Fact Pattern 25-1
First State Bank issues a letter of credit in favor of Oboe Company, an American firm,
to facilitate an international sales contract to buy resources from Lapland Mining, Ltd.,
a Finnish company.
Refer to Fact Pattern 25-1. To obtain payment, Lapland must comply with all of the
requirements of the letter of credit
a. strictly.
b. substantially.
c. reasonably.
d. materially.
Based on Blutos conduct, Cass reasonably believes that Dee has the authority to act on
Blutos behalf even though Dee does not have the actual authority to do so. Cass makes
a payment to Dee for Bluto. Dee keeps the money and disappears. Bluto
a. can demand that Cass make a repayment directly to Bluto.
b. can obtain damages from Cass for Dees misconduct.
c. may be estopped from denying that Dee had authority.
d. must repudiate Dees misconduct to avoid liability.
Fact Pattern 10-1
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 Mutuals investments. Refer to Fact
Pattern 10-1. With respect to Mutuals duties, Neils performance most likely
a. discharges Mutual from the contract.
b. has no effect on Mutuals performance.
c. increases Mutuals duties under the contract.
d. suspends Mutuals duty to perform.
Fact Pattern 25-1 (Questions 2831 apply)
First State Bank issues a letter of credit in favor of Oboe Company, an American firm,
to facilitate an international sales contract to buy resources from Lapland Mining, Ltd.,
a Finnish company.
Refer to Fact Pattern 25-1. First State Bank must pay Lapland when Lapland
a. enters into the contract with Oboe.
b. verifies that Oboe has the money to pay for the purchase.
c. complies with the terms and conditions of the letter of credit.
d. none of the above.
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.
Nico is interested in buying a franchise from Oz Inc. For Nico to make an informed
decision concerning this purchase, Oz must disclose in writing or online
a. general estimates of costs and sales, but not the basis for them.
b. material facts such as the basis of projected earnings figures.
c. no information.
d. start-up requirements, but not renewal conditions.
Denise, Ervin, and Flem occupy the positions of directors on the board of Gallery
Corporation. As directors, they may not
a. authorize major corporate policy decisions.
b. decide to issue stock and bonds, and declare dividends.
c. select and remove corporate officers.
d. support businesses that directly compete with Gallery.
Computer World (CW), after repossessing a multimedia system from Dave, a consumer,
decides to keep the system instead of reselling it. CW sends written notice to Dave. CW
can now keep the system
a. only after attempting an unsuccessful public sale of the system.
b. only after notifying any other appropriate secured party.
c. unless Dave objects.
d. under any circumstances.
United Industrial Corporation gives preferential treatment in hiring and promotion to
the members of all protected classes. This treatment results in discrimination against
members of the majority. This is
a. a bona fide occupational practice.
b. a business necessity.
c. constructive discharge.
d. reverse discrimination.
Speedy Shipping Corporation applies to TransInsurance Company for a fire insurance
policy on Speedys warehouse. On the application, Speedy misrepresents the age of the
property to obtain a lower premium. When a fire soon destroys the warehouse,
TransInsurance can
a. deny payment, because a fire destroyed Speedys warehouse.
b. deny payment, because of Speedys fraud in the application.
c. not deny payment, because a fire destroyed Speedys warehouse.
d. not deny payment, because the application is not part of the policy.
Stan is liable for the conversion of Tylers business law textbook
a. if Tyler proves that the book was in Stans possession when it disappeared.
b. if Tyler proves that the book is now in a third partys possession.
c. if Tyler proves that the book was not in his possession when it disappeared.
d. under no circumstances.
Doctors Medical Clinic orders 1,000 bandages from Emergency Supplies Company but
fails to specify the sizes. The bandages are delivered in an assortment of sizes. Doctors
Medical Clinic may
a. accept the bandages “as is only.
b. accept the bandages “as is or reject the entire shipment only.
c. accept only the bandages that it wants and reject the rest.
d. reject the entire shipment only.
Wilbur signs a note that includes a clause under which the notes holder can delay the
date of its payment indefinitely. This is
a. an acceleration clause.
b. an extension clause.
c. an immaturity clause.
d. a stop-payment clause.
Under the Resource Conservation and Recovery Act, before hazardous waste generated
by Xtreme Industries, Inc., can be transported, the waste must be properly labeled and
packaged by
a. the federal Environmental Protection Agency.
b. the local Resource Conservation and Recovery Committee.
c. the state Environmental Regulatory Commission.
d. Xtreme Industries, Inc.
Garden Tool Company makes hedge trimmers. Troy is injured while using a Garden
Tool trimmer and sues the company for product liability based on negligence. To win,
Troy must show that
a. Garden Tool did not use due care with respect to the trimmer.
b. Garden Tool misrepresented a material fact regarding the trimmer.
c. Troy was experienced in the use of trimmers.
d. Troy was in privity of contract with Garden Tool.
Khalis debt to Lew is past due. Lew obtains a judgment against Khali to collect the
debt, but Khali refuses to pay. Lew asks the court to order Khalis employer to pay a
portion of Khalis paycheck to Lew. This is a request for
a. an exemption from most federal limits on creditors actions.
b. an order of garnishment.
c. an order that would violate most state laws.
d. a right of contribution.
