Book Title
Business Law with UCC Applications 14th Edition

BUS LAW 61973

March 1, 2019
Expedited credit can be claimed by consumers who have suffered losses related to
substitution checks.
A product in a defective condition is unreasonably dangerous to the user, consumer, or
In a voluntary filing, the bankruptcy petition itself becomes the order for relief.
A nation-state starts a preventative war to stop another nation-state's imminent attack on
the first nation-state.
The gift of an engagement ring is a conditional gift given in contemplation of marriage.
A state has police power simply by virtue of its existence as a legitimate governmental
Litigation is the process by which adversaries voluntarily settle their disputes.
Oral evidence cannot be used to clarify terms that are obscure in a written contract.
The remitting bank describes any payor or intermediary bank remitting for an item.
The ‘devolution' of a right annuls the ethics and morality of a right.
An employer's vicarious liability for its employee's actions is based on the principle of
respondeat superior.
Creditors may be able to force debtors, such as farmers, into involuntary Chapter 7
bankruptcy if the debtor fails to pay bills generally as they become due.
CISG could apply to a contract between Melinda, a U.S. consumer, and Big Co., a
German company.
The person to whom a cosigner makes a promise is the obligee.
A person's contractual obligations may be voidable if that person suffers from a mental
impairment that prevents him or her from acting in a reasonable manner.
Capitalism is a complex, adaptive system of overlapping economic agents that operates
on the basis of competition and a free market that responds to the movement of supply
and demand.
The "corporate opportunity" doctrine states that managers may take an opportunity for
themselves if they offer the opportunity first to the corporation and the corporation
rejects the opportunity.
A conventional fixed-rate mortgage involves no government backing by either
insurance or guarantee.
The just war theory states that war is "just" war and has no relationship to morality.
A patient's general consent for routine tests and procedures can be implied when she
enters the hospital.
An agent may not recover compensation for illegal services unless they were rendered
at the request of the principal.
A private civil trial follows the same rules used in an official trial.
When dealing face-to-face, an acceptance becomes complete as soon as the offeree
freely communicates words of acceptance to the offeror.
A buyer may revoke an acceptance if the acceptance was made on the assumption that
the nonconformity of the goods would be corrected by the seller and the seller does not
do so.
When the purpose for which the agency was created is fulfilled, the agency is
automatically terminated.
An employer is barred from playing any role in the selection of union representatives.
A newspaper advertisement addressed to "Ohio residents only" would be a private offer.
Certified public accountants (CPAs) and non-CPA partners are not under the authority
of the Consumer Financial Protection Bureau as long as they are performing routine and
traditional tasks.
Consideration does not require that the benefits and sacrifices promised between the
parties be legal.
Viola, a promoter, wants to be certain the name Xenographics, Inc. is available for her
corporation. She can reserve the name in advance of incorporation.
A cashier's check is drawn by a bank upon itself.
The general welfare clause has been used over the last two centuries to give Congress
the power to create a national police force and the FBI.
A condition subsequent is one in which the parties agree that the contract will be
terminated when a prescribed event occurs or does not occur.
Most state incorporation statutes provide that a corporation's business affairs should be
managed under the direction of a board of community advisers.
Which of the following statements is true about the "true locality" rule (TLR)?
A. The TLR requires the court to look at the standard of care used in the exact locality
of the physician.
B. The TLR permits the court to judge the actions of a local physician against those of a
physician in a community of comparable size and socioeconomic character.
C. The TLR ignores the socioeconomic character of the physician's home base and
concentrates instead on the geographical limits of a state border.
D. The TLR permits general practitioners to be judged by one criterion and specialists
by another.
Which chapter of the bankruptcy code allows a federal homestead exemption?
A. Chapter 11
B. Chapter 7
C. Chapter 8
D. Chapter 12
Which of the following is true of a bank's duty to honor checks?
A. The drawee bank is not under a duty to honor all checks drawn by its customers in
presence of sufficient funds in the customers' accounts.
