Willton Bros. obtains from Marbowe Manufacturing a line of credit of $100,000, of
which Willton initially uses $27,000 for purchase of inventory. Marbowe may only have
a security interest in the inventory that covers the initial $27,000 advance.
a. True
b. False
Discuss which of the social ethics theories listed below you most agree with and why.
Discuss your reasons for disagreeing with the others.
a. Distributive justice
b. Social egalitarian
c. Libertarianism
An agent is not normally liable on a contract he makes with a third party on behalf of
a(n):
a. undisclosed principal.
b. disclosed principal.
c. unidentified principal.
d. All of these are correct.
A bill of lading serves as:
a. a receipt for the storage of goods.
b. evidence of the contract of insurance.
c. a document of title.
d. a contract for employment.
In an employment agreement with Carl, Arnold promises to work for Carl for the rest of
his life. This promise must be in writing or in proper electronic form to be enforceable.
a. True
b. False
The majority of states have adopted the 2001 revision of the Revised Uniform Limited
Partnership Act (ReRULPA), which reflects that LLPs and LLCs can meet many of the
needs formerly met by limited partnerships.
a. True
b. False
Deanne contracts with Leonard to paint her barn in two weeks. If Leonard breaches the
contract, Deanne can elect the remedy of damages or the remedy of injunctive relief to
prevent Leonard from providing his painting services for anyone else until he paints her
barn.
a. True
b. False
Marcella pays $12,000 down on a houseboat which Hugh had agreed to sell to her for
$64,000. Marcella then repudiates the contract. Hugh sells the houseboat to Lloyd in
good faith for $60,000. Marcella may recover from Hugh:
a. nothing, since she was the one who repudiated the contract.
b. her $12,000 down payment since Hughs contract with Lloyd created a novation and
discharged any duty Marcella had to pay anything toward the houseboat.
c. $8,000 in restitution, which represents Marcellas $12,000 down payment less the
$4,000 in damages Hugh sustained because of Marcellas breach.
d. only a nominal amount.
Under the CISG, contracts for the sale of goods do not have to be evidenced by a
writing to be enforceable, unless one of the parties has its place of business in a country
that provides otherwise.
a. True
b. False
Which of the following is true with regard to an exculpatory clause?
a. An exculpatory clause excuses one party from liability for her own tortious conduct.
b. Where one party has a superior bargaining position that has enabled him to impose an
exculpatory clause upon the other, the courts are inclined to nullify the provision.
c. An exculpatory clause may be unenforceable for unconscionability.
d. All of these are true.
An agreement to refrain from a particular trade, profession, or business is enforceable if
two requirements are met: that the purpose of the restraint is to protect a property
interest of the promisee and the restraint is no more extensive than is reasonably
necessary to protect that interest.
a. True
b. False
As amended in 2008, SEC rules define a small business issuer as a noninvestment
company with less than $10 million in public float.
a. True
b. False
Under FTC regulations and state legislation, a seller may not advertise goods at one
price and then raise the price once demand has been stimulated.
a. True
b. False
An “electronic agent” is not a true agent since it is not a person.
a. True
b. False
A quorum of shares must be present at the shareholders’ meeting, either in person or by
proxy, to make effective decisions.
a. True
b. False
Business law is primarily public law.
a. True
b. False
Bill goes to First Bank to get a loan. He signs a note and agrees to repay the bank. What
is the legal term for Bill’s status regarding the note?
a. Payee.
b. Maker.
c. Payor.
d. Drawer.
Lane Co. instructs its bank, Second Street Bank, to pay $200,000 to Moffett, Inc., also a
customer of Second Street Bank. The bank executes the payment order by crediting
Moffetts account with the $200,000 and notifying Moffett that the credit was made and
is available. In this case:
a. Lane Co. is the originator; Second Street Bank is both the sender and the
intermediary.
b. Lane Co. is both the originator and the sender, and Moffett, Inc. is the beneficiary.
c. the transaction is governed by the EFTA.
d. Lane Co.s payment order had to be communicated either electronically or in writing.
The estate of a debtor includes wages earned after commencement of a Chapter 7
liquidation proceeding.
a. True
b. False
The FTC has the power to seek in a federal district court a preliminary injunction,
pending completion of administrative proceedings, whenever the agency has reason to
believe that a person has been violating FTC rules.
a. True
b. False
The impostor rule is an exception to the general rule that negotiation of any order
instrument requires a valid indorsement by the person to whose order the instrument is
payable.
a. True
b. False
An accountant may not disclose the contents of his working papers under any
circumstances.
a. True
b. False
An agreement in connection with the sale of a business that prohibits the seller from
engaging in the same or similar business for a period of twenty-five years would be
unreasonable and unenforceable.
a. True
b. False
A person who undertakes to make a contract on behalf of another person gives an
implied warranty that he is in fact authorized to make the contract on behalf of the
person he purports to represent.
a. True
b. False
The Mortgage Reform and Anti-Predatory Lending Act of 2010 sets minimum
underwriting standards for mortgages and prohibits mandatory arbitration clauses and
prepayment penalties for ARMs.
a. True
b. False
The technical common law rules governing admissibility of evidence are used by most
administrative agencies during hearings.
a. True
b. False
If negligence of the plaintiff and negligence of the defendant proximately caused the
injury and damage sustained by the plaintiff, the plaintiff can recover some damages in
those states where contributory negligence is still recognized.
a. True
b. False
A trust may serve any purpose that is not against the law or public policy.
a. True
b. False
If the judge denies a defendants motion for __________, then the defendant has the
opportunity to present witnesses. However, if the judge grants the motion, then the
defendant automatically wins the case and does not need to present any evidence.
a. a new trial
b. a directed verdict
c. an offer of proof
d. change of venue
Which is not a revocable offer?
a. A bid to construct a bridge for the city.
b. An offer to buy stock in the ABC Corporation once it is formed.
c. A unilateral offer to pay John $30 to mow your lawn after he has completed half the
job and indicates he wishes to finish.
d. None of these are revocable offers.
