Dee, an accountant, does not work for Emergent Company, but wrongfully obtains
inside information concerning Emergent. Based on the information, Dee buys and sells
Emergent stock for personal gain. The Securities and Exchange Commission prosecutes
Dee, arguing that she is liable because she stole information rightfully belonging to
another. This argument is
a. the blue-sky theory.
b. the misappropriation theory.
c. the red-herring theory.
d. the tipper/tippee theory.
Paltry Assembly Company makes espresso machines and sells one to Vim through a
misrepresentation on the label on which Vim relies and that results in an injury to Vim.
Paltry is most likely liable for
a. a commonly known danger.
b. fraud.
c. privity.
d. puffery.
Thermo Gas, Inc., and Uno Oil Corporation refine and sell gasoline and other
petroleum products. To limit the supply of gas on the market and thereby raise prices,
Thermo Gas and Uno Oil agree to buy “excess” supplies from dealers and “dispose” of
it. This is
a. a deal that neither restrains trade or harms competition.
b. a legal restraint of trade.
c. a per se violation of the Sherman Act.
d. subject to analysis under the rule of reason.
Fruits & Vegetables, Inc., employs hundreds of seasonal and permanent workers, both
skilled and unskilled, in seven states. Fruits & Vegetables can hire illegal immigrants
a. if either the employer or the immigrants file special forms.
b. only if the employer files a special form.
c. only if the immigrants file special forms.
d. under no circumstances.
Joe files a voluntary petition for Chapter 7 bankruptcy. His petition does not need to
include
a. a list of Joe’s secured creditors.
b. a list of Joe’s unsecured creditors.
c. a list of the occupations of all Joe’s creditors.
d. the addresses of all Joe’s creditors.
Without a permit, Timberline Plywood Company discharges its untreated wastewater
into Urban City’s storm drainage pipes, which empty into Valley Creek. Under the
Clean Water Act, this discharge is most likely
a. a violation.
b. not a violation because the company does not have a permit.
c. not a violation because water is not a stationary source.
d. not a violation because a storm drainage pipe is not a point source.
Mallory’s sister gives Mallory a leather working kit for Christmas. Mallory uses the kit
to make a saddle. Mallory’s acquisition of the saddle is by
a. a bailment.
b. accession.
c. confusion.
d. production.
Milo buys an all-terrain-vehicle (ATV) from No-Limit Toys, Inc., on credit but makes
no payments on the account. Odell, the owner of No-Limit Toys, calls Milo at home on
a Monday morning at three a.m. Odell represents himself as PayNow Collection
Agency and demands payment “or else.” The next day, Odell sends Milo notice that he
has thirty days in which to request verification of the debt and that its payment will be
suspended during that time, but that if he does not pay the full amount due within five
business days, Odell will arrange for the “destruction of Milo’s good credit rating.”
Which laws has Odell violated, if any, and in what ways?
Olive Grove Enterprises, Inc., completes its registration process and issues a
free-writing prospectus. This tells prospective investors
a. about investing freely.
b. how to write their own prospectus.
c. that they can “freely write their own ticket” to buy Olive’s securities.
d. that they may obtain the prospectus at the SEC’s Web site.
MeatMen, Inc. spends a great deal of money and effort to ensure that all employees are
safe on the job, that all products are safe for consumers, and that the environmental
impact of the corporation is minimal. MeatMen appears to strongly believe in the
concept of
a. the moral minimum.
b. corporate social responsibility.
c. “grey areas” in the law.
d. government oversight.
Bango! Business, Inc., a U.S. firm, may have committed, in Chile, acts that would
constitute, in the United States, violations of U.S. antitrust laws. These laws apply
a. extraterritorially.
b. only to signatories of the North American Free Trade Agreement.
c. only to members of the World Trade Organization.
d. only within U.S. borders.
Kelly is injured when she slips and falls on Layla’s sidewalk. To determine whether
Layla owed a duty of care to Kelly, Layla is subject to the standard of
a. a realistic person.
b. a reasonable person.
c. a recognizable person.
d. a reliable person.
Myron and Norah would like to form Originals, Inc., to do business in the art market.
Generally, the articles of incorporation for a corporation do not include
a. the corporate name.
b. the nature and purpose of the corporation.
c. the capital structure of the corporation.
d. the minutes of the first organizational meeting.
Bo and Clancy decide to do business as Marketing & Promotion Services. To be a
partnership, this association can result from an agreement that is
a. express, but not from an agreement that is implied.
b. implied, but not from an agreement that is express.
c. express or implied.
d. written, but not otherwise express or implied.
