Jim is an appliance salesperson. To make a sale, he asserts that a certain model of a
Kitchen Helper refrigerator is the “best one ever made.” This is
a. fraud if the statement is the truth.
b. fraud if Jim believes that this statement is not true.
c. fraud if Jim is stating his opinion, not the facts.
d. not fraud.
Forest & Field Company makes and leases a backhoe to Zac. Due to a defect
attributable to Forest & Field’s negligence, Zac is injured in an accident in which his
neighbor Aaron is also hurt. In a product liability suit based on negligence, Forest &
Field may be liable to
a. Aaron only.
b. no one.
c. Zac and Aaron.
d. Zac only.
Josephine works for Tall Tales Publishing, Inc. The basis for Josephine’s contribution
under the Federal Insurance Contribution Act (FICA) is based on her
a. seniority at Tall Tales.
b. annual wage base.
c. special job skills.
d. county of residence.
Which of the following is considered personal property for the purpose of criminal
prosecution?
a. Telephone services
b. Land
c. A garage
d. A boundary fence
South Dakota, like other states, may regulate private activities to protect or promote the
public order, health, safety, and general welfare under its
a. police powers.
b. taxing powers.
c. spending powers.
d. supreme powers.
Will is the payee of a promissory note for $500. James offers to mow Will’s lawn five
times in exchange for the note. Will agrees. After fifth time James mows Will’s lawn,
James is
a. an HDC.
b. not an HDC, because he has not fully performed his promise.
c. not an HDC, because he did not take the note in good faith.
d. not an HDC, because he did not check if the note was overdue.
Greta is the only female employee in the maintenance department of Hydraulics Inc.
Greta’s supervisor and co-workers tease and play tricks on her so relentlessly that she
feels compelled to quit. This is
a. a constructive discharge.
b. a destructive discharge.
c. an instructive discharge.
d. not a discharge.
Jonah tells Levi he will give him an Xbox if Levi does Jonah’s chores for a month. Levi
promises to do the chores. Jonah and Levi have formed a
a. bilateral contract.
b. unilateral contract.
c. void contract.
d. unenforceable contract.
Maggie is a surety for Juli’s debt to Bill. Bill and Juli decide to make material changes
to the original contract without consulting Maggie. Maggie is
a. still bound by the contract.
b. discharged completely.
c. still bound by the contract, but allowed to make additional changes to the contract.
d. still bound by the contract unless she contests it within 30 days of the changes.
Which of the following is not an example of an equitable remedy?
a. Sally has a contract with Loud Sound Systems to provide the sound system at a party.
When the party is postponed indefinitely, she asks the court to cancel the contract and
return the parties to the position held before its formation.
b. Bill contracts to sell John a car, but then fails to deliver it. John asks a court to force
Bill to deliver the car to him.
c. Jane enters into a contract with Jill to provide 100 roses for a dinner party. Jane then
fails to deliver the roses. Jill asks the court to force Jane to deliver 300 roses.
d. All of the above are examples of equitable remedies.
Byron agrees to sell to Charity, for $1,500, a remote parcel of land. They believe the
land to be worthless, but beneath it is a gold mine. A court would
a. cancel the contract due to Byron’s failure to know the land’s value.
b. cancel the contract due to Charity’s failure to know the land’s price.
c. cancel the contract due to the difference between the contract price and the market
price.
d. enforce the contract.
Clive works for Digby Excavation Corporation. While operating a backhoe, Clive
suffers an injury. Clive will be compensated under state workers’ compensation laws
only if
a. he does not have health insurance.
b. he is completely disabled.
c. his injury was accidental.
d. his injury was intentional.
Harrison applies for a mortgage loan from Hill Top Bank that has an APR that is 1.5
percent more than the average prime offer rate for a comparable transaction. This loan
is Harrison’s first mortgage. Before giving Harrison the loan, Hill Top Bank must
a. verify Harrison’s ability to repay the loan only.
b. establish an escrow account for Harrison’s payments for homeowners’ insurance and
property taxes only.
c. establish an escrow account for Harrison’s payments for homeowners’ insurance and
property taxes and verify Harrison’s ability to repay the loan.
d. present all the loan documents to a judge for review.