B. If there are insufficient funds on deposit, the bank may charge the customer's account
if it does not create an overdraft.
C. If a bank fails to honor a check because of a mistake on its part, the bank is liable to
the customer for damages the customer suffers.
D. The drawee bank has a liability to the holder of the check, regardless of whether the
check is certified.
In 1978, Chapters 11 and 13 of the Bankruptcy Code were created, which:
A. made it easier for creditors to obtain bankruptcy relief.
B. allowed businesses and individuals to reorganize and keep going.
C. made it more difficult to declare bankruptcy.
D. allowed creditors to keep all of the debtor's assets.
The World Intellectual Property Organization Copyright Treaty:
A. gives copyright holders the right to copy, publish, and distribute their works in any
way, including by making video copies, audio copies, and encrypted copies.
B. makes it illegal to use technological means to bypass or override programs designed
to prevent access to a copyrighted work.
C. guarantees that copyright holders will be allowed to use the Internet to post their
works with full copyright protection.
D. grants limited immunity to persons who duplicate copyrighted works on the Internet,
as long as those users do not profit from the copying process.
AML Union tells Standard Co. during contract negotiations that "unfortunate events
may occur" if Standard does not agree to most of the union contract proposals. The next
day, two Standard Co. trucks burn. AML Union has:
A. not bargained in good faith.
B. made a statement of opinion.
C. exercised its First Amendment rights.
D. engaged in destructive bargaining.
Which of the following is true of insurable interest?
A. Sellers can retain the insurable interest to goods as long as they have the title to
B. Buyers cannot place insurance on goods.
C. Buyers cannot obtain an insurable interest if they might later reject the goods.
D. Buyers can obtain insurable interest on goods that are not mentioned in the contract.
Which of the following is a duty vested in a trustee by the court, when the debtor is a
business and files a Chapter 7 petition?
A. He may be authorized to operate the business for a limited period of time.
B. He may be authorized to make payments made by the debtor within 90 days before
the filing of the petition.
C. He may be authorized to sell the debtor's properties and hand over the proceeds of
the sales to the debtor.
D. He may be authorized to pay off the debts according to the personal priority list.
During a(n) ____________, the defendant is formally charged with a crime and can
either plead guilty or not guilty.
A. indictment
B. preliminary hearing
C. arraignment
D. initial appearance
Industries Inc. drew a check payable to "Gloria Schell and Pippen Tallit" in the sum of
$20,000. For a proper negotiation, the check needs to be indorsed:
A. only by Gloria Schell, since her name appears first.
B. by either payee, since the indorsement of only one of the payees is necessary to
negotiate the check.
C. by both payees.
D. by the maker.
An non-breaching party in a breach of contract case has a ____________ and cannot
take advantage of the breach that increases the amount of damages the breaching party
must pay.
A. duty to mitigate damages
B. right to punitive damages
C. duty to mitigate equities
D. right to specific performance
Miranda, a student in Brad's business law class, asks a hypothetical question that is, in
fact, based upon a current problem that her brother, Stan, is having. Brad gives an
incorrect answer, and Stan suffers a loss when he acts according to the answer Miranda
provided him. Brad has:
A. no duty of due care to Stan, but has to Miranda.
B. no duty of due care to either Miranda or Stan.
C. a duty of due care to both Stan and Miranda.
D. a duty of due care to Stan, but not to Miranda.
____________ is the reward given to persons who voluntarily assist a sinking ship or
recover its cargo from peril or loss.
A. Gift in causa mortis
B. Chose in action
C. Salvage
D. Severalty
Grandmother Smith is concerned about having an incapacitating illness that will
prevent her from managing her finances. Grandmother Smith should execute a(n):
A. power of attorney.
B. advance directive.
C. agency proxy.
D. durable power of attorney.
According to Chapter 13 of the Bankruptcy Code, which of the following statements is
A. Involuntary filings are permitted.
B. The debtor should be able to pay the entire amount they owe to each creditor.
C. The debtor must have an already established steady income.
D. Corporations and partnerships can file.
____________ occurs when a party to a contract either expresses or clearly implies an
intention not to perform the contract, even before being required to act.
