing Fab, Eve goes into
business with GR8 Things, Inc., in competition with Fab. Eve is liable for breach of
a. no duty or rule
b. the business judgment rule.
c. the duty of care.
d. the duty of loyalty.
Kelly files a suit against Lewis in a state court. The case proceeds to trial, after which
the court renders a verdict. The case is appealed to an appellate court After its review of
Kelly v. Lewis, the appellate court can
a. affirm, reverse, or remand all or part of the lower court’s decision.
b. only affirm or reverse all or part of the lower court’s decision.
c. only remand all or part of the lower court’s decision.
d. only reverse or remand all or part of the lower court’s decision.
Safe-Rite Company makes electrical cords and other connectors for electronic devices.
Tina files a product liability suit against Safe-Rite, alleging a warning defect. Under the
Restatement (Third) of Torts: Products Liability, in deciding whether to hold Safe-Rite
liable, the court may consider
a. neither the characteristics of expected users nor the content of any warning.
b. only the characteristics of expected users.
c. only the content of any warning.
d. the characteristics of expected users and the content of any warning.
Trudy and Uri enter into a contract for the sale of Trudy’s house for which Uri agrees to
pay her $250,000. Uri wants to transfer his right to the ownership of the house to Val,
his niece. This transfer
a. is prohibited.
b. may be oral or written.
c. must be implied.
d. must be in writing.
Frida hires Gert, a real estate broker, to act as her agent to sell her house. The house
burns down before being sold. The agency agreement is likely
a. still in force if Frida gives Gert additional consideration.
b. still in force if Gert does not tell prospective customers.
c. terminated by mutual consent of the parties.
d. terminated by operation of law.
Suisse Internationale, a Swiss maker of athletic equipment, enters into a price fixing
agreement with Total World Sports, a U.S. wholesaler of Suisse’s products. U.S. courts
will apply U.S. antitrust laws if
a. the agreement was made in Switzerland.
b. the agreement was made in the United States.
c. the price fixing has a substantial effect on U.S. commerce.
d. the Swiss government agrees to be sued in the United States.
A contract between Kim and Larry to lease real property contains an exculpatory
clause. This clause is
a. enforceable only if either party is in a business important to the public interest.
b. enforceable only if the lease involves residential property.
c. generally enforceable as a matter of public policy.
d. generally unenforceable.
Ginamarie files a suit against Gaming Innovators Unlimited, Inc., to enforce a written
contract between the parties. If the court finds that the parties intended the contract to
be the final statement of their agreement, parol evidence can be admitted to prove
a. an orally agreed-on condition precedent.
b. terms discussed orally before the contract but not contained in it.
c. terms discussed orally at the time of the contract that contradict the written terms.
d. nothing.
Imperio Caffeine Corporation makes and sells coffee under a variety of brand names.
Imperio wants to merge with Java Company, its main competitor. In weighing a
challenge to the deal, a court looks at the relevant product market. This most likely
includes coffee and
a. no other products.
b. products that are not identical but are related, such as spin-offs.
c. products that are reasonably interchangeable.
d. products with identical attributes only.
Brendan signs a check “pay to the order of City College Bookstore” drawn on his
account in Delta Bank to pay for his current semester’s textbooks. The bookstore
deposits the check in its account in Eagle Bank. Like most checks, this check is
a. a one-party instrument.
b. a four-party instrument.
c. a three-party instrument.
d. a two-party instrument.
Jolie signs a contract with Keaton, an unlicensed physician, to perform plastic surgerya
medical procedure. This contract is enforceable by
a. Jolie.
b. Jolie’s medical insurance company.
c. Keaton.
d. no one.
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.
Fact Pattern 34-2
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 34-2. Later, Bertram dies. With respect to the stock transfer
restriction agreement, Bertram’s death most likely
a. triggers the division provision.
b. invalidates the entire agreement.
c. voids the division provision only.
d. violates the entire agreement.
Frawsty Corporation distributes beverages in the greater Northwest. Frawsty’s board of
directors can delegate some of its functions to
a. Frawsty’s incorporators.
b. Frawsty’s officers.
c. Frawsty’s shareholders.
d. no one.
Cash is an employee of Drowsy Resort, Inc., covered by federal overtime provisions,
which apply only after an employee has worked more than
a. eight hours in a day.
b. forty hours in a week.
c. 160 hours in a month.
d. one year for the same employer.
Genetic Seed Company hires Howie to work on Genetic’s shipping dock, accepting
deliveries and dealing with other companies’ drivers. With respect to Genetic, Howie is
most likely
a. an agent.
b. an independent contractor.
c. a principal.
d. a work for hire.
Natural Gas Company does not use proper filters on its smokestacks, which
consequently pollute the air. Obie, a Natural Gas employee, suffers respiratory illness.
To succeed in a suit against Natural Gas on the ground of negligence, Obie must show
that he suffers from
a. a distinct harm separate from that affecting the general public.
b. a lesser harm than an injunction would impose on Natural Gas.
c. Natural Gas’s failure to use reasonable care to avert herm to Obie.
d. the same harm as that affecting the general public.
Bret contracts to work for City Construction Corporation (CCC) during July for $4,500.
On June 30, CCC cancels the contract. Bret declines a similar job with Downtown
Builders, Inc., which would have paid $4,000. Bret files a suit against CCC. As
compensatory damages, Bret can recover
a. $4,500.
b. $4,000.
c. $500.
d. $0.