Ellen offers to sell her math textbook to Julia for $50. Julia does not respond. Ellen and
Julia do not have a contract because they lack the requirement of
a. agreement.
b. capacity.
c. consideration.
d. legality.
Karen is a judge hearing the case of Local Dispatch Co. v. National Transport Corp.
Applying the relevant rule of law to the facts of the case requires Karen to find
previously decided cases that, in relation to the case under consideration, are
a. as different as possible.
b. as similar as possible.
c. at odds.
d. exactly identical.
In Benny v. City Car Dealership, a state supreme court held that a minor could cancel a
contract for the sale of a car. Now a trial court in the same state is deciding Daphne v.
Even Steven Auto Deals, Inc.,, a case with similar facts. Under the doctrine of stare
decisis, the trial court is likely to
a. allow the minor to cancel the contract.
b. disregard the Benny case.
c. order the minor to cancel the contract.
d. require the minor to fulfill the contract.
Quality Care Insurance Company provides life insurance policies. Quality Care applies
a concept of insuring a large number of people with the knowledge that only a small
proportion of them will die in a given year. The large number of premiums provides the
funds to pay for the small number of deaths. This concept is known as
a. risk avoidance.
b. risk pooling.
c. risk rating.
d. risk transferring.
Jane orders a laptop and some software. When the goods arrive, Jane opens the boxes.
If the shrink-wrap agreement for the products includes the usual terms, and Jane does
not want to accept them, most likely she must
a. return the laptop only.
b. return the software only.
c. return the laptop and software.
d. file a lawsuit against the manufacturer.
Gary has two houses. He allows his friend David to live in one of them without paying
rent. David dies. David’s tenancy
a. passes to his heirs indefinitely.
b. passes to his heirs for one year.
c. passes to his heirs for five years.
d. is terminated.
The payment of Brian’s debt to Chuck is guaranteed by Brian’s personal property. This
is
a. an attachment.
b. a secured transaction.
c. perfection.
d. a violation of most state laws.
Peak & Vale Accountants provides other firms with accounting services. Questions of
what is ethical involve the extent to which Peak & Vale has
a. a legal duty beyond those duties mandated by ethics.
b. an ethical duty beyond those duties mandated by law.
c. any duty beyond those mandated by both ethics and the law.
d. any duty when it is uncertain whether a legal duty exists.
Marvin is a very good businessman. He starts Marvin’s Bike Company in the small
town of Wheatland, WY. There is one other bike store in Wheatland. Through good
business management, Marvin’s Bike Company obtains a great deal of market power in
Wheatland. This acquisition of monopoly power is
a. a per se violation of Section 1 of the Sherman Act.
b. an illegal restraint on trade.
c. not an antitrust violation.
d. a per se violation of Section 2 of the Sherman Act.
Pola files a petition in bankruptcy. Pola’s non-dischargeable debts include
a. domestic-support obligations.
b. student loans if payment would impose undue hardship.
c. unpaid loans to finance home repairs.
d. unsecured credit-card debt.
Mickey is a director of Fine Art Dealers, Inc. Mickey is trained in art valuation. Fine
Art Dealers makes several purchases in which it pays too much money for artwork.
Mickey approves all the transactions without reading the details. Mickey is most likely
a. liable for breach of the duty of care.
b. not liable for breach of the duty of care.
c. liable for breach of duty of loyalty.
d. liable for violation of the business judgment rule.
Trucks & Trailers, Inc. (T&T), and United Delivery Service enter into a contract for a
lease of trucks. T&T is a merchant who deals in goods of the kind leased. Under the
UCC, an implied warranty of merchantability arises
a. automatically in lease contracts.
b. only if the lessee asks for it.
c. only if the lessor does not expressly disclaim it.
d. only in conjunction with sales contracts, not lease contracts.
