Yves is an accountant charged with negligence by Zesty Soup Company, a client. Yves
may successfully defend against the claim if he can show that
a. scienter was lacking.
b. he complied with all International Financial Reporting Standards.
c. the negligence was not the proximate cause of the clients losses.
d. the negligence was only contributory.
Rural Utility, Inc., enters into a contract with Shovel Excavation Service to dig up,
replace, and rebury Rurals cables in a certain location. Rural advances Shovel 10
percent of its cost. If the parties rescind the contract, Shovels refund of the payment
would be
a. a penalty.
b. liquidated damages.
c. restitution.
d. specific performance.
Bud approves on behalf of Codybut without authorizationa contract with Dik to build a
new silo. Cody does not ratify the contract. Later, Dik tries to enforce the deal. This
attempt will be
a. partly successful.
b. partly unsuccessful.
c. totally successful.
d. totally unsuccessful.
Timber Products, Inc., and Walt, a consumer, enter into a contract for a sale of plywood.
If the contract includes a clause that is perceived as grossly unfair to Walt, its
enforcement may be challenged under the doctrine of
a. good faith.
b. square dealing.
c. the mere image rule.
d. unconscionability.
Kitsch Niche Corporation is a noninvestment company that wants to issue $3 million of
stock in a twelve-month period. Kitsch Niche, with less than $20 million in annual
sales, qualifies as a small business issuer. Before Kitsch Niche sells the stock, it must
provide investors with
a. an offering circular.
b. a notice of the issue.
c. a red herring prospectus.
d. a tombstone ad.
Rita borrows $30,000 from South State Credit Union. South State accepts Ritas equity
in her home as collateral, which can be seized if the loan is not repaid on time. This is
a. a home equity loan.
b. a hybrid mortgage.
c. a reverse mortgage.
d. a violation of the law.
Lana applies for a firefighters job with Metro City, which responds with a letter setting
an appointment for a medical exam. The letter also states that it is “an employment offer
conditioned on the applicant passing the exam. This letter is
a. a bilateral contract that Lana accepted by applying for the job.
b. a quasi contract on which Lana can rely for employment.
c. a unilateral contract that Lana can accept by passing the exam.
d. no contract.
Lena borrows from Mac and Nicol, using the same collateral for both loans. Only Nicol
has a perfected security interest. Lena defaults on both loans. The party with first rights
to the collateral is
a. Lena.
b. Mac and Nicol, in proportion to Lenas debt to each.
c. Mac only.
d. Nicol only.
Lani is asked to serve as a witness to Monas will. To qualify, Lani must be
a. a collateral heir.
b. a lineal descendant.
c. eighteen years of age or older.
d. mentally competent.
Greta is a member of Hovercraft LLC. As a member, Greta is
a. a manager or officer, but not an owner.
b. an investor, but not a manager, officer, or owner.
c. an owner.
d. a participant, but not an investor, manager, officer, or owner.
Jen makes a gift of a check to Kilroy who takes it in good faith and without notice of
any claim, defense, or defect. With respect to this check, Kilroy is
a. an extraordinary holder in due course.
b. an ordinary check passer.
c. an ordinary holder.
d. an ordinary holder in due course.
Grace applies for a homeowners insurance policy on her house with Heroic Insurance
Company through Ian, a broker. In this transaction, Ian is
a. an agent for both parties.
b. Graces agent, and not Heroics agent.
c. Heroics agent, and not Graces agent.
d. not an agent.
Fanny buys clay to throw pottery, which is glazed and fired in a kiln. The finished
products are sold to Gifte Shoppe, which sells these items and others to customers who
often present them as gifts. Thus, property can be acquired in various ways. The most
common way to acquire personal property, however, is to
a. buy it.
b. commingle it.
c. produce it.
d. receive it as a gift.
Liz trespasses on Mega Corporations property. Through the use of reasonable force,
Megas security guard Ned detains Liz until the police arrive. Mega is liable for
a. assault and battery.
b. false imprisonment.
c. intentional infliction of emotional distress.
d. none of the choices.
Britney, an employee of Computer Associates, is arrested at work. A grand jury issues a
formal charge against Britney for larceny. This charge is
a. an arraignment.
b. an indictment.
c. an information.
d. an inquisition.
Quik Fix-It, Inc., offers Pam a job as a plumber. No time for acceptance is specified in
the offer. The offer will terminate
a. after a reasonable period of time.
b. after a typical work week (five business days).
c. after a usual month (thirty calendar days).
d. never.
Shade Tree Lending Corporation advertises loans as fixed-rate loans but, in fact, their
rates or payment amounts will change. This is
a. a legal and ethicalbut morally arguablefinancial ruse.
b. a legalbut unethicalbusiness practice.
c. a necessary tactic to generate a profitable loan in todays market.
d. a violation of the law.
Fact Pattern 23-1
Desi starts up eSites, an Internet service, and leases office space in a building owned by
Fred. The lease requires Desi to pay Fred a base rental of $1,250, plus 10 percent of
eSites profits, each month. The term is two years. Desi hires Gwen to work at eSites
tech support desk at an hourly wage of $12.50, plus a commission of 10 percent of the
profits. The term is also two years.
Refer to Fact Pattern 23-1. Desi and Fred are
a. not partners, because Fred does not have an ownership interest or management rights
in eSites.
b. not partners, because the lease includes a “base rental.
c. not partners, because the rent includes only 10 percent of the profits.
d. partners in a partnership for two years.
Omega Corporation makes and markets digital timers, clocks, and related products.
