Book Title
Business Law with UCC Applications 14th Edition

BUS LAW 63239

March 1, 2019
Laura promises to pay Stuart "a reasonable amount" for repairing her car. Stuart sends
Laura a $500 invoice and Laura sends Stuart a $350 check marked "payment in full".
There is an accord and satisfaction created if Stuart cashes the check.
In the Opening Case regarding the Ebola outbreak, the plaintiff claimed the hospital did
not provide her proper care.
In creating a senior assisted-living home exclusively meant for people above the age of
62, Jodie would run afoul of age discrimination prohibitions.
The legal term used to describe the sacrifice that each party must experience is that
party's bargained-for-exchange.
An FTC order, under which a company agrees to stop a disputed practice without
necessarily admitting that it violated the law, is called a consent order.
Only two parties are associated with any assignment—the assignor and the obligor.
A consignment contract is a type of mutual benefit bailment in which the consignor
entrusts goods to the consignee for the purpose of selling them.
A Chapter 11 disclosure statement must be approved by the court before there can be a
vote by creditors on the reorganization plan.
A devisee receives real property under a will.
An injunction occurs when a court orders a defendant to pay damages or face jail time.
A check is overdue ninety days after its date.
Special statutes allow small loan companies, pawn shops, and other lending agencies
that accept high-risk applicants for credit to charge a higher rate of interest.
If an accountant follows the GAAS or GAAP guidelines, it will automatically lead to
his or her vindication in a court of law.
The CEO of Earth Enterprises hires Jason, promising him "long-term employment." A
few weeks later Earth Enterprises files for bankruptcy and terminates Jason's
employment. Jason may sue for wrongful discharge.
Reverse discrimination refers to a practice that is designed to eliminate discrimination
against the members of a protected class and that has affirmative effect on other
members of that class or on the members of another protected class.
An electronic party should always ensure that a copy of the contract is available on a
hyperlink that will display the actual language of the agreement.
The principal or employer is ordinarily liable for an agent's or employee's crimes, even
if the principal or employer does not actually aid or participate in their commission.
The American Law Institute's insanity test is also known as the irresistible impulse test.
People found not guilty by reason of insanity must be set free under the American legal
Historically, courts have issued injunctions to use the Sherman Act to break up labor
To be a holder in due course, the person in possession of the instrument must first be an
Francis has many traffic tickets and fears that her license will be suspended if she gets
another traffic ticket. When stopped for speeding, she hands over her license to the
police officer with a $100 bill clipped to the license. Francis has likely committed a
Under the RUPA entity theory, a partner has the right to sue to see the partnership's
When the bank collects or attempts to collect checks made payable to the customer, it
acts as the customer's agent.
In negotiated rulemaking, affected parties can contest a rule established by a
rule-making agency.
RUPA considers a partnership to be an entity in relation to liability.
According to the uncertainty principle, when intent and results coincide, it is usually
based on the strategic thinking and experience of the persons involved.
The set of circumstances that leads a woman to believe that the only way she can
escape death is to use force against her tormentor is called battered spouse syndrome.
In the Classic Cases—Declaration of Independence, the text argues that Jefferson
derived his four central truths of social contract from John Locke's famous book,
The RUPA requires that a partnership agreement be in writing to be enforceable among
the partners.
Silitron Co. employs a total of 125 full-time employees, but it is closing one plant
which has only 60 employees. Under the WARN act, it is not required to give 60 days
advance notice to a union official.
Merchant A orally enters into a $1,000 contract with Merchant B. Merchant A will be
legally bound if Merchant B sends a written confirmation, even if Merchant A has not
signed it.
When a corporation is set up as a mere instrumentality of a parent corporation, it is
sometimes referred to as a dummy corporation or a corporate shell.
A ____________ loan is that which deliberately misstates the qualifications of a
borrower to push a loan through the approval process.
B. liar
C. subprime
D. home equity
Satisfactory performance:
A. is either an express or implied condition of every contract.
B. exists when parties fully accomplish every term, condition, and promise to which
they agreed.
C. exists when a party executes all the terms, except minor details that do not affect the
contract's real intent.
D. terminates an agreement, freeing the parties of any further obligation or liability.
Henrietta offers a $500 reward for the return of Fifi, her lost dog. Silas finds and returns
the dog. This is an example of a(n):
A. bilateral contract.
B. unilateral contract.
C. quasi-contract.
D. unenforceable contract.
A knife made by Knife Co has a metal handle with no warning, and the manufacturer
has received reports that some consumers have received electrical shocks when
attempting to use the knife as a screwdriver while installing an electrical outlet. Athena
is one such consumer and decides to sue the manufacturer and the seller. Which of the
following is true of this situation?