SealCoat Paving enters into a contract with Royal Golf & Tennis Club to provide
surface material for Royal’s tennis courts by April 1 for a tournament to begin May 1.
The contract specifies an amount to be paid if the contract is breached. This is a
liquidated damages clause if the amount is
a. meant to pay for additional liquid sealant in the event of damage.
b. a reasonable estimate of the loss on a breach.
c. designed to penalize the breaching party.
d. intended to quickly provide cash to the nonbreaching party.
David, an Alabama resident, files a suit in an Alabama court against QuickAds, an
Internet company based in Georgia that provides advertising services. QuickAds only
contact with persons in Alabama has been through QuickAds’s passive advertising. The
Alabama court is
a. likely to have jurisdiction over the case.
b. not likely to have jurisdiction over the case.
c. likely to refer the case to a higher district court.
d. likely to refer the case to an appellate court.
Wrugged Woolens, Inc., a U.S. corporation, sets up a specialized marketing
organization in Scotland by appointing a foreign agent. This is called
a. direct exporting.
b. indirect exporting.
c. a joint venture.
d. piracy.
Kathleen sells Richard a racehorse for $1,000. Both Kathleen and Richard think that the
horse is too slow to win any races. Richard then enters the horse in a race, and it wins
easily. He enters it in more races, and the horse soon wins more than $1 million.
Kathleen tries to rescind the contract to sell the horse, claiming that it was worth more
than $1,000. A court will
a. cancel the contract due to Kathleen’s failure to know the horse’s value.
b. cancel the contract due to Richard’s failure to know the horse’s price.
c. cancel the contract due to the difference between the contract price and the horse’s
true value.
d. enforce the contract.
In business deals, Fiona, the chief executive officer of Snacks n” Bites, Inc., follows
duty-based ethical standards. These are most likely derived from
a. a corporate ethics code.
b. a cost-benefit analysis.
c. philosophical reasoning.
d. the law.
Bobby has fifteen creditors. To force Bobby into bankruptcy proceedings, at least three
creditors must join the petition and their unsecured claims must add up to at least
a. $500.
b. $10,250.
c. $14,425.
d. $50,000.
Bill orders 1,000 nails from Super Hardware, Inc. Super Hardware keeps its nails in
packages of 100,000. Bill and the agent for Super Hardware both sign the contract for
the sale of the nails on Monday. The agent separates 1,000 nails on Wednesday. The
agent delivers the nails to Bill on Thursday morning, and Bill pays for the nails on
Friday. Identification of the nails took place on
a. Monday.
b. Wednesday.
c. Thursday.
d. Friday.
TruCalling, Inc., sells ringtones for cellphones. The company’s ad states, “Our tones
aren”t phonythey ring true!” The Federal Trade Commission would consider this ad
a. false and misleading.
b. impermissibly vague and general.
c. a deceptive half-truth.
d. none of the choices.
Ron signs an instrument using an “R” with a circle around it. With this mark for a
signature, the instrument is
a. negotiable.
b. nonnegotiable, because an initial does not state the signer’s name.
c. nonnegotiable, because an initial is not a signature.
d. nonnegotiable, because a simple initial implies a lack of binding intent.
Kim’s Pony Rides orders ten saddles from Little Horse Saddles, Inc. The sales contract
states that if the saddles are defective, Kim’s will allow Little Horse Saddles to repair or
replace them instead of rejecting the shipment. When the saddles arrive, they are
defective. In this case, the perfect tender rule
a. does not apply.
b. applies to both parties.
c. applies only to Little Horse Saddles.
d. applies only to Kim’s Pony Rides.
HVAC Parts Company charges different buyers different prices for identical goods.
HVAC’s prices are subject to evaluation under
a. the Clayton Act.
b. the Federal Trade Commission Act.
c. the Sherman Act.
d. no antitrust law.
Luc writes a check for $1,000 drawn on Ridgetop Bank and presents it to Bianca.
Bianca presents the check for payment to Ridgetop Bank, which dishonors it for
insufficient funds. The party most likely liable to Bianca is
a. Luc in a civil suit.
b. Luc in a criminal prosecution.
c. Ridgetop Bank in an administrative proceeding.
d. neither Luc nor Ridgetop Bank.
Fact Pattern 21-3
Dhani, an accountant for Eureka, Inc., learns of undisclosed company plans to market a
new laptop. Dhani buys 1,000 shares of Eureka stock. He reveals the company plans to
Fay, who buys 500 shares. Fay tells Geoff, who tells Hu. Both Geoff and Hu buy 100
shares. They know that Fay got her information from Dhani. When Eureka publicly
announces its new laptop, Dhani, Fay, Geoff, and Hu sell their stock for a profit.