Which of the following need NOT be proved in order to establish the defense of
economic duress?
a. That one side involuntarily accepted the terms of another.
b. That circumstances permitted no other alternative.
c. That one party explicitly made the economic threat.
d. That the circumstances leading up to the contract were the result of coercive acts of
the opposite party.
A “commercial unit” is a unit of goods that by commercial usage is a single unit and
that, if divided, would be materially impaired in character or value.
a. True
b. False
Earned surplus would include undistributed profits, income, gains, and losses from the
date of incorporation.
a. True
b. False
Identify whether the following statements could result in actionable fraud and why or
why not.
a. A statement by an art dealer to a potential buyer, “I think this painting is underpriced
because the artist is now gaining national recognition.
b. A vacuum cleaner salespersons statement, “This machine is the best available for the
cost.
c. A city councilmans statement to a fellow councilman that, “If we vote for that action,
the resulting consolidation will be illegal.
Molly makes a note payable to the order of Patrick; Patrick indorses it to Amy; Amy
indorses it to Blake; and Blake indorses it to Homer. Homer presents the note to Molly
within a reasonable time, but she refuses to pay. If Homer notifies only Patrick of the
dishonor, Amy and Blake are discharged from liability.
a. True
b. False
Seller, through no fault of its own, is unable to deliver the goods to buyer because the
agreed type of carrier is unavailable. Explain what the Code requires.
Discuss the concept of fair use in relation to copyright law.
Allpay Industries, in manufacturing its products, emits noxious fumes into the
neighboring community. It also releases pollutants into a stream that runs through its
property. Identify the elements of a tort in general and discuss whether Allpays actions
constitute a tort. If so, identify the tort.
Mark complied with all formation requirements for incorporating his taxicab business.
He is the sole shareholder in the corporation. The corporation owns two automobiles
that Mark frequently uses for his own personal use. In addition, he sometimes deposits
the money he takes in during the day into his personal checking account. One day, an
employee of the company, while driving one of the company vehicles, accidentally hits
a pedestrian in a crosswalk. The pedestrian sues both Mark and the taxi company for
$100,000. The corporate assets are only $32,000. Is the corporation liable for the acts of
its employee? Will Mark be personally liable under the facts? Explain.
Jasmine owns a controlling interest in the Hardwick Company. Explain her
responsibilities if she wants to privately sell her interest.
Smith’s of Dallas agreed to buy $10,000 worth of dresses F.O.B. Dallas from
Magnifique Manufacturing Co. in New York for their October 1 Fall Showing. The cost
of shipping the dresses is $300. In New York, Magnifique dresses were the rage, but the
boom had not yet reached Dallas. By September 15, Smith’s realized that the shop could
not afford all of these dresses and called Magnifique to cancel the contract before the
goods were shipped. On September 15, the market price for the dresses in New York
was $9,000 and in Dallas, $5,000. On October 1, the market price had risen to $9,500 in
New York and to $7,000 in Dallas. What may Magnifique do? What damages may be
sought from Smith’s?
The Elm Street Partnership is a limited partnership in which Arlo is the sole general
partner and Barbara and Charles are the limited partners. Now the partnership is being
dissolved, and Barbara wants her money. The partnership creditors include Charles, for
a $1,000 loan, in addition to his capital contribution. In what order should the
partnership assets be distributed?
Ed, Vivian, and Pablo enter a partnership. Identify the source of the duties among the
partners and whether these can be waived or varied. Name the principal duties Ed,
Vivian, and Pablo have to each other and to the partnership.
Under the CISG, what are the damages for breach of contract by one party? Does the
aggrieved party have any responsibilities after the breach occurs?
Distinguish between a rejection of an offer and a revocation of an offer.
Discuss the definition of a contract given in The Restatement, Second, of Contracts.
Briefly trace the history of labor law in the United States. In your discussion, identify
four major federal labor laws and their purposes.
What six elements must be present for the crime of larceny to exist?
Does a new partner in a firm have personal liability for debts existing when he joined
the firm? What should a prospective partner do to avoid unreasonable liability?
What are the ways in which a minor may disaffirm a contract? What is the effect of a
minor’s misrepresenting age in order to enter into a contract? Explain.
Fritz is seriously considering bankruptcy, because he has a large number of outstanding
debts, the principal ones of which are as follows: (1) he owes his ex-wife $25,000 in
back alimony and child support; (2) he owes $20,000 in guaranteed student loans; (3)
he has a lawsuit pending against him in which his ex-girlfriend is asking for $50,000 in
damages (the suit is based upon the intentional tort of battery and arises from an
incident in which Fritz got mad at his girlfriend and hit her); and (4) he owes the First
Bank $20,000 for a loan secured by his new sports car. Should Fritz file for bankruptcy?
What are the two major issues regarding payment for shares?
Kartov Corporation is in the business of developing pharmaceutical products. It uses a
number of highly technical secret processes in its business. Martin worked for the
company for five years and then left after an argument with one of the vice presidents
of the company. He then went to work for one of Kartov’s competitors, which has begun
to market similar products that seem to have been produced using the secret processes
developed and used by Kartov. What, if any, recourse does Kartov have under the
circumstances?