Ralph offers to sell Sophie, who is seventeen years of age, a car about which Ralph
intentionally misrepresents several material facts. In reliance on the misrepresentations,
Sophie buys the car. To prove fraud in this transaction, Sophie would have to show that
a. Ralph intentionally deceived Sophie.
b. Ralph made statements that were obviously exaggerated.
c. Sophie does not know anything about cars.
d. Sophie is under eighteen years of age.
Oceanic Vessels, Inc., and Pacific Harbor Company enter into a contract for a sale of a
boat. Oceanic is a merchant who deals in goods of the kind sold. The goods are
defective. Under the UCC, the implied warranty of merchantability is breached
a. only if Oceanic did not know about and could not have discovered the defect.
b. only if Oceanic did not know about the defect.
c. only if Oceanic knew about or could have discovered the defect.
d. regardless of what Oceanic knew or could have discovered.
Jody is an agent for Insta Cross Country Trucking Inc. In the course of Jodys
performance for the firm, Jody pays Heck for certain vehicle maintenance and repair
services. Jodys right to obtain the amount of those payments from Insta arises under the
principals duty of
a. avoidance.
b. cooperation.
c. indemnification.
d. reimbursement.
To avoid liability for intentional injuries, Vermont Power Corporation includes in its
contracts an exculpatory clause. This is
a. enforceable if the other parties are protected from liability.
b. enforceable if the other parties consent to it.
c. enforceable if the other parties have equal bargaining power.
d. not enforceable.
Lexy, a salesperson for My-T-Fine Corporation, learns that My-T-Fine will increase the
dividend it pays to shareholders. Lexy buys 10,000 shares of My-T-Fine stock. When
the price increases, Lexy sells the shares for a profit. Lexy would not be liable for
insider trading if the information about the dividend was
a. material when she sold the stock.
b. public after she bought the stock.
c. public before she bought the stock.
d. speculative when she bought the stock.
Order Processing Corporation and Pinpoint Data, Inc., enter into a contract online in a
state that has enacted an unmodified version of the UETA. With regard to the E-SIGN
Act
a. the E-SIGN Act does not preempt this version of the UETA.
b. the E-SIGN Act preempts this version of the UETA.
c. the “fit between the acts is an issue for a court to determine.
d. the two acts “cancel each others application.
Global Enterprises Corporation (GEC) engages in what some unhappy ex-employees
and disgruntled consumers consider to be bad corporate behavior. These individuals
post “horror stories about GEC on rogue Web sites. By providing a forum for
complaints, the potential for damage to the reputation of any corporation via the
Internet has
a. decreased.
b. increased.
c. neither decreased nor increased.
d. both decreased and increased.
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 bad weather destroys Garden Orchards apple crop,
Harukos obligation to deliver apples to Fresh Produce is
a. breached.
b. discharged.
c. not affected.
d. suspended.
Mary, who is charged with a crime, claims that Nick, a government agent, entrapped
her. For entrapment to be a valid defense
a. Mary must not have been predisposed to commit the crime.
b. Nick must have pressured Mary into committing the crime.
c. Nick must have suggested that the crime be committed.
d. all of the choices.
Bob writes a check on his account at County Bank to Dona, a famous singer. The
person claiming to be Dona is an imposter, however, named Edy. Edy indorses the
check to Frank, for whom County Bank cashes it. Ultimately, the loss will most likely
fall on
a. Bob.
b. County Bank.
c. Dona.
d. Frank.
Genna is a director of Fashion NOW Corporation. Without informing Fashion NOW,
Genna starts up Evertrendy, Inc., to compete. Genna is liable for breach of
a. no duty or rule
b. the business judgment rule.
c. the duty of loyalty.
d. the right of participation.
Superior Energy Corporation engages in ethical behavior solely for the purpose of get-
ting good publicity and thereby increasing profits. Superior is
a. acting unethically in its pursuit of publicity.
b. acting unethically in its pursuit of profits.
c. acting unethically in its setting of priorities.
d. not acting unethically.
