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Shelly offers to sell Jane goods both parties know are stolen. Jane accepts the offer, and
agrees to pay for the goods. Later, Jane refuses to accept or pay for the goods. If Shelly
sues Jane for breach of contract, what is the probable result?
a. The law would enforce this valid, enforceable contract.
b. Jane would win as this is a voidable contract.
c. Shelly would win as this is a unilateral contract.
d. The law would not enforce Jane's promise, as it does not have a lawful purpose.
The landmark federal labor statute that requires financial disclosures by union
leadership and guarantees union members free speech and fair elections is the:
a. NLRA.
b. Labor-Management Relations Act.
c. Labor-Management Reporting and Disclosure Act.
d. Norris-LaGuardia Act.
Walter worked nights as a clerk in a fast-food store. On his last work shift, Walter's boss
told him, "I'm really grateful for the year that you have worked here. I am going to give
you a bonus of $1,000 in your last paycheck." When Walter got his last paycheck, there
was no bonus. If Walter sues, the likely result will be:
a. Walter will win, as the promise is enforceable.
b. Walter will lose, as he gave no consideration.
c. Walter will lose unless the promise was in writing.
d. Walter will win, as no consideration is required to modify an employment contract.
Which of the following is the most appropriate term to use when describing
management's duty to its shareholders?
a. Official duty.
b. Legal duty.
c. Fiduciary duty.
d. Statutory duty.
Discuss the effect on an instrument of: (a) contradictory amounts between the numerals
and amount written in words on a check; (b) the interest rate left blank on a promissory
note; and (c) contradictory terms that are typed onto a promissory note and terms that
are preprinted on the note form.
Tony fell and injured himself in a Mega Toy Store. Mega Toy Store is incorporated in
Delaware. Tony is a resident of Nevada but was injured in a Mega Toy Store located in
Arizona. Mega Toy does not do business in Nevada. Tony's damages exceed $100,000.
If Tony decides to sue Mega Toy Store:
a. he may file the lawsuit in an Arizona state court.
b. he may file the lawsuit in a federal district court in Arizona.
c. he must file the lawsuit in a federal district court because the federal courts would
have diversity jurisdiction in this case.
d. Either a or b.
Jurisdiction is:
a. the study of law.
b. the authority of a court to decide a particular type of case.
c. a federal court concept.
d. applicable only to appeals courts.
Abraham has just purchased his first car. His bank, First State Bank, loaned him the
money to buy the car and has required him to purchase insurance to protect the car as
the collateral for the loan. Which basic types of coverage should Abraham buy to satisfy
the bank requirement and to protect himself from the risks of operating an automobile?
a. Collision coverage only.
b. Collision and comprehensive coverage only.
c. Collision, uninsured motorist, and comprehensive coverage.
d. Collision, uninsured motorist, comprehensive, and liability coverage.
The Electronic Communications Privacy Act covers:
a. e-mail communications.
b. transmissions from cellular phones.
c. transmissions from pagers.
d. All of the above.
Kelley went ice skating on a neighbors pond, but she fell through a thin area into icy
waters. Kelley did not have permission to be on the property, and the neighbor did not
even know that she was there. Is the neighbor liable for Kelleys injuries?
a. Yes. The neighbor should have posted "thin ice notices.
b. No. Kelley was a trespasser and the neighbor could only be held liable for
intentionally injuring her or for gross misconduct.
c. It may depend on Kelleys age.
d. Yes, the neighbor is strictly liable.
Negligence concerns harm that:
a. is unforeseeable.
b. arises intentionally.
c. arises by accident.
d. is always substantial.
Which of the following transactions would be considered by the IRS to be a taxable sale
of assets? Changing the form of business from:
a. a corporation to an LLC.
b. a partnership to an LLC.
c. an LLC to a corporation.
d. All of the above.
Which of the following statements is incorrect concerning liquidated damages?
a. A liquidated damages clause will be enforced if, when the contract was made, it was
difficult to estimate actual damages.
b. The amount of liquidated damages must be a reasonable estimation of the actual
harm resulting from a breach.
c. Nominal damages are not the same thing as liquidated damages.
d. Liquidated damages are enforceable even if the amount is considered to be a penalty
on the breaching party.
