Bagsby owns a business selling insects for organic gardening. Bagsby is seeking a loan
from First Natural Bank. The loan officer is asking that the loan be secured by Bagsby’s
inventory of insects, now owned or hereafter acquired. In order to do this, a new
security agreement will need to be signed each time Bagsby gets new insects or sells his
insects.
a. True
b. False
Corporate stock can be divided into categories called ________, which can be further
divided into ________.
a. authorized shares, classes.
b. classes, series.
c. equity, assets.
d. debentures, classes.
An assignment is valid and enforceable against all parties:
a. from the moment it is made.
b. from the moment the assignor notifies the obligor.
c. from the moment the assignee notifies the obligor.
d. from the moment the obligor is notified from any source.
Noncompetition agreements are:
a. more common today than they were in the past, although policy issues they raised in
the 1700s have never gone away.
b. now illegal, as they violate antitrust laws.
c. infrequently litigated.
d. relatively recent developments, first used following the Great Depression in the
United States.
Jamie is building a house on her lot. She invites Earnie of Earnie’s Excavation to bid on
the excavation job. Earnie observes that the lot next to Jamie’s is also under excavation
and the soil in that lot is normal and not excessively rocky. Based on the assumption
that the soil in Jamie’s lot will be similar, he and Jamie agree that the excavation will
cost $3,000. When Earnie starts digging, he learns there is solid rock under Jamie’s lot.
Earnie says it will cost an extra $2,500 for the excavation work. Jamie agrees just to get
the job done but later refuses to pay a dime more than $3,000. If Earnie sues, the most
likely result would be:
a. Jamie wins, as Earnie was under a preexisting duty to dig the basement.
b. Earnie wins as this modification is governed by the UCC and consideration is not
required to enforce a modification of the agreement.
c. Jamie wins as Earnie was not acting in good faith and just wanted to put Jamie in a
situation where she didn’t have a choice but to agree to more money.
d. Earnie wins, as the modification was due to unforeseen difficulties.
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.
Mary contracted to buy 100 table lamps. Under the terms of the agreement, Mary is to
pay for the lamps upon delivery. This is an example of:
a. a condition precedent.
b. a concurrent condition.
c. a condition subsequent.
d. a service condition.
Ed wants to give Howard his old car, but Howard says he doesnt want it. Howard later
reconsiders and tells Ed he does want the car. His previous repudiation means there is
no gift, and Howard has no rights in the car.
a. True
b. False
The type of product that prompted passage of the Consumer Product Safety Act was:
a. automobiles.
b. children’s toys.
c. refrigerators.
d. food products.
Limited liability is a major advantage of a partnership as compared to a corporation.
a. True
b. False
Nevada passed a law banning all commercial billboards along state highways to
improve the appearance of the environment. If this law were to be challenged, which of
the following would a court examine to determine if the law is constitutional?
a. It would have to be established that the law furthers an interest of the state of Nevada
to create a more aesthetically pleasing environment.
b. It would have to be shown that the law directly and materially advances the state’s
goal of a more aesthetically pleasing environment.
c. It would have to be shown that the law reaches no further than necessary to promote
the state goal.
d. All of the above.
Whether or not the zoning board will grant a request for a variance depends upon:
a. the type of the proposed building.
b. the reaction of the neighbors.
c. the reason the owner claims she is harmed by the zoning ordinance.
d. All of the above.
An example of the type of relationship required to find undue influence would be:
a. a salesperson-purchaser relationship.
b. a bartender-customer relationship.
c. a doctor-patient relationship.
d. a neighbor-neighbor relationship.
Zebra Toy Company invests a large sum of money in retail stores located in a foreign
country. Zebra intends to bring its foreign earnings back home to the United States. This
practice is known as:
a. repatriation of profits.
b. inflow profit streaming.
c. expropriation.
d. comity.
Mitch takes his two best suits to Quality Cleaners and receives a ticket as a receipt.
Quality tells Mitch his suits will be cleaned and will be ready to be picked up on
Monday. Another customer overhears the exchange and early on Monday goes to
Quality, convinces the worker he is Mitch but that he has lost his receipt. He identifies
and retrieves the suits, which happen to fit him perfectly, too. Quality Cleaners:
a. is strictly liable to Mitch for the suits.
b. is liable to Mitch only if Mitch can prove Quality was grossly negligent.
c. has no liability unless Mitch proves Quality did not use ordinary care.
d. will avoid liability if the receipt contained an exculpatory clause excluding gross
negligence.
Amy Hudson has been trying to purchase Glen Cappel’s antique desk for some time, but
Glen has been reluctant to sell. One evening Glen said to Amy, “Okay, I’ll sell the desk
for $550.” Amy replied, “Thank you, Glen. I accept.” The agreement was not reduced to
writing, but Glen and Amy did shake hands. Two days later, Amy sent Glen a letter
outlining the terms of the agreement, and stating that she would deliver $550 cash
according to the agreement within ten days. The letter was signed, “Best regards, Amy.”