Phil and Kelsey enter into a contract for a sale of Harmonica, a dog. Phil pays the price,
but Kelsey does not deliver. Phil can use specific performance as a remedy if
a. Kelsey is lawfully withholding delivery of Harmonica.
b. Phil cannot effectively cure the defect.
c. Harmonica is unique.
d. Harmonica has not been identified to the contract.
Joy and Kris enter into a contract for Kris to lay sod in Joys yard for which she agrees
to pay Kris. When Kriss schedule conflicts, she contacts Leza, to whom Kris “assigns
all rights under the contract. Kris is
a. absolved of any liability under the contract.
b. in breach of the contract with Joy.
c. liable to Joy if Leza does not perform.
d. liable to Leza for inducing a prohibited contract.
Louis, a certified public accountant and an investor, and Maria, an insurance
salesperson and a realtor, may create an agency relationship for
a. a business purpose only.
b. a legal purpose only.
c. any purpose.
d. no purpose.
Prime Property Investments, Inc., files a financing statement to provide notice of its
security interest in the property of Qwik Breakfast Restaurant. The initial effective term
of a financing statement is a period of
a. five days.
b. five months.
c. five weeks.
d. five years.
Niche Stores, Inc., must hold a shareholders meeting
a. once a month.
b. once a year.
c. once every two years.
d. only when it is called by the board of directors.
As the beneficiary of a business trust, Kevins liability for trust debts and obligations is
a. limited to his capital investment in the trust.
b. limited to his personal assets.
c. nothing.
d. unlimited.
Jared uses his computer to secretly install software on thousands of personal computers
without their owners knowledge. The program can reproduce itself and spread from one
computer to another via any USB port. This program is
a. a hacker.
b. a bot.
c. a virus.
d. a worm.
Fact Pattern 10-3
Estelle enters into a contract to buy 132 acres from Desmond to subdivide and sell in
quarter-acre lots for Country Acres, a residential development.
Refer to Fact Pattern 10-3. If Estelle breaches the contract, Desmonds remedy would
most likely be
a. a certain ratio of the amount that Estelle has in liquid funds.
b. a percentage of Estelles unrealized profit.
c. the difference between the lands contract and market prices.
d. specific performance.
GR8 Stores, Inc., hires Haul-Way Company, a common carrier, to transport fifty
large-screen HDTVs from San Diego to Phoenix. En route, a pothole causes the truck to
crash, damaging the goods. Liability for the damage most likely rests with
a. GR8 Stores and Haul-Way.
b. GR8 Stores only.
c. Haul-Way only.
d. neither GR8 Stores nor Haul-Way.
Omar sends Nell an e-mail ad touting software that will cloak its user in “the anonymity
of the Internet. Nell pays Omar for the software, which is never delivered to her. This is
online
a. auction fraud.
b. puffery.
c. retail fraud.
d. frustration but not fraud.
Fact Pattern 14-2
Jake is the maker of a $2,000 promissory note payable to Kim. Kim indorses the note to
Lou who, in turn, indorses it to Mona, who then indorses it to Nat, the present holder.
Refer to Fact Pattern 14-2. Suppose that Mona pays Nat on the note. With timely notice
to the proper parties, Mona may collect payment on the note from
a. Jake, Kim, or Lou.
b. Jake or Kim only.
c. Lou only.
d. no one.
Uri is an employee of Verity Security Services. For Uri to obtain the benefits of federal
wage-hour requirements, Verity must be engaged in
a. business activity.
b. employment at will.
c. international commerce.
d. interstate commerce.
Frank slips and falls on Guys Harbor Tour Boat and is injured. Frank files a suit against
Guys for $500,000. If Frank is 20 percent at fault and Guys is 80 percent, under the “50
percent rule comparative negligence principles, Frank would recover
a. $0.
b. $250,000.
c. $400,000.
d. $500,000.
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.
Securities that are exempt from the registration requirement can generally be sold and
resold without being registered.
When Looking Glass Corporation wishes to issue certain securities, it must provide
sufficient information for Alice, and other unsophisticated investors, to evaluate the fi-
nancial risk involved. Specifically, the law imposes liability for making a false
statement or omission that is “material. What sort of information would Alice consider
material?
A principal is liable for harm caused to a third party by an agent who commits a tort
while acting in the scope of his or her employment.
A joint refusal to deal with a particular person or firm is always a violation of antitrust
law.
Monopoly power is an extreme amount of market power.
All mistakes of fact are material.
“Consideration refers to the genuine assent of all of the parties to a contract.
U.S. antitrust law may protect foreign consumers and competitors from violations by
U.S. firms.
An ethics program can clarify what a company considers to be unacceptable conduct.
Adhesion contracts are often held to be contrary to public policy.
Conditioning the sale of one product on the purchase of another is a tying arrangement.
Because embezzlement is considered a white-collar crime, it cannot be considered a
computer crime.
Some promises are not legally binding contracts.
A group of individuals getting together to finance a particular project may form a
syndicate.
Unlike an ordinary bailee, a warehouse company cannot limit its liability.
Fungible goods are goods that cannot be delivered by physical transport.
A bailee is a buyer or lessee.
A federal judge must adhere strictly to federal sentencing guidelines.
To be valid, a security agreement must contain a description of the collateral.