Ian steals a business law textbook from Jules. Kris, who does not know that the book is
stolen, buys it from Ian. Kris has committed
a. conversion.
b. disparagement of property.
c. no tort.
d. wrongful interference with a business relationship.
For Petra to recover the benefit of her bargain from a breached real estate contract with
River City Properties, Inc., the most appropriate remedy is
a. damages.
b. quasi-contractual recovery.
c. rescission.
d. specific performance.
Saf-T Lenders, Inc., takes possession of Tiaras stock in Urgent Care Corporation to
perfect Saf-Ts security interest in the stock. This is
a. after-acquired property.
b. a pledge.
c. a purchase-money security interest.
d. a violation of most state laws.
Elise and Flair are partners in Gourmet Cupcakes, a new general partnership and
business enterprise. As general partners, Elise and Flair are subject to liability that is
a. limited to the amount of their investment in Gourmet Cupcakes.
b. limited to the deductible on Gourmet Cupcakess insurance policy.
c. limited to the extent that Elise and Flair believe to be reasonable.
d. not limited with respect to Gourmet Cupcakess obligations.
Kirk presents an instrument that states “pay to the order of Liv to Metro Bank for
payment. This is a special type of draft drawn on a bank, ordering the bank to pay a
fixed amount of money on demand. This is
a. a certificate of deposit.
b. a check.
c. a debit card transaction receipt.
d. a trade acceptance.
Tiny is an accountant. Tinys violation of generally accepted accounting principles and
generally accepted auditing standards
a. does not indicate that Tiny was negligent.
b. is prima facie evidence that Tiny was negligent.
c. precludes Tiny from raising any defense against a negligence claim.
d. is embarrassing but will never subject Tiny to liability.
Fact Pattern 50-1B
Shopping Mall, Inc. (SMI), leases space to Toney Goods Company and Uneek Stuf
Store. Later, Uneek begins to sell items that are similar to Toneys goods, and Toney
abandons its space before the end of the lease term.
Refer to Fact Pattern 50-1B. Toney is liable to
a. neither SMI nor its tenants.
b. SMI and Uneek for disputing Uneeks business decision.
c. SMI for at least some of the unpaid rent.
d. SMIs tenants, except Uneek, for abandoning Toneys space.
Office Accounting, Inc., hires Perry to repair a computer on site for $400, but Perry
does not show up as agreed. Office Accounting hires Raul to do the job for $350. Office
Accounting may recover from Perry
a. compensatory damages.
b. consequential damages.
c. nominal damages.
d. punitive damages.
Rapid Pest Control itself out to others as being a corporation but makes no attempt to
incorporate. Ponce signs a contract with Rapid Pest Control that is not performed.
Ponce files a suit against the firm. The court will likely hold that Rapid Pest Control is
a. a corporation by estoppel.
b. an alien corporation.
c. an S corporation.
d. ultra vires.
Fact Pattern 28-1A
Dollar Value Motors asks Estimable Bank for a loan to increase its vehicle inventory.
Estimable requires Flair, Dollar Values president, sign a personal guaranty to pay the
debt if Dollar Value defaults. Meanwhile, to buy a pick-up truck from Dollar Value,
Gina asks Harper to co-sign a credit application.
Refer to Fact Pattern 28-1A. If Harper signs the application only after language is
included that requires Dollar Value to exhaust its legal remedies against Gina before
looking to her, then Harper is
a. a surety.
b. a lienor.
c. a guarantor.
d. a creditor.
On May 1, Doug signs a check that is payable to the order of Employees Credit
Corporation and that is dated July This check is
a. negotiable.
b. nonnegotiable, because it is payable to a corporation.
c. nonnegotiable, because it is postdated.
d. nonnegotiable, because it is signed by the drawer.
Dave, an accountant, does not work for Emergent Company, but wrongfully obtains
inside information concerning Emergent. Based on the information, Dave buys and sells
Emergent stock for personal gain. The Securities and Exchange Commission prosecutes
Dave, arguing that he is liable because he 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.
The Securities and Exchange Commission decides to create a new rule relating to the
dissemination of material nonpublic information through corporate blogs, tweets, and
Web sites. The first step is to
a. compile the rule with others in the Code of Federal Regulations.
b. conduct an on-site inspection.
c. publish a notice of the proposed rulemaking.
d. solicit public comment.