A. Frustration-of-purpose
B. Abandonment of contractual obligations
C. Commercial impracticability
D. Anticipatory breach
Munchburger, a fast-food outlet, sends an employee to hand out leaflets outside Hick's
Burger, a competing fast-food outlet. The leaflets falsely accuse Hick's of using
horsemeat in its burgers. Hick's may successfully sue Munchburger for:
A. disparagement.
B. invasion of privacy.
C. interference with a contractual relationship.
D. defamation.
The judges on the collective science court must be:
A. drawn from a sample of people affected by the technology in question.
B. scientists with expertise in the areas under investigation.
C. from government bodies involved in legislation about the subject.
D. lawyers with a scientific background in the subject.
____________ performance occurs when a party, in good faith, executes all promised
terms and conditions with the exception of minor details that do not affect the real
intent of their agreement.
A. Complete
B. Satisfactory
C. Partial
D. Substantial
Joe, an outspoken union advocate working in the shipping department at Frontline Co.
for the past 10 years, is transferred to clean out the oil pit. Joe is also paid less for this
job. Joe has several allergic reactions to the oil and quits the company due to health
reasons. Frontline Co. has:
A. exercised lawful management rights.
B. made a discriminatory decision in violation of the Civil Rights Act.
C. established a closed shop.
D. engaged in constructive discharge.
A robber kills a convenience store clerk and escapes with just $5. Which of the
following types of homicide best fits the facts?
A. Second-degree murder
B. First-degree murder
C. Voluntary manslaughter
D. Involuntary manslaughter
Indorsers are obligated to make the payment only when the:
A. instrument has not been properly presented to the drawee or party obliged to pay the
B. instrument is not dishonored.
C. notice of dishonor is not given to the secondary party within the time and manner
D. instrument has been properly presented to the drawee or party obliged to pay the
instrument, and payment must be demanded.
When the misuse of the legal procedure involves the filing of a false civil lawsuit, it is
A. wrongful civil proceedings.
B. malicious prosecution.
C. abuse of process.
D. invasion of privacy.
Hazel offers to sell her home to Mandisa for "about $100,000 plus closing costs."
Mandisa accepts Hazel's offer, but a dispute arises concerning the precise dollar amount
of the purchase price. How will a court resolve this dispute?
A. The court will declare the purchase price and terms too indefinite to create a binding
B. The court will determine a reasonable price to be paid by Mandisa.
C. The court will appoint a licensed real estate appraiser to determine the price to be
paid by Mandisa.
D. The court will require Mandisa to pay the average of her price and Hazel's price.
Which of the following is true of a nondisclosure agreement?
A. It requires employees to promise not to reveal any confidential trade secrets, should
they leave their present employment.
B. It limits a worker's employment options after leaving his or her present job in order
to protect the present employer's confidential matter.
C. It restricts the seller of a business to enter the same type of business during a
reasonable time and within a reasonable geographical area.
D. It states that the party who wrote the contract will not be liable for any economic
loss or physical injury, even if that party caused the loss or injury.
Allison and Zena own property as joint tenants. Zena's creditors can levy:
A. upon Zena's interest, and take over Zena's interest as a tenant in common.
B. upon Zena's interest on execution, and take over Zena's interest as a joint tenant.
C. both Allison's and Zena's interest on execution, and take over their interest as a lien
D. upon both Allison's and Zena's interest on execution, and take over their interest as
One of the key factors a plaintiff (employee) must prove in a wrongful discharge
lawsuit based on the public policy tort exception to employment-at-will is
____________, which requires the existence of a definite public policy, clearly created
by the U.S. Constitution, the state constitution, or a general governmental policy.