Later, Amy had second thoughts, and refused to go through with the purchase. Nothing
had been exchanged at this point. Glen:
a. can enforce the contract against Amy because the statute of frauds is satisfied under
this situation.
b. cannot enforce the contract against Amy because her signature was inadequate
without her last name under the statute of frauds.
c. cannot enforce the contract against Amy because he did not sign the letter.
d. can enforce the contract because they shook hands on the agreement.
Researchers who study happiness find that people expect material goods to make them
happier than they actually do.
a. True
b. False
The bankruptcy of an agent automatically terminates an agency relationship.
a. True
b. False
The Supreme Court in the Teresa Harris v. Forklift Systems, Inc. case held that
a. for there to be sexual harassment, the conduct must affect an employee’s
psychological well-being.
b. conduct need not affect an employee’s psychological well-being to constitute sexual
harassment.
c. Title VII does not apply to sexual harassment cases.
d. Title VII does not apply to same-sex harassment.
In a Chapter 13 bankruptcy, creditors cannot force a debtor into bankruptcy; nor can
they vote to confirm or reject a plan of reorganization.
a. True
b. False
Professor Jones accuses Rachel, a senior at a large state university, of cheating on an
exam. The Professor claims that Rachel must prove to him that she did not cheat. If she
fails to convince him, she will be expelled from college. Rachel is being denied her due
process rights.
a. True
b. False
The Consumer Trade Commission focuses mainly on protection of consumers in the
area of antitrust law.
a. True
b. False
A sports fan, injured by a hockey puck that flew into the stands during an NHL game,
would be subject to the defense of assumption of the risk in a suit to recover for her
injuries.
a. True
b. False
Jeff picks up a piece of metal pipe and swings it around, hitting Gary across the back of
the head. What factor would be required for Jeffs employer to be liable to Gary?
a. Jeff was at the factory when it happened.
b. Jeff voluntarily hit Gary.
c. Jeff was moving the pipe as part of his work responsibilities when he hit Gary.
d. Gary cannot be an employee of the same company as Jeff.
The advantages of trademark registration include all EXCEPT:
a. potential damages are higher.
b. after five years the mark becomes almost impossible to challenge.
c. it allows the trademark owner to use the TM symbol to put others on notice of the
protection.
d. the mark is valid nationally.
A landlord’s substantial interference with a tenant’s use of the property is considered:
a. a constructive eviction.
b. a tort.
c. a violation of federal housing law.
d. permissible in a periodic tenancy.
A rock group assigns its payment under a performance contract to the Costume Shop, a
business that has supplied the group with outrageous stage outfits, and to which the
group owes a great sum of money. Under this arrangement the rock group is the:
a. assignor.
b. assignee.
c. delegator.
d. delegatee.
A rock group assigns its payment under a performance contract to the Costume Shop, a
business that has supplied the group with outrageous stage outfits, and to which the
group owes a great sum of money. This is:
a. a valid assignment because of the rule of freedom to contract.
b. a valid assignment because this is a simple transfer of the right to receive money.
c. an invalid assignment because it increases the burden of the payor.
d. an invalid assignment because this is a personal service contract.
An agreement in which a buyer agrees to buy all the goods produced by a manufacturer
is known as:
a. a requirements contract.
b. an output contract.
c. an exclusive dealing contract.
d. an option contract.
Jenny is an officer of a corporation. She made a difficult business decision. When
challenged about her decision, the court ruled she had acted in good faith and that the
business judgment rule applied. As such:
a. Jenny will not be held personally liable for a decision that results in money losses to
the company.
b. Jenny’s decision will be reviewed by a court.
c. Jenny is immune from a lawsuit.
d. Jenny must resign from the board.
Harold and Zack have pooled their money together to buy real estate but have filed no
formal papers to form a business. Harold, a lawyer, handles all the legal matters and
Zack, a real estate broker, finds buyers for the property they have subdivided. Harold
and Zack are engaged in a:
a. partnership.
b. close corporation.
c. joint venture.
d. business trust.
A salesclerk at Braybon’s Department Store observed a customer remove a ring from a
display case and put it in her purse. In most states, Braybon’s would be able to detain
the customer for suspicion of shoplifting.
a. True
b. False
Longs Department Store contracted to buy 1,000 drop-waist velour dresses in heather
gray from Durham. Subsequently, Durham called and asked to ship mink-colored
dresses instead of heather gray. Long agreed, in writing, to the change. Which statement
is correct?
a. The modification is not enforceable since there was no consideration for the change.
b. The modification is not enforceable since the parties are merchants.
c. The modification is enforceable.
d. Whether the modification is enforceable depends on the gap-filler rule.
There is strong evidence that ethical behavior pays off financially for businesses.
a. True
b. False