Book Title
Business Law with UCC Applications 14th Edition

BUS LAW 68846

March 1, 2019
Ethical theories are all based on the assumption that people want to live ethical lives.
A durable power of attorney preserves the authority of an agent when the principal
becomes incapacitated.
Courts can uphold an agreement that is partly legal and partly illegal.
Stare decisis means "let the decision stand."
The complaint is presented by the plaintiff directly to the defendant and is called service
of process.
The UNEP, which has its central offices in Bangladesh, was the first UN institution
located in a developing nation-state.
A duty is an essential element of tort law, as well as a legal obligation placed on an
Under the Check 21 Act, bank customers have an absolute right to see their original
canceled checks.
Under modern law, court-issued injunctions are typically temporary, and can never be
A prescriptive theory explains how to create values that benefit society.
Auditors may unconsciously help the organization they audit, rather than the outside
When contracting parties accept mutual obligations through oral discussion, they have
created an implied contract.
An implied warranty is created by statements of the seller and not imposed by law.
Kincaid, a promoter, enters into contracts that include XYZ Co., a corporation not yet
formed. Kincaid is personally liable on these contracts.
Sagan forgets to list in his health insurance application that he broke his arm at age five.
He is not guilty of fraudulent concealment.
Coinsurance covers goods that are moved by land carriers such as rail, truck, and
Carolyn signs a handwritten will without witnesses. Such a will is called a holographic
The law will not enforce an agreement that has not been bargained for.
Statutory interpretation is the process of determining the constitutionality of various
legislative statutes, administrative regulations, or executive actions.
If Spader is found insane by a court, any checks he writes after this will be considered
Greenmail is an offer by a target corporation to the bidder to acquire a portion of the
shares, which are already held by the bidder, at a price greater than when it was
originally sold.
GAAP was created by the FASB.
Fred Farmer, the mortgagor, is entitled to a jury trial when Big Bank attempts
foreclosure on his farm.
One of the objectives of labor unions is sponsoring laws that help improve political
conditions for workers.
The Wagner Act allowed an individual employee in a unionized business to negotiate
his or her own employment contract.
Strikes by public employees who perform vital services are generally illegal, unless
specifically authorized by statute.
The rationale for the employment-at-will doctrine is that the employer has the sole right
to terminate the employment relationship at any time.
A partnership consists of an association of two or more "persons," one of which cannot
be another partnership.
The "means test" requires an analysis of the degree of control the hiring person
exercises over the hired person.
Two friends are playing a paintball game on the sidewalk, when a paintball shot hits a
passerby in the eye. This would be an example of acting with recklessness.
An "estate in fee simple" allows the land to be owned temporarily, for which a fee is
A doctor who injects an antibiotic into a patient's arm without the patient's consent may
be liable for battery.
The right to exclusive possession by the tenant makes the landlord a trespasser should
there be any unauthorized entry by the landlord into the rented premises.
Sean gives an oral promise to Oscar to sell his old house. Oscar, relying on Sean's
promise, puts on a new roof and paints it. Oscar cannot enforce this oral contract.
A security interest is automatically perfected when the secured party has a legally
enforceable right to take the property and sell it to satisfy the debt.
The ____________ accepts the risk of loss in return for a premium.
A. insured
B. insurer
C. beneficiary
D. benefactor
Laura has a tenancy at will apartment rental agreement with Management Apartments.
When Management sells the apartment complex where Laura lives, what is the legal
status of Laura's apartment rental agreement?
A. In most states, the rental agreement ends.
B. In most states, Laura could sue Management Apartments for selling the apartment
without her consent.
C. In most states, the rental agreement continues if Laura gives written notice to both
the old and new owners of her desire to continue it.
D. In most states, the rental agreement ends only if it had existed for less than one year.
____________ is a vision of society in which competition for wealth is the only
recognized value and virtually all social decisions are left to unregulated markets... It is
a world in which... "everything [is] for sale."
A. Neoliberalism
B. Rational ethics
C. Social contract theory
D. Utilitarianism
____________ is aimed at understanding the laws of nature and the principles of the
physical universe without any practical goals in mind.
A. Pure research
B. Juriscience
C. The motivation test
D. Applied research
Today, promises under seal are:
A. enforceable in some states for contracts not involving goods.
B. enforceable under the UCC for contracts involving goods.
C. enforceable under the UCC if made by a merchant, in writing, stating the time period
over which the offer will remain open.