Upon graduating from college, Kathy announced her plans to enter law school the
following fall and to marry Rick in December. Kathy's father was afraid that marriage
during her first year in law school might cause her to fall behind in her studies or cause
her to drop out of school. He called Kathy and promised her $10,000 if she postponed
her wedding until after completion of her first year of law school. Kathy agreed and
postponed the wedding for a year. Kathy successfully completed her first year of law
school, but soon thereafter, Kathy's father died. The administrator of her father's estate
claimed she was not entitled to the $10,000 because there was no consideration for her
father's promise. If Kathy sues the estate, she will probably be:
a. unsuccessful because her father's death terminated the contract.
b. successful, as there was consideration.
c. unsuccessful because her father received no benefit.
d. unsuccessful because it was merely fatherly advice not to get married during the first
year of law school.
The primary goal of the North American Free Trade Agreement (NAFTA) is to:
a. allow Canada, the United States, and Mexico to compete as a common economic
entity against other countries in the world.
b. allow for the free and unrestricted movement of people from one country to another
to improve the labor market of all three counties.
c. eliminate almost all trade barriers between the three nations.
d. All the above are correct.
A customer in a restaurant would be considered ________ to whom the restaurant
owner owes a duty ________.
a. a licensee; to warn of known dangers.
b. an invitee; of reasonable care.
c. a social guest; only to avoid intentionally injuring him.
d. none of the above.
In the historic case of Hamer v. Sidway, the nephew:
a. lost, as there was no consideration.
b. lost, as the uncle was dead.
c. won, as there was consideration.
d. won, as there was a completed gift.
Pamela is planning to sell her home decorating store to her daughter. Pamela has:
a. a greater duty to reveal problems in the business because her daughter assumes she
will be honest.
b. no duty to disclose hidden defects in the business.
c. a lesser duty to reveal problems in the business because she has a relationship of trust
with the buyer.
d. a duty to report only any latent defects she knows about that her daughter should not
be expected to discover herself.
The Toxic Substances Control Act regulates:
a. chemicals other than pesticides, foods, drugs, and cosmetics.
b. insecticides.
c. natural gas.
d. pesticides.
Generally, Rita signs her name using an infinity symbol rather than her legal name. Rita
signed an instrument using this symbol. Which statement is correct?
a. The instrument cannot be negotiable. To be a negotiable, the instrument must be
signed in Rita's legal name.
b. The instrument cannot be negotiable. To be negotiable, the instrument must be signed
in Rita's given name.
c. The instrument cannot be negotiable. To be negotiable, the instrument must be signed
using letters from the alphabet.
d. The instrument can be negotiable. Rita intended to indicate her signature.
An intentional tort involves conduct in which:
a. the defendant intended to harm the plaintiff.
b. the defendant intended a certain physical act which ends up injuring someone.
c. injuries are caused to someone because of the defendants neglect or oversight.
d. there is resulting punishment, including prison, for the defendant.
Unsolicited commercial e-mail (UCE) or unsolicited bulk e-mail (UBE) messages:
a. are commonly known as "cookies."
b. constitute about 80 percent of all e-mail.
c. are estimated to be fraudulent either in content or packaging in approximately
one-fourth of all cases.
d. although annoying, do lower the cost of connecting to the Internet.
The Lippman v. Shaffer case held that:
a. the business judgment rule did not apply to the case.
b. the business judgment rule protected the boards decision to make the payments in
question.
c. there was a contractual duty for the board to make the payments in question.
d. the motion for summary judgment was denied.
Sonny, a college student, places a telephone order for a new computer from Computers,
Inc. The price of the computer is $1500. The clerk who takes the order sends Sonny a
copy of the invoice. The next week, Sonny calls back and tries to cancel his order.
a. Sonny cannot cancel the order because Computers, Inc. accepted his order.
b. Sonny cannot cancel the order if he has received the invoice.
c. Sonny can cancel the order; the invoice is unenforceable against him, as he did not
sign the invoice.
d. Sonny can now cancel the order but only if he does so in writing within ten days.