A. causation
B. jeopardy
C. clarity
D. absence of justification
Sally's grandmother, Laura, promised in her will to make Sally an heir to her home if
she would move into Laura's home and care for her. Sally agreed to this and moved into
Laura's home. But when Laura died, her will named Bob, a family friend, as heir to her
home. Is Sally legally entitled to the home?
A. Yes, helping her grandmother provided consideration.
B. No, Sally just had a duty to help her grandmother.
C. Yes, Sally was legally closer to her grandmother than Bob.
D. No, Laura may write her will however she wishes.
Tina is a limited partner in Aon Enterprises, a limited partnership, while Mark is a
general partner. Tina assumes management duties for three weeks, while Mark is
recovering from heart surgery. Most likely, who or what has liability for partnership
actions during this period?
A. Aon Enterprises only
B. Mark only
C. Tina only
D. Mark and Tina
When auditors conclude that the financial records of the company are an accurate
reflection of the company's financial status, they will issue a(n):
A. unqualified opinion.
B. qualified opinion.
C. adverse opinion.
D. disclaimer.
All lawn maintenance businesses must pay the state a $200 annual license fee with no
other legal regulations. ABC Yards, Inc. fails to pay the license fee. Which of the
following is true in case ABC Yards has failed to acquire a license because of the failure
to pay the $200?
A. The lack of a license will not necessarily make a contract void.
B. The lack of a license makes the contracts void under contract laws.
C. All contracts of ABC are voidable, due to their failure to obey the regulation.
D. Only executory contracts by ABC will be voidable.
The law has built-in ____________—on the one hand, a person discovers the
____________ of the law when he understand the law's actual intent, while on the other
hand, if a person holds to the ____________ of the law the person may have missed the
true meaning.
A. dualities; spirit; letter
B. dualities; words; interpretation
C. dualities; abstract; concrete
D. dualities; uncertainty; reason
Which of the following statements about a mediator is true?
A. The mediator usually encourages the disputing parties to compromise on their
demands, but cannot force the parties to do so.
B. The mediator has the power to issue a binding judgment on the disputing parties,
regardless of what the parties do.
C. The mediator must be chosen from among the parties involved in the dispute.
D. The mediator's role is only useful before a lawsuit is filed by the parties.
Jose works as an exotic dancer at the "Gentlemen's Nightclub." Though he gets tips
from the patrons, Jose is paid a weekly salary. Later, Jose discovers that though he
works the same number of hours as the females, their salary is double his. If Jose sues
the Gentlemen's Nightclub, who will win?
A. Jose may win because of the Equal Pay Act.
B. Jose may win because of Title VII.
C. Gentlemen's Nightclub may win if they consider breast-size (or lack thereof) as a
factor of the value of the employee.
D. Gentlemen's Nightclub may win because employers can discriminate against men in
an exotic dancing venue.
Some states require that a merger involving an LLC have a ____________, rather than
the two-thirds majority required of corporations.
A. 51% majority vote
B. one-third majority vote
C. four-fifths majority vote
D. unanimous approval
The Raymonds financed the purchase of their house through Reed Bank, a local bank
with branches in Houston, where the Raymonds lived. The family made their mortgage
payments punctually each month at the nearby branch. However, without prior warning,
Reed Bank assigned the mortgage to Stanley Savings Bank located in Washington.
Discuss the rights of Reed Bank in making this assignment and if the Raymonds can
avoid the inconvenience of dealing with Stanley Savings Bank.
Cheatham and Dunlay are involved in a partnership dispute that presents several
complex legal issues. They decide to use early neutral evaluation. Discuss how this
process might be helpful in this situation.
Jackson sells his farmland. A dispute has arisen about whether or not the following
items are included in the sale. The contract is silent concerning the following items: a
growing cotton crop, a tractor, an irrigation pump that can be unbolted by disconnecting
two pipes, and a tool shed that sits upon concrete blocks on top of the ground. Discuss
each of these and decide if they are included in the sale of the farmland.