A. Athena can sue the manufacturer, since there is no specific warning label on the
B. Athena cannot file a suit as a warning label may not reduce the likelihood of an
injury in case of a knife.
C. Athena cannot file a suit against the manufacturer, since the danger presented by the
product is obvious.
D. Athena can bring a lawsuit against the manufacturers, stating that the warning on the
product was inadequate.
A(n) ____________ of a note is required to ____________ the instrument without
reservations of any kind.
A. indorser; pay
B. maker; pay
C. drawer; transfer
D. maker; assign
Which of the following is true about the legality of an agreement?
A. An agreement is not divisible if the legal part of a contract can be removed from the
illegal part without changing the nature of the contract.
B. The court will not enforce any agreement or contract that is either fully or partially
C. An agreement can sometimes be partly legal and partly illegal.
D. A court has to enforce both the illegal and the legal parts of the contract.
Which of the following is true of "time for performance"?
A. When there is nothing to indicate in the contract that time is of importance, the court
will allow additional time.
B. Including the phrase "time is of the essence" in a written contract has no effect on the
C. When the time for performance is not stated in the contract, the contract must be
performed within a reasonable time.
D. When there is something special about the contract that indicates time is essential,
additional time is allowed.
Manuel is seriously ill and gives Juanita his diamond ring to remember him by. When
Manuel recovers, he cannot obtain the return of the ring from Juanita.
Michelson was chairman of the board and chief executive officer of a computer
manufacturing firm. When considering whether to purchase CompuPrint, the
manufacturer of computer printers, Michelson examined CompuPrint's financial
records, consulted with legal and financial experts, and conducted an in-depth study of
the marketplace and decided that it would be profitable for his corporation to purchase
CompuPrint. If CompuPrint turns out to be a poor investment, and a court hears a case
challenging Michelson's decision, the court will most likely analyze his conduct based
on the ____________ rule.
A. business judgment
B. insider trading
C. fairness
D. shareholder protection
The U.S. Court of Appeals for the Federal Circuit was established by Congress
primarily to:
A. hear appeals on questions of law from the lower courts.
B. streamline and unify patent law.
C. decide on the details involved in bringing a case to trial.
D. simplify issues and avoid unnecessary arguments and surprises in the subsequent
Jan signs the articles of incorporation for a corporation being formed, and Tom wants to
locate possible investors in the new corporation. Jan is a(n):
A. incorporator.
B. promoter.
C. registered agent.
D. shareholder.
The ____________ Act specifically addresses promotional allowances.
A. Clayton
B. Robinson-Patman
C. Federal Trade Commission
D. Sherman
Koto, a successful accountant, has been invited to join the board of directors of Big
Corp. Koto is concerned that she will face personal liability for her decisions while on
the board of Big. Big Corp. can limit Koto's liability at this point in time by including:
A. protective measures in its corporate charter.
B. voluntary protective measures in its bylaws.
C. voluntary protective measures in its articles of organization.
D. protective measures in the members' agreement.
Some jurisdictions consider managers liable only if they exceed their authority and the
violation results in negligent or intentional conduct. This duty is referred to as the duty
A. diligence.
B. loyalty.
C. care.
D. obedience.
____________ occurs when one party makes false statements or commits some sort of
false action that causes another party to rely on those falsehoods and then experience an
injury or loss as a result.
A. Abandonment of contractual obligation
B. Fraudulent misrepresentation
C. Anticipatory breach
D. Constructive breach of contract
A(n) ____________ contract is implied by the direct or indirect acts of the parties.
A. express
B. implied-in-fact
C. unilateral
D. void
Mercedes receives a box of unordered office supplies in the mail. What is her legal
A. She must return it.
B. She must report this to the local postal inspector.
C. She must pay for it.
D. She may consider it a gift.
Rajid, an immigrant who speaks little English, enters into a contract to pay $300 per
month for ten years to purchase an auto from Travel Motor Co. The appraised retail
value of the car is $5000. What legal remedy would release Rajid from his contract?