D. unenforceable as a consideration in a new contract.
Donna entered into an oral contract with Ava to purchase a house from Ava, with $500
per month payments for the next 10 years. Donna moved into the house, remodeled it,
and did extensive repairs. At the end of 10 years, Ava refused to convey title to the
house to Donna and produced evidence at the resulting trial that the fair market rental
value for the house averaged $800 per month over the 10-year period. Does Donna have
an enforceable contract?
A. Yes, Donna is entitled to the ownership of the house because oral contracts for the
sale of land are enforceable under the Statute of Frauds.
B. No, Donna cannot claim ownership of the house since there was no written contract
with Ava.
C. Yes, Donna can claim ownership of the house based on equitable estoppel.
D. No, Donna is not entitled to the ownership of the house since she was paying below
the fair value.
The Fair and Accurate Credit Transactions Act: ____________________________.
A. Establishes the same type of legal parity between electronic records and paper
B. Is a federal act designed to deal with problems associated with cyber-commerce
C. Prohibits merchants from using credit card receipts that show anything other than the
last five credit card numbers
D. Is a federal amendment to the Uniform Electronic Transactions Act
Under the ____________ Act, employers with more than 100 full-time employees must
give written notice to a union official 60 days before any plant closing or mass layoff.
A. Federal Employees' Compensation
B. Fair Labor Standards
C. Worker Economic Opportunity
D. Worker Adjustment and Retraining Notification
In some jurisdictions, minors who become ____________ cannot void a contract,
despite their apparent minority.
A. ratified
B. emancipated
C. abandoned
D. disaffirmed
EA Games Industries is a manufacturer of home video game machines and home video
games. Johnson Department Store wants to market the home video games, but EA
refuses to sell the games unless Johnson also agrees to purchase the home video
machines. A court will most likely find such a restriction to be a(n):
A. interlocking directorate.
B. lawful tying agreement.
C. unlawful tying agreement.
D. per se violation.
A(n) ____________ opinion is a qualified opinion by an auditor that indicates that the
financial statements are an accurate reflection of the company's financial health apart
from some minor deviation from GAAP, not serious enough to warrant an adverse
A. "except for"
B. "unless"
C. "but for"
D. "indeterminate"
Some argue that ____________ is actually in the long-term best interests of the
corporation. This argument, referred to as ____________, is based on the notion that
socially responsible corporations benefit by creating ____________ for themselves,
thus motivating consumers to purchase their products, investors to buy their stock, and
lawmakers to grant them further legal advantages.
A. profit maximization; social responsibility; goodwill
B. social responsibility; enlightened corporate self-interest; goodwill
C. profit maximization; enlightened corporate self-interest; goodwill
D. social responsibility; profit maximization; goodwill
Tangent Enterprises is a partnership consisting of Delen, Javid, and Kaya. Kaya leaves
the partnership to do volunteer work in Africa. Discuss the legal status of Tangent
The Crown Corp. offers to buy the voting stock of the L&N Corp. with the intention of
acquiring L&N and changing its management. To avoid being taken over by Crown,
L&N asks the Spendle Corp. to outbid Crown. In this situation:
A. L&N is a hostile bidder, Crown is the target, and Spendle is a white knight.
B. L&N is a friendly suitor, Crown is a hostile bidder, and Spendle is the target.
C. L&N is the target, Crown is a hostile bidder, and Spendle is a white knight.
D. L&N is the target, Crown is a friendly suitor, and Spendle is a hostile bidder.
In order to bring a derivative suit, a shareholder must own stock:
A. at the time of the injury only.
B. at the time of the suit only.
C. both at the time of the injury and at the time of the suit.
D. at the time of the injury, suit, and trial.
The Opening Case, Windsor v. United States, involved the constitutionality of the
Defense of Marriage Act (DOMA).
The ____________ Directives, also known as the ____________ Principles, guarantee
the rights of European citizens while, at the same time, ensuring the smooth exchange
of data among those nation-states that honor the privacy and data protection standards
A. Encrypted Cloud Data; Consumer Safe Harbor
B. EU Identify Theft and Deterrence; Debtor Safe Harbor
C. EU Data Protection and Privacy; Safe Harbor
D. EU PRISM; Safe Harbor
The social contract ethical theory:
A. explains how to formulate values that permit a society to run smoothly.
B. advocates a society in which people must fend for themselves.
C. states that to live harmoniously, people must give up certain rights and freedoms.
D. states that people cannot be forced to adhere to rules, or be punished for not doing
The ____________ has unified, streamlined, and refined the legal principles regarding
such diverse areas as reverse engineering, consumer protection, shrinkwrap licenses,
fair use, and consumer warranties.