Just unionized, Medium Co. has named Erica as its chief negotiator with Large Union
in obtaining a contract. Erica wonders what topics are mandatory subjects of collective
bargaining. Discuss.
Jalenos owned voting stock in Altech, Inc.
Jackie borrowed $1,000 from Uncle John in 1975, with repayment due in 1977. Jackie
never repays the loan, and Uncle John never attempts to collect it. In 2004, Jackie
writes Uncle John a letter stating that she is sorry that she did not repay the debt and
encloses a check for $100 toward repayment. Uncle John cashes the check. He dies of a
heart attack one week later. Uncle John's heirs find the letter and sue Jackie to collect
the remaining $900 balance. Analyze the case.
Logan's building has a replacement cost of $500,000 and his fire insurance policy has
an 80% coinsurance clause. Logan has $200,000 of insurance on the building which is
completely destroyed by fire. Discuss how much Logan will collect from the fire
insurance policy.
Alexander Warehouse Co. stores boxes of china for Crystal Import Co., but stacks the
boxes too high so that lower boxes collapse and break the china contents. Alexander
asserts that this is Crystal's responsibility for not having stronger boxes, and Crystal
asserts that Alexander improperly stacked the boxes. Discuss what party is responsible
for the damage.
Big Co. creates a wholly owned subsidiary, Small Co. Small Co. sells poor quality
merchandise on credit to consumers at unlawful rates of interest and violates the
warranty agreements made with consumers. Discuss if Big Co.
A U.S. Court has to decide the application of a NAFTA provision in a dispute between
Big Co., a U.S. based firm, and Medium Co., a Canadian company, concerning the
export of prescription drugs by Medium Co. from Canada to the U.S. Discuss the
guidelines that a U.
Leonard Spinoza, a physical therapist, was laid off from his job at the Shelby Hospital
because of economic conditions. He registered with the state unemployment
compensation agency and requested unemployment compensation. The interviewing
official told him about a job for a physical therapist at the Bellville Hospital. Spinoza
refused it on the grounds that he needed vacation before accepting another job. Would
Spinoza qualify for unemployment compensation?
Discuss if the following instrument is negotiable:
"Ninety days after today, I promise to pay Sarah J. two thousand dollars."
Signed: Peter K.
A gasoline tanker truck is speeding around a curve in the road and overturns on the
shoulder of the highway. The truck catches fire due to a spark igniting the gasoline and
the fire spreads through a field where it burns a house and barn. The driver is arrested
and accused of a criminal act. Analyze the situation.
Tang went into a bicycle shop to purchase a bike rack. He asked the salesperson for
help in picking out a rack that would fit his bike. While the salesperson was helping
another customer, Tang went ahead and chose one he wanted. The salesperson then told
Tang that the rack was a good one. After Tang put the rack on his bike, it did not fit
properly and damaged his gear shift. Explain whether Tang can rightfully claim that the
salesperson committed a breach of warranty of fitness for a particular purpose.
Priscilla, a production manager for the Orange Hope Company, told her supervisor that
she was considering joining the company's union. Her supervisor, who did not belong to
the union, told Priscilla that he would promote her if she did not join the union, which
he described as corrupt. Were the supervisor's actions legal? Explain.
Nick sues Bradford & Co., alleging employment discrimination. Nick believes Bradford
& Co.'s e-mail will reveal evidence of discriminatory attitudes and actions by its
management. Nick sends a letter to Bradford & Co., requesting copies of e-mail
messages for the last six months, but receives no answer. What should Nick do?
Hundreds of residents of Rosewood County in Pennsylvania have filed a lawsuit in state
court against Thompson Brothers, a New York-based homebuilder, concerning the
completion of Thompson's newly-built apartment facility. Fearing the hostility of a
Pennsylvanian jury, Thompson is considering removing the case to federal court.