A. Unconscionability
B. Specific performance
C. Punitive damages
D. Implied understanding
Brett offers to dust and vacuum all the rooms in Arlene's apartment for $45. Arlene says
she will accept his offer if he lowers his fee to $40. According to the common law of
contracts, Arlene has:
A. made an unequivocal acceptance.
B. made a counteroffer.
C. demonstrated the mirror image rule.
D. entered into an option contract.
Dishonor means:
A. fraud in the payment method.
B. deception in the amount of payment.
C. refusal to pay a negotiable instrument.
D. an extension of payment.
Planter, Inc. sold $100,000 in plants and plant supplies to Ace Corporation. When the
supplies were delivered to Ace, Ace ordered its bank, Fourth National, to pay $100,000
to Planter. Fourth National debited Ace's account and ordered Chase Superior, Planter's
bank, to credit Planter's account for $100,000. In this transaction:
A. Planter is the originator and Ace is the beneficiary.
B. Ace is the originator and Chase Superior is the beneficiary.
C. Ace is the originator and Planter is the beneficiary.
D. Fourth National is the beneficiary and Chase Superior, the originator.
In a tenancy in common, the tenants:
A. always take title at the same time.
B. cannot transfer their share to their heirs.
C. always have equal interests in the property.
D. have equal right to possess the property.
A holder in due course of a negotiable instrument:
A. can receive more rights than the previous holders.
B. cannot transfer greater rights than they have themselves.
C. can take an instrument even when it is not indorsed to him or her.
D. is a person to whom the instrument is transferred as a gift.
Any person who ____________ contributes to the ____________ of an instrument
____________ exercise the defense of ____________ against a holder in due course
who pays the instrument in good faith.
A. negligently; fraud in the inducement; may; alteration
B. negligently; presentment; may not; alteration
C. intentionally; material alteration; may; alteration
D. negligently; material alteration; may not; alteration
Which of the following is true of recording a mortgage?
A. A failure to record the first mortgage would remove the obligation of the mortgagor
to the first mortgagee.
B. The second mortgagee must know about the first mortgage and is exempted to record
the mortgage.
C. If the mortgage is not recorded and a later mortgage is given on the same property,
the old mortgage is superior to the second.
D. Recording a mortgage notifies any third party that the mortgagee has an interest in
the real property covered by the mortgage.
The legal term used to describe the sacrifice that each party must experience in a mutual
exchange is that party's legal:
A. detriment.
B. exchange.
C. accord.
D. release.
The Dispute Settlement Board of the WTO allows:
A. retaliatory measures.
B. imposition of tariff for no more than 10 months.
C. a ban on the imports of the offending nation for no more than 5 months.
D. a boycott.
An option contract:
A. removes the possibility of revocation through death or insanity of the offeror.
B. is valid only if in return for the agreement to hold the offer open, the offeror receives
no money or something else of value from the offeree.
C. is a contract that permits a party to lease real property while at the same time holding
an option to purchase that property.
D. is an agreement that binds an offeror to a promise to hold open an offer with no time
limit specified.
Charles creates a revocable living trust. What are the typical advantages of creating a
revocable living trust?
A. Estate tax advantages
B. Management advantages
C. Both estate and income tax advantages
D. Management advantages as well as estate and income tax advantages
In the case United States v. Todd Newman and Anthony Chiasson, the Second Circuit
Court of Appeals held that for a ____________ to be ____________, she must have the
requisite ____________ to receive a personal benefit in exchange for that information.
A. defendant-tippee; criminally liable; mens rea
B. defendant-tipper; civilly liable; mens rea
C. defendant-tippee; civilly liable; mens rea
D. defendant-tippee; criminally liable; actual authority
Lucy's stepfather, Zed, passed away intestate when she was 19. Zed had never adopted
Lucy, but they were much closer than most fathers and daughters. As a stepdaughter:
A. Lucy's legal rights of inheritance are the same as those of adopted children.
B. Lucy's legal rights of inheritance are the same as those of Zed's natural children.
C. Lucy has a limited right of inheritance, since she was not adopted.
D. Lucy has no right of inheritance, since she was not adopted.
Shawn was an indorser on a check. A subsequent holder presented the check to the bank
named on the instrument and was informed that there was not enough money in the
account to honor the check. The next day, the subsequent holder demanded the money
from Shawn. Must Shawn pay the subsequent holder of the instrument? Why or why
Shareholders of Mitas Corp. are concerned that the directors are not performing their
tasks properly for the benefit of the corporation. Discuss what must be done by the
shareholders before bringing a derivative suit.
Michael is the corporate manager at Hatch & Jake Pvt. Ltd. He is asked to always
consider if the benefits to the shareholders outweigh the costs to the corporation.
Michael takes the action only if the shareholders' benefits offset corporate costs.