Cindy agrees in writing to pay Bob $5,000 to “accidentally” hit and kill her horse,
which has a large insurance policy, with his truck. Bob hits but does not kill the horse,
and Cindy refuses to pay him. In their suit against each other for breach of contract, the
court will consider
a. only Bob to be at fault.
b. only Cindy to be at fault.
c. both Bob and Cindy to be at fault, but Bob to be more at fault than Cindy.
d. Bob and Cindy to be equally at fault.
Which of the following independent regulatory agencies is responsible for preventing
businesses from engaging in unfair trade practices?
a. The Federal Reserve System Board of Governors (the Fed)
b. The Federal Trade Commission
c. The Securities and Exchange Commission
d. The National Labor Relations Board
Jane is the secured party in a secured transaction with Margaret. Jane could also be
referred to as the
a. debtor.
b. secured creditor.
c. collateral.
d. filing officer.
Kathleen sells Richard a race horse 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.
Rita, a minor, signs a contract to buy a sport utility vehicle (SUV) by misrepresenting
her age to be twenty-one. In most states, Rita may
a. disaffirm the contract.
b. disaffirm the contract only if she makes full payment.
c. disaffirm the contract only if she returns the SUV in good condition.
d. not disaffirm the contract.
Super Toolmakers, Inc., contracts to sell its business to True Hardware Corporation.
Before either party has performed, rescission of this contract requires
a. a mutual agreement to rescind.
b. consideration.
c. performance by all of the parties.
d. an accord and satisfaction.
Bud lists his assets in writing and then makes a will, referring to the list in a way that
makes the list necessary to carry out the terms of the will. This
a. does not invalidate or revoke the will.
b. makes the will entirely invalid.
c. revokes the will only to the extent of the assets in the list.
d. revokes the will only to the extent of the assets not in the list.
The rights and duties of a bank and its customer are contractual.
Clothing is not included in state exemption statutes.
The UETA does not apply to a transaction unless the parties “opt in.”
An e-mail is an acceptable form of a written memorandum.
An executed contract is one that has been fully performed by both parties.
In most Chapter 7 bankruptcies, the proceeds exceed the amount needed to pay all
creditors and the debtor receives the amount remaining after all the creditors have been
paid.
On May 1, Brand Name Industries, Inc. (BNI), sent Carol a letter, via overnight
delivery, offering to employ her to audit BNI’s financial statements for the current year
for $10,000. 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 $12,000?” BNI received the fax. The next day, Dan offered to conduct the audit
for $8,000. On learning of Dan’s offer, Carol immediately e-mailed BNI, agreeing to do
the work for $10,000. BNI received this e-mail on May 7. Explain why BNI and Carol
do, or do not, have a contract.
Under the UCC, an oral contract for a sale of goods is enforceable once payment has
been made and accepted.
The course of performance is the practice or method of dealing so regularly observed as
to justify an expectation that it will be observed in a particular transaction.
If a principal does not ratify an unauthorized contract, the principal is not bound.
Java Bean Company imports coffee beans and sells them under two-year contracts to
Mellow Roast, Inc., and other coffeemakers. The contracts require that during the
two-year term a coffeemaker not buy beans from Java Bean’s competitors. The
contracts do not limit the coffeemakers’ purchase of tea or other beverage ingredients
from other suppliers, however. In the second year of the contract, Mellow Roast
protests that this arrangement violates antitrust law. Is Mellow Roast correct? If not,
why not? If so, under which antitrust statute, or statutes, could these contracts be held
illegal?
Counterfeiting is robbery.
Privity of contract establishes the basic concept that third parties have no rights in
contracts to which they are not parties.
A receipt issued by a warehouser for goods stored in a warehouse is a warehouse
receipt.
A contract must be in writing to be enforceable if the contract makes performance
possible within any definite period of time.