Tilly, the chief financial officer for USA Products Corporation, attempts to apply
Christian precepts in making ethical decisions and in doing business. In applying
duty-based ethical standards that are derived from a religious source, Tilly would
consider the motive behind an act to be
a. irrelevant.
b. the least important consideration.
c. the most important consideration.
d. the only consideration.
Dales debts are discharged in a liquidation bankruptcy. With respect to Dales
prebankruptcy debt, Even Stevens Credit Reporting Agency must automatically report
a. nothing.
b. the debt as “discharged, except the nondischargeable debt.
c. the debt as “discharged, including the nondischargeable debt.
d. the debt as “unpaid.
Parker, a salesperson for Quality Textiles, Inc., shows Rosa, a fabric buyer for Style
Clothing Company, samples of cloth, stating that any shipment will match the samples.
This statement is
a. an express warranty.
b. an implied warranty.
c. a warranty of title.
d. puffing.
On behalf of the rock group Uno, their manager Thalia agrees to a performance in
Seaside Amphitheatre on July 4. Rex, acting for Seaside Productions, sends a written
copy of the agreement to Thalia to be signed. Typically, businesspersons put their
contracts in writing to
a. ensure proof of the contracts existence.
b. create substance from form.
c. obtain a check or other negotiable instrument.
d. practice their “letters of credit.
The board of directors of Integral Components Corporation consists of Frida, Gayla,
and Hart. A quorum is the minimum number of these directors
a. who must be at odds in a dispute to call for its resolution.
b. who must be present to validly transact business.
c. that the shareholders may remove from office at any one time.
d. whose positions must be vacant to warrant an election.
Fizzical Fitness, a gym, leased its facilites and equipment from Gym Gear Inc. Fizzical
agreed to buy towels and other supplies only from Gym Gear at prices set by the seller
at the time of delivery. Later, Fizzical filed a suit against Gym Gear, alleging that the
prices were set improperly. According to the majority in Casserlie v. Shell Oil Co., an
inquiry into Gym Gears motive in setting the prices is not necessary if it acted
a. in good faith.
b. with the motive of driving competitors out of business.
c. with the intent of making the most profit in the least time.
d. to set commercially unreasonable and discriminatory prices.
Upton borrows $150,000 from Valley Credit Union to buy a home, which secures the
loan. Three years into the term, Upton stops making payments on it. Valley Credit
repossesses and auctions off the property to Wesley. The sale proceeds are not enough
to cover the unpaid amount of the loan. In most states, Valley Credit can ask a court for
a. a deficiency judgment.
b. a reverse mortgage.
c. a short sale.
d. nothing.
Intoxicated, Clio agrees to sell her restaurant, Diners Café, to Evan for half of its real
market value. This deal is most likely void if
a. Clio appeared intoxicated to Evan.
b. Clio disaffirms the contract after becoming sober.
c. Clio was so intoxicated as to have no memory of the deal.
d. Evan fraudulently induced Clio to become intoxicated.
Betty files a suit against Carl. Before going to trial, the parties meet, with their
attorneys to represent them, to try to resolve their dispute without involving a third
party. This is
a. arbitration.
b. litigation.
c. mediation.
d. negotiation.
Flo agrees to work as Garys personal accountant for one year but dies in the sixth
month of the contract. Flos estate
a. is discharged from any contractual liability.
b. must find a competent accountant to fulfill the contract.
c. must pay liquidated damages.
d. must refund any money paid to Flo on the contract.
Master Metals Corporation is publicly held. Under the Securities and Exchange
Commissions “notice and access e-proxy rules, Masters dissemination of proxy
materials to its shareholders by posting them on a publicly accessible Web site is
a. allowed in any circumstance but not required.
b. allowed only if warranted.
c. prohibited.
d. required.
To raise capital to form Plasticity Corporation with Quinn, Rona sells bonds and stock
in other companies, and plans to register an initial public offering under the Securities
Act of 1933. SEC Rule l0b-5 covers
a. most forms of securities.
b. only bonds.
c. only securities registered under the Securities Act of 1933.
d. only stock.
Ula wants to initiate a suit against Valley Farms by filing a complaint. The complaint
should include
a. an explanation to refute any defense the defendant might assert.
b. a motion for summary judgment.
c. a motion to dismiss.
d. a statement of the facts necessary to show Ula is entitled to relief.