Joan Kilney had a major car accident. She continued to be fed through a
surgically-implanted gastrostomy tube for a period of five years. She expressed a wish
to end the prolonged agony by taking recourse to the right to die. What difficulties are
generally faced by a trial court in such cases and what could be the remedy as has
envisaged by several commentators?
A(n) ____________ will provide temporary insurance coverage until the policy is
formally accepted.
Quinlan picked up the goods that he had stored in Dana's warehouse, promising to pay
Dana the following week. Several months passed, and Quinlan still had not paid Dana
for storing the goods. Dana claimed that she had a warehouser's lien on the goods that
were stored in her warehouse. Was Dana correct? Why or why not?
A state law restricts the sulfur dioxide emissions from electric generation plants more
severely than those of the federal Clean Air Act. Must an electric generation plant obey
the state law or may it follow the federal statute?
Small towns want to restrict the speed of trains passing through the towns to 20 miles
per hour. The Federal Railroad Administration allows trains to travel through the towns
at up to 70 miles per hour. Discuss whether or not the towns may restrict the speed of
the trains.
Small Co. is afraid that it will become the subject of a takeover bid and lose its
independent existence. Can Small Co. take the help of a friendly suitor to offset any
takeover bid? If so, how?
Jackson's wallet is stolen. The thief makes use of the identification items in the wallet to
pass himself off as Jackson in order to establish fraudulent credit card accounts and in
general, disrupt Jackson's financial life. Analyze the crimes and the law violations for
which the thief can be convicted.
Susan, aged 16, owns a rare violin. Eric knows Susan is 16 and contracts with Susan
that she will sell him the violin for $1,000 with delivery to take place when Susan is an
adult. When Susan seeks to disaffirm this contract, Erin asserts that since delivery is to
occur after Susan becomes an adult, she may not disaffirm. Analyze the case.
Mark gives a $3,000 check drawn on Access Bank to Acme Industries who mislays the
check for three weeks. When Acme finds the check, they request that Access Bank
certify the check. Access declines to do so, and Acme tells Mark that the check has been
dishonored. Mark contacts Access who agrees to certify the check. Access subsequently
wants to withdraw their certification, since Mark has insufficient funds in his account.
Discuss the legal issues contained in their situation.
To encourage individuals to serve on boards of directors, legislatures have enacted a
variety of measures to protect good faith and due diligent activities of directors. Discuss
the types of measures enacted by state legislation.
Mark was speeding on the highway when he and John had a car accident and suffered
serious head injuries. As a result, John's memory was affected, and he could not
remember any of the incidents on the day of the crash, including the fact that Mark's
rash driving caused the car crash. At the hospital, Mark, who suffered minor injuries,
convinces John that the crash was no one's fault and just bad luck. John is empathetic
and signs a contract with Mark stating that neither party would sue the other for
damages. However, Lily, who was with John in the car and was also injured, knows that
Mark was responsible and challenges the contract in court, in addition to filing a lawsuit
against Mark. Analyze the case.
Daly and Leva entered into an agreement whereby Leva borrowed $15,000 from Daly,
and Daly took a security interest in Leva's next corn harvest. The financing statement
identified Daly and Leva by name and included their mailing addresses. Leva signed
the statement. Can the security interest, in this case, be perfected by the financing
statement filed?
Tom and Cindy are discussing what it means to have a "right-to-work law." Tom says
that it means to have no discrimination in employment. Cindy says it means that
everyone has a right to unemployment benefits until they find a job that fits their skills
and experience. Discuss the accuracy of these comments.
A tabloid journalist pays money to the trash collector of a celebrity movie star in order
to obtain access to the celebrity's trash. The journalist then writes a story about the
celebrity's lifestyle based upon the contents of the trash. The trash is locked in a special
building on the celebrity's property and the trash collector has a key to the building and
has signed a confidentiality agreement. Is truth a defense that the journalist may assert
when sued by the celebrity?
Samantha sues Acme Chemical Co. in a federal court for injuries caused five years ago
by the application of a residential pesticide produced by Acme. The state statute of
limitations (time to bring lawsuits) in Samantha's state is three years. Samantha wants
the federal court to apply a longer four-year federal statute of limitations. How will the
federal court resolve this question?
Oliver wrote a check to Greg Motors for $4,000 drawn on Uphill Bank in payment for a
secondhand car. Greg Motors deposited the check in its account at Seventh Day Bank,
which sends the check to Uphill Bank for collection. Oliver's car broke down before he
reached home that evening, and he contacted his bank to stop payment on the check.
Discuss what Uphill bank must do with the check to ensure a stop payment.