Like other business corporations, Omega issues securities to
a. increase its market share.
b. obtain financing.
c. reduce its production costs.
d. safeguard its facilities.
Fealty Credit Corporation asks its employees to evaluate their actions and get on the
ethical business decision-making “bandwagon. Guidelines for judging individual
actions include all of the following except
a. an individuals conscience.
b. business rules and procedures.
c. loopholes in the law or company policies.
d. promises to others.
Nina, a high school teacher, requires Milo and her other students to submit their
assignments to a plagiarism service to be compared to the contents of an online
database of scholarly works. The assignments are also archived in the database. A
federal court is most likely to find that this
a. infringes the studnets copyright interests.
b. qualifies as “fair use and does not infringe the students copyrights.
c. falls under the definition of “loss in the Computer Fraud and Abuse Act.
d. fits within the “damages clause of the Virginia Computer Crimes Act.
NOW Shopping Mall Corporation leases space to Only U Stores and Pik-Ur-Choice,
Inc. Later, Pik-Ur-Choice begins to sell items that are similar to Only Us goods, and
Only U abandons its space before the end of the lease term. Only U is liable to
a. not NOW or its other tenants.
b. NOW and its other tenants, except Pik-Ur-Choice, for any effect on their business.
c. NOW and its other tenants, including Pik-Ur-Choice, for any effect on their business.
d. NOW only for the unpaid rent.
Geoff serves in a representative capacity for Huck. To accomplish the objectives of this
relationship, Geoffs authority can be implied
a. by contradiction.
b. by custom.
c. by lack of reason.
d. under no circumstances.
Cliff dies without a will. His survivors include his spouse Dana and his two children,
Efrem and Fay. Under applicable laws, Dana will probably receive
a. all of Cliffs estate.
b. none of Cliffs estate.
c. one-half of Cliffs estate.
d. one-third of Cliffs estate.
Any decision by the management of Fast-Food Franchise Corporation may significantly
affect its
a. operators only.
b. operators, owners, suppliers, the community, or society as a whole.
c. owners only.
d. suppliers, the community, or society as a whole only.
Harbor Bay Bank has made mortgage loans to consumers that qualify for the Home
Affordable Modification Program (HAMP), which offers incentives to lenders to
change the terms of certain loans. The purpose of HAMP is to
a. convey property through lenders to consumers who can afford it.
b. force lenders to forgive all high-risk mortgages.
c. reduce monthly payments to levels that homeowners can pay.
d. transfer affordable property to investors to lease to consumers.
Louislarger and stronger than Micathreatens to hit Mica before hitting and injuring him.
Mica files a suit against Louis for assault and battery. Mica will most likely recover for
a. assault and battery.
b. assault but not battery.
c. battery but not assault.
d. neither assault nor battery.
Skyler dies after having made a valid will. Skyler has died
a. in escheat.
b. in probate.
c. intestate.
d. testate.
Summit Credit Corporation lends funds to Toby, a consumer, to apply to the cost of a
sport utility vehicle (SUV), which is the collateral for the loan. An enforceable security
interest also requires
a. a written agreement and Summits possession of the SUV.
b. a written agreement or Summits possession of the SUV.
c. the vehicle sellers acknowledgement of the loan in writing.
d. Tobys possession of the SUV.
McCall and Teresa enter into a contract for the distribution of McCalls produce to local
restaurants for which Teresa agrees to pay. McCall transfers his right to payment under
the contract to Midtown Bank. This transfer is
a. a delegation.
b. an assignment.
c. a novation.
d. prohibited by law.
Refined Commodities, Inc., agrees to deliver ten tons of sheet metal to Select Builders
Corporation. The agreement states that delivery is to be within “3 days, although the
parties intend “30 days. Refined cannot convince Select to amend the contract. Refined
should seek
a. damages.
b. reformation.
c. rescission.
d. specific performance.
A record does not require a signature to have legal effect under the UETA.
Quality Products, Inc., files a suit against Retail Sales Corporation. Sid is a witness for
Quality. Tod is a witness for Retail. Quality may direct interrogatories to
a. Retail only.
b. Retail, Sid, or Tod.
c. Sid only.
d. Sid or Tod only.
A director usually serves on a corporations board for a life term.
A tenant is not responsible for the ordinary wear and tear of leased premises.
A seller can terminate a contract on the basis of commercial impracticability if increases
in the sellers costs threaten to undercut its profits.
Under the UCC, a sellers tender of goods that do not conform in every way to a contract
is not a valid tender.
Unauthorized access to an electronic fund transfer system is a federal felony.
A partnering agreement can indicate the parties intent with respect to subsequent
contracts.
Law includes enforceable rules governing relationships between individuals and their
society.
An event must be certain to occur to constitute a contract condition.
On default, unless the security agreement states otherwise, the secured party has the
right to repossess collateral.
A corporate takeover is the process of acquiring control over a corporation by the
purchase of a substantial number of the voting shares of its stock.
When a member dissociates from a limited liability company, the members duty of
loyalty continues.
According to utilitarianism, an action that affects the majority adversely is morally
wrong.
A bailee is a buyer or lessee.
An electronic symbol, adopted by a person with the intent to sign an e-record, is an
e-signature.
An employer must modify its job-application process so that those with disabilities can
compete for jobs with those who do not have disabilities.
Restrictions on imports may include quotas.
An independent contractors physical conduct is controlled, or subject to control, by his
or her employer.
Resolving whether a promise should be enforced is the essence of contract law.