Alpha and Xenon companies are both major international conglomerates. They are
negotiating a contract whereby Alpha will install a computer system for Xenon. One
clause in the contract states that Alpha will not be liable for damages caused by the
negligent installation of the computer system, except that Alpha warrants the system
and will fix any problem for a period of two years following installation. Alpha
completes the installation of the computer system. Xenon loads extensive amounts of
information on the system, but all of it is destroyed because Alpha negligently installed
the memory chips. Alpha fixes the memory, but Xenon incurred significant expenses in
recreating the lost information. Xenon sues for these expenses. Alpha defends with the
noted clause in the contract.
a. Xenon wins; these types of clauses are never enforceable.
b. Xenon wins; exculpatory clauses are sometimes valid, but this one would not be
valid.
c. Xenon wins; this exculpatory clause is not valid because it is unconscionable.
d. Alpha wins; this exculpatory clause is enforceable.
Laverne knew that her house was infested with termites. Nevertheless, Laverne listed
her house for sale by owner. Shirley had been looking for the perfect house for months
now. She was about to give up the search when she decided to stop at Laverne's open
house one Sunday afternoon. Shirley fell in love with the house, the yard, and the
neighborhood. Shirley was so excited about buying this house that she did not bother to
hire an attorney, hire a company to conduct a termite inspection, or talk to the neighbors
about the condition of the house. Within six months after buying the house, the front
porch started to crumble, exposing the rotten wood destroyed by termites. The
neighbors confirmed that Laverne had mentioned that the house was infested with
termites. Shirley wants out of the deal or money to repair the termite damage. Shirley's
claim against Laverne would most likely be based on:
a. a duty to disclose defects.
b. the implied warranty of habitability.
c. a partition action.
d. profit.
Discuss whether or not the following common transactions are bailments and if so, who
is the bailor/bailee, and what type of bailment is involved:
A) Renting storage space in Farmer's Frank's huge barn to keep your classic car out of
the snow and ice of winter. The rental agreement provides for $100/month rent and
Farmer Frank has the only access to the barn.
B) Hiring a moving company to move your belongings to a new residence.
C) Loaning your lawn mower to your neighbor.
D) Parking your car in a "park and lock" parking lot.
Lori and her friends burn an American flag as an act of political protest. Lori is arrested
for violating a state law that prohibits flag burning. The Supreme Court has ruled that
laws making it illegal to burn an American flag:
a. are void because they deny a person due process rights.
b. are void because a state court has no power to prosecute a person for burning the
federal flag.
c. are void because they violate a person's right to freedom of speech.
d. are valid.
Dean Builders agrees to purchase all of its sump pump requirements for the new houses
it builds from Satisfactory Sump Pump, Inc. These two business have had similar
agreements the last three years and Dean's requirements have averaged 100 sump
pumps per year. This year there was an unusually wet spring and Dean's requirements
doubled to 200 sump pumps. Because of the high demand of sump pumps, the market
price of the pumps tripled. Satisfactory Sump Pump, Inc. delivers 100 pumps at $75,
the contract price. Satisfactory has exhausted its inventory and cannot deliver any more,
so Dean buys the other 100 pumps from other suppliers at $225 each. Dean sues
Satisfactory Sump Pump, Inc. for the additional expense. What is the most likely result?
a. Satisfactory Sump Pump, Inc. wins; output and requirements contracts are not
enforceable since no quantity is stated.
b. Dean wins; Satisfactory Sump Pump, Inc. agreed to meet the needs of Dean and did
not do so, which is a breach.
c. Satisfactory Sump Pump, Inc. wins; requirements contracts are governed by a good
faith standard, and it was unreasonable for Dean to demand so many additional pumps.
d. Dean wins; the requirement of good faith applies only between merchants, and Dean
is not a merchant.
Which of the following is not a provision of the Sarbanes-Oxley Act of 2002?
a. Congress established the Public Company Accounting Oversight Board, which has
the authority to regulate public accounting firms, establishing audit rules and ethics
guidelines.
b. After five years with a client, the lead audit partner must rotate off the account for at
least five years.
c. Congress established the American Institute of Certified Public Accountants to
develop ethical guidelines in a Code of Professional Conduct.
d. Auditors must communicate regularly and completely with audit committees of their
clients and must describe options the firm considers in preparing financial statements.