Rodeo Ranch’s agent Slim is authorized to draw checks on Rodeo Ranch’s account in
Town Bank. Upper Range Corporation is a Rodeo Ranch supplier. Slim writes a check
“pay to the order of Upper Range [signed] Slim,” indorses the check in Upper Range’s
name, and deposits it in his account in Verity Bank. If Verity Bank collects payment, the
ultimate party most likely to suffer the loss is
a. no one.
b. Rodeo Ranch.
c. Town Bank.
d. Upper Range.
Orin is a shareholder of Pinkwater Corporation. In some states, Orin might incur
personal liability for unpaid Pinkwater debts if he
a. accepts a dividend knowing that it was paid from retained earnings.
b. buys stock for less than its fair-market value.
c. fails to fulfill his fiduciary duty to the majority shareholders.
d. sells his shares.
Blueberry Café signs an agreement with County Credit Bank to borrow $40,000 at 20
percent interest. Later, the state legislature passes a law lowering the maximum
permissible rate of interest to 15 percent. Blueberry’s best argument for avoiding
payment to County Credit is that
a. performance of the contract is commercially impracticable.
b. payment of the loan would force the debtor into bankruptcy.
c. the law has rendered performance of the contract illegal.
d. the specific subject matter of the contract has been destroyed.
Fact Pattern 15-2
Mutual Company enters into a contract to employ Neil as an investment manager for
two years. During the first year, Neil is often absent without explanation and when
present fails to adequately monitor and manage Mutual’s investments.
Refer to Fact Pattern 15-2. With respect to Mutual’s duties, Neil’s performance most
likely
a. discharges Mutual from the contract.
b. has no effect on Mutual’s performance.
c. increases Mutual’s duties under the contract.
d. suspends Mutual’s duty to perform.
Justice For All, a political organization, files a claim to challenge a Colorado statute that
limits the liberty of all persons to broadcast “annoying” radio commercials. This claim
is most likely based on the right to
a. equal protection of the law.
b. privacy.
c. procedural due process.
d. substantive due process.
By contract, Quality Metals Corporation forbids Resource Refining, Inc., a wholesale
buyer of Quality’s products, from purchasing the products of Quality’s competitors. This
is allowed
a. under any circumstances.
b. unless its effect is to cause a competitor a loss of any business.
c. unless its effect is to substantially lessen competition.
d. unless there is no effect on a competitor.
Lark enters into a contract to mine gravel in Milena’s quarry, sell it, and share the
profits on its sale with Milena. If the duties under this contract are discharged like those
under most contracts, the duties will be
a. repudiated.
b. breached.
c. performed.
d. rescinded.
Tori files a suit against the state of Utah, claiming that a Utah state law violates the
commerce clause. The court will agree if the statute
a. impinges on citizens’ private activities.
b. imposes a substantial burden on interstate commerce.
c. imposes a substantial burden on the state.
d. promotes the public order, health, safety, morals, or general welfare.
Mountain Mining Company, a U.S. firm, owns property in Bolivia. The government of
Bolivia seizes the property for an illegal purpose without paying just compensation.
This is
a. confiscation.
b. defalcation.
c. dumping.
d. expropriation.
Tundi is a partner in YooHoo! Amusement, a new partnership. A YooHoo! debt comes
due. Tundi is
a. not liable for the debt.
b. only liable for the debt up to the amount of his capital contribution.
c. personally liable only to the extent the other partners do not pay.
d. personally liable to the full extent of the debt.
Noah and Orin do business as Personnel Partners. In most states, for purposes of suing
and being sued, Personnel Partners would be treated as
a. an aggregate of the individual partners.
b. a natural person.
c. an entity.
d. a non-existent party.
A court may depart from a precedent if the court decides that the precedent should no
longer be followed.
In a reorganization, a debtor pays a portion of the debts, is discharged of the rest, and is
allowed to continue in business.
When the words in a contract have more than one meaning, they are cut from the
contract.
Different standards for air quality apply to existing sources of pollution and major new
sources.
The key to liability under Section 10(b) of the Securities Exchange Act of 1934 and
SEC Rule 10b-5 is whether undisclosed inside information is material.
Setting realistic workplace goals can reduce the probability that employees will act
unethically.
Under the act of state doctrine, a firm whose assets a foreign government has expro-
priated may not recover compensatory damages in a U.S. court.
A divorce occurring after the execution of a will revokes dispositions of property to the
former spouse.
An artisan’s lien requires that the lienholder must have agreed to provide certain
services on a credit, not a cash, basis.
An acceptance must be unequivocal.
Alienation is a transfer of contract rights between citizens of different nations.
Unlike a “natural person,” a corporation cannot be compelled to give self-incriminating
testimony.
The Environmental Protection Agency periodically updates the pollution standards.
Express powers of a corporation can be found in the law of the state of incorporation.
The doctrine of sovereign immunity can immunize a foreign nation from the
jurisdiction of U.S. courts.
A seller must use words such as “warrant” to make an express warranty.
Creditors attempting to collect debts are generally considered to be debt-collection
agencies.
A sole proprietorship’s income is taxed as the owner’s personal income.
Certain debts are not dischargeable in bankruptcy.
Major credit reporting agencies must provide consumers with free copies of their own
credit reports every twelve months.