A. Law Enforcement Access to Entity Information Act
B. Discovery of Electronically Stored Information Act
C. Uniform Computer Information Transactions Act
D. Secured Electronic Transactions Act
In most states, an innocent misrepresentation by the insured would make the policy:
A. voidable by the insurer.
B. voidable by the beneficiary.
C. enforceable, since there was no intentional misconduct.
D. enforceable to a reasonable amount as determined by the court.
Morgan, an agent was instructed to sell Drew's property at a specified "firm" price of
$450,000. A month later, the value of the property decreased substantially to $75,000
because of zoning changes. What is the status of the agency relationship?
A. Most likely, the agency is terminated because of impossibility.
B. It would terminate unless Drew had given Morgan a durable power of attorney.
C. It becomes an agency coupled with an interest, and continues unaffected by any
change what so ever.
D. It requires the agent to compensate the principal with less compensation.
____________ outlines the historical laws and the procedures that were followed by
merchants in commercial transactions.
A. Contract law
B. Commercial law
C. Trade law
D. Lex mercatoria
For most business decisions, the quorum, or minimum number of directors necessary to
conduct business, is usually ____________ of the total number of directors.
A. three-quarters
B. two-thirds
C. one-half
D. a majority
Gordon employs Josh as an agent to sell Gordon's house. When does this agency end if
the agreement is silent?
A. When the house is sold
B. When Josh locates a possible buyer
C. When Josh decides to look for other employment
D. When Gordon decides to look for another agent
The right to equity of redemption:
A. is the mortgagor's (debtor's) right to pay off the mortgage in full, including interest,
and thus, discharge the debt in total.
B. states that a default on one installment payment will make the entire balance due
immediately, giving the mortgagee the right to collect the full amount.
C. is the mortgagee's right to apply to a court to have the property sold.
D. gives the mortgagor the right to receive each installment payment as it falls due.
____________ are values that govern a society's attitude toward right and wrong and
toward good and evil.
A. Ethics
B. Laws
C. Market values
D. Morals
A(n) ____________ is a transfer of an interest in real property for the purpose of
creating a security for a debt.
A. mortgage
B. secured loan
C. security interest
D. unsecured loan
_________ contracts for the sale of goods of $500 or more are ________________ if
the contract _________________________.
A. Oral, enforceable, involves specially manufactured goods that cannot be resold
B. Oral, not enforceable, is an executed agreement
C. Written, not enforceable, involves admissions in court
D. Electronic, not enforceable, is a written memorandum
In which of the following situations can an agent legally appoint a subagent?
A. When the case involves co-agents
B. When the appointment is implied from the nature of the employment
C. When the situation involves a nondelegable duty
D. When the co-agent demands such an appointment
____________ is a universal normative principle that follows a set pattern that can be
used to understand natural processes or human behavior.
A. Neoconservativism
B. Neoliberalism
C. Realpolitik
D. A covering law
At the end of her two-year lease, Margo remained in her apartment and continued to
pay her landlord rent every month, which he accepted. One day, Margo received a letter
from her landlord accusing her of creating a tenancy at sufferance and threatening
immediate eviction. Was the landlord acting within his rights? Explain.
Anita wants to go into business for herself, but does not know how to start. Discuss the
best way for Anita to begin.
Starting in 1985, Helena drives across Giant Ranch to cut twenty miles off the trip from
her land to the nearest public road. Giant Ranch does not object to this until Helena
protests the environmental policies of Giant Ranch. Giant then fences off the path that
Helena drives, and Helena protests this in a suit. Discuss the likely result of this case.
Tom is an official of Large Co., a mining company. Tom is paid by Large Co. to be the
company spy in union meetings and make reports about the inner workings of the
union. Discuss the legal aspects of this situation.
Polio cases have decreased by over 99% since 1988, from an estimated 350000 cases
then to 1349 reported cases in 2010. The reduction is the result of the global effort to
eradicate the disease. In most countries, the global effort has expanded capacities to
tackle other infectious diseases by building effective surveillance and immunization
systems. Success hinges on financing the next steps of the global eradication initiative.
The World Health Organization has played a significant role in meeting such health
challenges. How does the WHO accomplish its targets?
Iko purchased a house through Stockholm Bank Pvt., Ltd. A year later, Iko wanted to
make improvements on the mortgaged property and borrowed money from Jeremy,
mortgaging the same property again. Jeremy is unaware of the mortgage of the house
by Stockholm Bank and records the mortgage. Analyze the situation in case Iko is
unable to repay both the mortgagees.