Refer to Fact Pattern 21-3. If Dhani is liable under the Securities Exchange Act of 1934,
it will be because the information on which he based his purchase of Eureka stock was
a. a forward-looking forecast.
b. not material.
c. not yet public.
d. not yet true.
Oklahoma enacts a law requiring all businesses in the state to donate 10 percent of their
profits to Protestant churches that provide certain services to persons whose income is
below the poverty level. PriceLess Stores files a suit to block the law’s enforcement.
The court would likely hold that this law violates
a. no clause in the U.S. Constitution.
b. the establishment clause.
c. the free exercise clause.
d. the supremacy clause.
Tyler, a citizen of West Virginia, files a suit in a West Virginia state court against
Louisville Sales Corporation, a Kentucky state company that does business in West
Virginia. The court has original jurisdiction, which means that
a. the case is being heard for the first time.
b. the court has a unique method of deciding whether to hear a case.
c. the court has unusual procedural rules.
d. the subject matter of the suit is interesting and new.
At 1 a.m., on the sidewalk in front of Ace Credit Corporation, which is closed, Ben
buys a $500 promissory note for $50 from Curt. When presented with Ben’s demand for
payment, Diann, the maker of the note, could successfully claim that Ben
a. acquired the note with notice that it was overdue.
b. did not acquire the instrument in good faith.
c. did not give value for the instrument.
d. none of the choices.
Lizzie, a clerk at a Movies Unlimited store, takes a DVD player from the store without
permission. Lizzie is liable for
a. appropriation.
b. benefiting an employee.
c. conversion.
d. wrongful interference with a business relationship.
Evan is charged with a crime. Almost all federal courts and some state courts would not
hold Evan liable if, at the time of the offense, as a result of a mental disease or defect,
Evan lacked substantial capacity to
a. appreciate the wrongfulness of his conduct only.
b. appreciate the wrongfulness of his conduct and obey the law.
c. appreciate the wrongfulness of his conduct or obey the law.
d. obey the law only.
Rio Business Corporation pays potential clients, including private foreign companies
and the representatives of foreign labor organizations to facilitate business. If Rio
knows that the payments will be passed on to a foreign government, this practice is
a. illegal if the payments violate the Foreign Corrupt Practices Act.
b. legal because a third party acts as a “go-between.”
c. legal because private parties are involved on both sides of the deal.
d. legal because the payments are intended to facilitate business.
A principal owes an agent a duty of compensation.
Very few states have limited the amount of damages that can be awarded in tort cases.
Loan flipping occurs when a lender convinces a homeowner to refinance soon after
obtaining a mortgage.
Conditioning the sale of one product on the purchase of another is an exclusive-dealing
contract.
The right to cure is the right of a party who tenders nonconforming performance to
correct his or her performance within the contract period.
Constitutional safeguards protect the rights of individuals against federal government
actions.
The TRIPS agreement covers computer programs.
The Environmental Protection Agency can regulate a toxic substance that poses an
imminent hazard but cannot prohibit its use altogether.
Signal Sets Company contracts to deliver one hundred 52-inch plasma high-definition
television sets to a new retail customer, Tuner TV Store, on May 1, with payment to be
made on delivery. Signal tenders delivery in its own truck. Tuner’s manager notices that
some of the cartons have scrape marks. Tuner’s owner phones Signal’s office and asks
whether the sets might have been damaged as they were being loaded. Signal assures
Tuner that the sets are in perfect condition. Tuner tenders Signal a check, which Signal
refuses, claiming that the first delivery to new customers is always for cash. Tuner
promises to pay the cash within two days. Signal leaves the sets with Tuner, which
stores them in its warehouse pending its “Grand Opening Sale” on May 15. Two days
later, Tuner’s stocker opens some of the cartons and discovers that a number of the sets
are damaged beyond ordinary repair. Signal claims Tuner has accepted the sets and is in
breach by not paying on delivery. Will Signal succeed on these claims? Explain.
Expenses that are caused directly by a breach of contractsuch as those incurred to
obtain performance from another sourceare compensatory damages.
A law that has any impact on religion is unconstitutional.
Fraud occurs only when there is reliance on a statement of opinion.
A party cannot recover damages for severe emotional distress absent a showing of
physical injury.
When an instrument is dishonored, only written notice is sufficient to hold secondary
parties liable.
The agreement resulting from a buyer clicking on a box containing the words “I agree”
is known as a click-on agreement.
Ethical reasoning is the process through which an individual links his or her moral
convictions or ethical standards to the particular situation at hand.