GR8 Fashion, Inc., complains to the Federal Trade Commission (FTC) about an ad
broadcast by Hy-Time Clothes Company, GR8s competitor. The FTC investigates and
concludes that the ad is deceptive. The FTCs next step is to
a. conduct negotiations between the competitors.
b. draft a formal complaint.
c. issue a cease-and-desist order.
d. permit GR8 to broadcast similarly deceptive counteradvertising.
All-USA Imports, Inc., disputes the use of “all-usa.com as a domain name by All-USA
Overseas Exports, Ltd., and files a suit to resolve the dispute. Service of process must
be by
a. e-mail.
b. personal delivery.
c. regular mail.
d. whatever means is reasonably calculated to do the job.
Shelly and Tom disagree over the amount of money due under their contract. To avoid
involving any third party in a resolution of the dispute, Shelly and Tom might prefer to
use the alternative dispute resolution method of
a. arbitration.
b. litigation.
c. mediation.
d. negotiation.
Brendan signs a check “pay to the order of City College Bookstore drawn on his
account in Delmar Bank to pay for his current semesters textbooks. The bookstore
deposits the check in its account in Evergreen Bank. Like most checks, this check is
a. a one-party instrument.
b. a four-party instrument.
c. a three-party instrument.
d. a two-party instrument.
Fact Pattern 41-1A
Cherry Grove Apartments, Inc., merges with Dutch Elm Realty, Inc. Only Dutch Elm
remains.
Refer to Fact Pattern 41-1A. Cherry Grove held rights in certain real property. After the
merger, Dutch Elm acquires the rights
a. automatically.
b. only after completing certain additional statutory procedures.
c. only Cherry Groves former shareholders expressly approve.
d. only if the acquisition is a specified result of the merger.
Office Company and Keen Company wish to combine all assets, stock, and personnel
into a new firm to be called OK Corporation. This is
a. a consolidation.
b. a merger.
c. a share exchange.
d. a takeover.
Elmo pays First National Bank $1,000 plus a service fee to draw a check on itself made
payable to Go Delivery Service. This is
a. a cashiers check.
b. a certified check.
c. a trade acceptance.
d. a travelers check.
Teresa owns a used-car lot where Salvatore works as a salesperson. Teresa tells
Salvatore not to make any warranties for the cars. To make a sale to Rosa, however,
Salvatore adds a 50,000-mile warranty. Later, Rosa sues Teresa for breach of warranty.
Teresas right to hold Salvatore liable for any damages she has to pay is the right of
a. avoidance.
b. cooperation.
c. indemnification.
d. reimbursement.
Gary threatens physical harm to force Hugh to sell his business, Imports from Asia,
Inc., to Gary for a below-market price. This is
a. duress.
b. fraud.
c. puffery.
d. undue influence.
Resource Remarketers, Inc., offers to buy crude oil from Petro Producers, Inc. The
parties later dispute the deal in court. Petros claim that Resource ordered 10,000 gallons
and Resources testimony that it ordered only 1,000 gallons
a. prevents the enforcement of any contract between these parties.
b. supports an enforceable contract for 10,000 gallons.
c. supports an enforceable contract for 5,500 gallons.
d. supports an enforceable contract for 1,000 gallons.
Orin relinquishes the right to his daughter Nekos control, care, custody, and earnings.
This act is
a. disaffirmance.
b. emancipation.
c. ratification.
d. severability.
Fact Pattern 23-1B
Sociedad Guarantia (SG), a Mexican firm, borrows $1 million from Tri-national Bank,
a U.S. firm. Later, SG files for bankruptcy under Mexican law and asks the Mexican
court to order the reimbursement of payments on the loan. Tri-national files a suit
against SG in a U.S. court, arguing that the funds do not belong to SG.
Refer to Fact Pattern 23-1B. The U.S. court in Tri-nationals suit is most likely to apply
the principle of comity because
a. the actions of foreign nations “taken in connection with commercial activities are
exempt from the jurisdiction of U.S. courts.
b. the bankruptcy proceedings in the Mexican court appear to be fundamentally fair and
not in violation of U.S. public policy.
c. the courts of one country will not review the validity of acts by the courts of another
country within their own jurisdiction.
d. the nations of the world are constitutionally bound to honor the actions of each others
courts.