Under which of the following does the insurer promise to pay the insured a fixed yearly
amount, as guaranteed income, after the insured attains a specified age?
a. Straight life policy.
b. Whole life policy.
c. Universal life policy.
d. Annuity contract.
Martin, Leah, and Pablo are considering forming a business. What factors should they
consider in making a choice of organization?
a. Ease of creation and operation.
b. Whether there is personal liability for the owners.
c. How the owners will be taxed.
d. All of the above.
All Seasons, Inc. ordered $5,000 worth of Christmas decorations from Santa, Inc. The
shipment of decorations was to arrive no later than October 1, but did not arrive until
December 1. All Seasons was able to purchase some of the unfulfilled order through
other suppliers, but had to pay 15% more than the price under contract with Santa, Inc.
As a result of the delay, All Seasons' sales were down 25%. All Seasons can recover:
a. punitive damages.
b. nominal damages.
c. compensatory damages and consequential damages.
d. compensatory damages, consequential damages, and punitive damages.
Distinguish between a contract and a gift. Give an example of each.
Firing an employee for her refusal to violate the law would raise a claim of wrongful
discharge.
Limited liability is a major advantage of a partnership as compared to a corporation.
Mega Corp has decided to subcontract about 30 percent of its production work to a
company located in Thailand. The subcontracting is designed to replace union workers
with cheaper labor. The work that will be contracted away had previously been done in
the company's main plant in New Jersey. The union representing the Mega Corp
workers claims this is an issue subject to mandatory bargaining. Management claims it
is a corporate organization decision and, thus, not subject to bargaining. Who is right?
The Uniform Probate Code has been adopted in all states.
Fraudulent, but not innocent, misrepresentation permits the injured party to rescind a
contract.
After the SEC completes its review of a preliminary registration statement, it sends the
issuer a comment letter setting forth changes that must be made.
Obscene speech is protected by the First Amendment.
Mabel, an 85-year-old widow who is in poor health, signs a contract with the only
nursing home in Anytown (the nearest alternative facility is 75 miles away). The
contract obligates Mabel to pay $4,000 per month for the rest of her life and for her
estate to pay the same amount for the period of time that the unit sits empty upon her
death. Mabel's daughter believes this agreement amounts to an adhesion contract. What
is an adhesion contract? What factors will a court look at in determining whether an
adhesion contract exists?
The FTC can impose a fine for each violation of a voluntary compliance affidavit, a
consent order, an FTC rule, or a cease and desist order, even one issued against
someone else.
Mary goes into Honest Harry's Electronics and purchases a TV. Mary agrees to pay for
the TV in 30 days on the store's "30 days same as cash" plan. This is an executory
contract.
Halbeck, LLC was negligent in its audit of E-treme, Inc. Unbeknownst to Halbeck,
E-treme used the financial statements to secure a loan from Great State Bank. Under the
foreseeable doctrine, Halbeck will be liable to Great State Bank for its losses on the
loan.
John was a licensed physician in Michigan. When he retired to Florida, he started
providing medical services to the people in his condo, relying on his Michigan license.
Isaac, John's next-door neighbor, owed John $2000 for medical services. John will be
able to enforce the contract he made with Isaac.
A landowner's highest duty is owed to licensees.
James purchased an abandoned lot. When he started to develop the land, he discovered
several underground storage tanks containing hazardous waste buried on the site. He
claims the seller, Richards, is liable to him for the cost of removing the tanks. Richards
claims he owned the lot for 20 years and never knew of the underground tanks.
Richards argues he purchased the land from Thomas and that Thomas or his heirs are
liable for the cost of removing the underground tanks. Explain whether Richards is
liable to James. Does Thomas or do his heirs have any liability to James or Richards?
Summary judgment is appropriate when there are no essential facts in dispute.
The NLRA requires the union and the employer to reach an agreement through
good-faith collective bargaining.
A corporation is required to have at least one class of stock with voting rights.
The 1934 Act requires companies with a class of stock that is publicly traded to make
regular filings with the SEC.