In a suit against Sandy, Taylor obtains a remedy. In the U.S. legal system, this remedy
will most likely be
a. an injunction.
b. damages.
c. rescission.
d. specific performance.
Employment Sources, Inc., enters into a contract with Fred. If Fred is a minor, this
contract is most likely
a. enforceable.
b. unenforceable.
c. void.
d. voidable.
Principal Resources Corporation contracts with Quality Construction to build an
addition to Principals corporate office building. Quality contracts with Rite Supply
Company for materials for the addition but refuses to pick up the materials. Meanwhile,
Principal hires Skye, a certified public accountant, to work in its cost-accounting
division as an employee, with no authority to hire or supervise others. Skye asks Theo,
an outside experienced accountant, to advise her on certain accounting procedures but
fails to pay Theo for the service. Principal also contracts with Uma, a salesperson, to
solicit orders for its products in a designated territory. Uma obtains an order from Verity
Industries, Inc., which is assured the order will be filled soon. But Uma does not follow
through with the paperwork and fails to submit the order to Principal. Verity suffers a
loss. Rite Supply, Theo, and Verity Industries claim Principal is liable under agency law.
Discuss fully whether an agency relationship was created by Principal with Quality
Construction, Skye, or Uma.
Kelsy obtains a business liability insurance policy from Luminous Insurance Company
for Kelsys Framing & Art Supplies store. When an event occurs that gives rise to a
claim, Luminous has a duty to
a. investigate to determine the facts.
b. file a suit against Kelsy so that a court can settle the claim.
c. find a third party on whom to impose liability.
d. refund any unearned amount of the premium.
Leon files a suit against Moira, a medical doctor, alleging negligence. As a physician,
Moira is held to the standard of
a. a blameless individual.
b a faultless ordinary person.
c. a reliable professional.
d. a reasonable physician.
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.
Hua, a resident of Illinois, owns a warehouse in Indiana. A dispute arises over the
ownership of the warehouse with Jac, a resident of Kentucky. Jac files a suit against
Hua in Indiana. Regarding this suit, Indiana has
a. federal question jurisdiction.
b. in personam jurisdiction.
c. in rem jurisdiction.
d. no jurisdiction.
Heidi and Ian are directors and shareholders of Globe Software, Inc. Heidis written
authorization to Ian to vote Heidis shares at a Globe shareholders meeting is
a. a violation of the duty of loyalty.
b. a preemptive right.
c. a proxy.
d. a quorum.
LaDonna signs a one-year lease with Mae to occupy an apartment in Ames, Iowa, near
the University of Iowa. LaDonna needs the apartment only for two semesters and may
have to sublet it for the rest of the term. LaDonnas tenancy is
a. a periodic tenancy.
b. a tenancy at will.
c. a tenancy by the entirety.
d. a fixed-term tenancy.
SEC Rule 10b-5 applies in relatively few cases involving the trading of securities.
A forum-selection clause indicates the place for the resolution of a dispute arising under
a contract.
Joint ownership of property in and of itself creates a partnership.
In a general partnership, the partners are personally liable for the debts of the
partnership.
A license is the revocable right of a person to come onto another persons land.
A customer must examine a bank statement and report any discovered forged signature
to recover from the bank for the forgery.
A bank that has certified a check is under no obligation to accept it.
Criminal law focuses on duties that exist between persons.
A financing statement is effective for no more than five months from the date of filing.
An expression of opinion by a seller will not usually create a warranty.
To create an enforceable security interest, the secured party must give value.
A debtors vehicle is never exempt from satisfaction of a judgment debt.
Recreation & Sports Equipment Corporation sells a product that is capable of seriously
injuring consumers who misuse it in a foreseeable way. Does the firm owe an ethical
duty to take this product off the market? What conflicts might arise if the firm stops
selling this product?
Copyright protection is automaticregistration is not required.
A manufacturers duty of care does not extend to the inspection and testing of products
bought to incorporate in the final product.
If a lessee wrongfully refuses to accept goods that conform to a contract, the lessor
must tender substitute goods.
In a fee simple absolute, the owner has the greatest aggregation of rights, privileges,
and power possible.