Amanda agrees to pay a county official $20,000 personally in exchange for his using
public funds to build a public one-half-mile all-weather road into her farm, so that she
can attract buyers for her farm. The county official takes the $20,000, but never builds
the road. Discuss the enforceability of this agreement.
Sarah promises to give $10,000 for the construction of Save the Butterflies, a local
charity, and is publicly honored as a "golden" donor of Save the Butterflies, by putting
her name on the "Wall of Honor." Sarah later does not pay the $10,000. Discuss the
ways in which Save the Butterflies may legally collect the $10,000 from Sarah.
Charlie, a high school dropout, works as an accountant for Small Co. Discuss if the
state may prevent Charlie from working as an accountant due to his lack of education
and failure to meet state registration requirements.
Patricia Selan, a freelance photographer, entered a work-for-hire agreement with
Dynamic Prints Ltd. During the negotiation stage, Selan asked that the contract include
an ADR clause, which would make certain that the parties would submit all disputes to
ADR. The clause stated that whenever a disagreement arose, the parties would first talk
about the problem informally. If, after 14 days, no solution was reached, the claim
would go to the American Arbitration Association, which would assist them in choosing
an objective mediator who would help them choose an appropriate ADR plan. What
benefits does this contract offer Selan?
Downtown Construction Co. obtained possession on April 1 of a bulldozer from
Bulldozer Sales Co. to use in Downtown's business with a right to return the bulldozer
no later than June 1 with no obligation other than to pay for the fuel the bulldozer used.
Downtown is owned by Alice who allows her fifteen-year-old son, Bob, to operate the
bulldozer on May 1 on a Downtown job. Bob is inexperienced and wrecks the
bulldozer. Explain who has the risk of loss.
Tom and Jerry operate an ice cream business as equal partners. Tom wants to reinvest
the profits, and Jerry wants to distribute and spend the profits. If they litigate, the court
will likely order the business assets sold, which will destroy the income potential for
both Tom and Jerry. Discuss how this dispute might be resolved by arbitration.
Chris, Miller, and Kacy created a limited liability company by filing the articles of
organization, appointing a statutory agent, and paying the appropriate filing fee. They
also agreed to run the LLC themselves, making it a member-managed LLC. Chris
entered an agreement whereby he purchased 1,000 barrels of oil. Neither Miller nor
Kacy believe that Chris paid a good price for the oil. Nevertheless, Chris argues that the
LLC is bound by the contract he entered. Is Chris correct? Explain.
Small Bank mistakenly dishonors a $5,000 check written by its customer, Wanda, to
Hyram Real Estate as a down payment for a new home. As a result of the dishonor,
Wanda's closing is delayed by thirty days. She incurs $500 extra rental expenses,
$1,000 in attorney's fees and home mortgage interest rates increase by one half percent
before her closing. Hyram deposited the $5,000 check in its account and suffered $300
in NSF charges when credit for the deposit was withdrawn. Discuss the liability of
Small Bank to Wanda and Hyram.
Amalgamated Enterprises is considering closing its plant in a small U.S. town where its
average wages are $10 per hour, and moving production to a foreign country where
average wages for the same work will be $2 per hour. Amalgamated is the largest
employer in the community. What theories of social responsibility may Amalgamated's
management consider in making a final decision about the plant?
Josie writes a check on January 15 to Rusty Enterprises, but later realizes that the
merchandise she purchased was of poor quality. She gives a stop payment order to the
bank on January 20. Her bank has the check in its possession and is accepting it as she
completes her stop payment order. Her bank pays the check, and Josie demands that her
account be recredited. Discuss the legal aspects of this situation.
Jennifer contracts to purchase Allison's house when Allison is transferred out of the
state. The contract calls for monthly payments, but allows Jennifer to pay the remaining
balance at any time. Jennifer, on June 1, sends Allison an offer to pay the balance.
Allison receives the offer on June 2, but sets it aside until October 1. When Allison
realizes that Jennifer has not made any payments for four months, she threatens to sue
Jennifer for breach of contract. Discuss the legal rules governing this situation.
Irene buys Shawn's second hand furniture, and they sign a contract on a Sunday.
However, the contract mentions that Irene will collect the furniture on Tuesday and will
pay the consideration to Shawn at that time. Analyze the legality of the contract,
considering that the state where Irene and Shawn live is not very restrictive about
prohibiting all business activity on Sundays.
Sue is in her apartment complex when she hears screams and what sound like gunshots.
However, she fails to call 911. Has Sue committed a crime due to her failure to call the
police? Explain.