Beth is an accountant with Consumer Sales Corporation. Doral buys Consumer stock
and loses money on the investment. To recover from Beth under Section 10(b) of the
Securities Exchange Act of 1934 and SEC Rule 10b-5, Doral must prove
a. none of the choices.
b. fraud and reliance only.
c. fraud, reliance, and materiality only.
d. scienter, fraud, reliance, materiality, and causation only.
Noah and Orin do business as Pest Control Partners. In most states, for the purposes of
suing and being sued, Pest Control Partners would be treated as
a. an aggregate of the individual partners.
b. a natural person.
c. an entity.
d. a non-existent party.
Kylas debt to Lark is past due. Lark obtains an order of garnishment to require Kylas
employer My Pi Pizza Restaurant to pay part of Kylas paycheck to Lark. The law
a. limits the amount that can be taken from Kylas take-home pay.
b. permits My Pi to dismiss Kyla because her wages are garnished.
c. practically does not allow Lark to collect the awarded amount.
d. requires My Pi to retain Kyla as an employee until the debt is paid.
GR8 Stuf Company files a registration statement with the SEC before making an
offering to the general public. The registration contains false, immaterial statements of
which the investors are unaware. GR8 Stuf is charged with violating the Securities Act
of 1933. GR8 Stufs best defense is
a. the investors were not aware of the misrepresentations.
b. the issuer reasonably believed the misstatements were true.
c. the offering was made available to the general public.
d. the untrue statements were not material.
Paco offers to pay Quik Delivery (QD) $50 if it picks up and delivers to him a package
from Rich within 30 minutes. QD can accept the offer only by meeting the deadline. If
QD performs as directed, these parties will have
a. a bilateral contract.
b. a trilateral contract.
c. a unilateral contract.
d. no contract.
Infinite Sales Corporation obtains an insurance policy that protects Infinite Sales in the
event of the death or disability of Jacqueline, Infinites executive sales manager. This is
a. casualty insurance.
b. fidelity or guaranty insurance.
c. key-person life insurance.
d. term life insurance.
Ronaldo agrees to pay Simplex Cash Store a debt that is otherwise dischargeable in
bankruptcy. This is
a. a reaffirmation.
b. a liquidation.
c. a reorganization.
d. a petition.
Ivy and Justin want to form and do business as Kayak Adventures Corporation. A
corporation can be owned by
a. natural persons only.
b. artificial persons only.
c. artificial or natural persons.
d. neither “artificial nor “natural persons.
Workers have a right to refuse to cross a picket line of fellow workers who are engaged
in a lawful strike.
Federal mortgage disclosure requirements apply to the written materials that a lender
provides and to any oral representations.
Bank customers cannot demand that their original canceled checks be returned with
their monthly statement.
Any failure of a bank to honor a check because it would create an overdraft is a
wrongful dishonor.
It is an unfair labor practice to refuse to bargain collectively with an elected employee
representative.
If a contract requires that performance be rendered directly to a third party, the third
party is an incidental beneficiary.
The same principles that govern the filing of a liquidation petition apply to
reorganization proceedings.
Common law is a term for law that is common throughout the world.
A pipe in Gerts house springs a leak. Gert contracts with Hollys Plumbing &
Construction Company to repair the pipe and fix the damage to Gerts house. Gert pays
10 percent of the price in advance. Hollys does the work, but Gert refuses to pay the
rest of the price. What can Hollys do, and how is it done?
Accountants and other professionals do not face liability under the common law for any
breach of contract.
Courts typically consider the adequacy of consideration.
On May 1, Brand Name Industries, Inc. (BNI), sent Carol a letter, via overnight
delivery, offering to employ her to audit BNIs financial statements for the current year
for $1,000. In the letter, BNI stated that Carol had ten days to accept. On May 5, Carol
sent BNI a fax that stated, “The price for the audit seems too low. Would you consider
paying $1,200? BNI received the fax. The next day, Dan offered to conduct the audit for
$800. On learning of Dans offer, Carol immediately e-mailed BNI, agreeing to do the
work for $1,000. BNI received this e-mail on May 7. Explain why BNI and Carol do, or
do not, have a contract.
Alienation is a transfer of the ownership of land.
The incompetence of a customer immediately revokes a banks authority to pay an item.
Factors to consider when choosing a business form include continuity of life.
Under the U.S. Constitution, each branch of government limits some actions of the
other branches.
Samantha is an accountant. Theo is an attorney. Which professional is most restricted
from disclosing her or his clients communication?
The ordinary rules of agency normally do not apply to the employment of corporate
officers.