Diderot’s accountant is Esteban and his attorney is Figaro. All states protect, as
privileged information, Diderot’s communications with
a. Esteban and Figaro.
b. Esteban only.
c. Figaro only.
d. none of the choices.
Cruz, a sugar cane farmer in Brazil, forms an alliance with Alexis, an importer and
marketer in the United States. Their products carry a Fair Trade label. This means that
Cruz
a. is willing to fairly trade goods instead of cash for his products.
b. receives a stable minimum price for his products.
c. employs forced labor at a fair price whenever possible.
d. produces crops as cheaply as possible to keep his prices minimal.
Ricardo, an accountant, contracts to conduct an audit for Sensei Sushi Restaurants. In
performing the audit, Ricardo fails to detect certain misconduct. Ricardo is most likely
a. liable if a normal audit would have revealed the misconduct.
b. liable if Ricardo issues a specifically qualified opinion.
c. not liable if Ricardo generally disclaims any liability.
d. not liable if the misconduct was due to Sensei Sushi’s negligence.
Rural Financial Corporation is a secured party with a security interest in property
owned by Strawberry Fields, Inc. Perfection of this security interest may not protect
Rural Financial against the claim of
a. a bank.
b. a buyer in the ordinary course of business.
c. a subsequent lien creditor.
d. a trustee in bankruptcy.
Fine Food Company, Gourmet Cheeses, Inc., and Healthy Eats, Inc. agree to exchange
information and share advertising. This trade association is
a. a deal that neither restrains trade nor harms competition.
b. a legal restraint of trade.
c. a per se violation of antitrust law.
d. subject to analysis under the rule of reason.
Paradise Footwear buys a franchise from Quadrangle Athletic Shoes, Inc. This rela-
tionship, like all other franchise relationships, is governed by
a. contract law.
b. no law.
c. the Franchise Disclosure Document, or FDD.
d. Article 2 of the Uniform Commercial Code.
Eudora is interested in buying a franchise from First Home Realty Company. In this
transaction, the Federal Trade Commission’s Franchise Rule
a. does not apply.
b. enables Eudora to weigh the deal’s risks and benefits.
c. enables First Home to weigh the deal’s risks and benefits.
d. prohibits certain types of anticompetitive agreements.
Soft Drink Corporation is charged with violating the Sherman Act through conduct
subject to the rule of reason. When applying the rule of reason in this situation, a court
will not consider
a. the purpose of the agreement.
b. the parties’ market ability to implement the agreement.
c. the effect of the agreement on international trade.
d. the potential effect of the agreement on competition.
Bart, the owner of Clear Cut Corporation, signs an instrument that includes the phrase
“payment for this note will be made from the proceeds of next year’s timber sale.” This
instrument is
a. negotiable.
b. nonnegotiable, because payment can be made only out of a particular source.
c. nonnegotiable, because it states an express condition to payment.
d. nonnegotiable, because the reasons for the note are not clear on its face.
Fact Pattern 16-B1
Ripe Produce, Inc., and Southeast Asian Bistro & Market enter into a contract for the
delivery of locally grown fruits and vegetables. The parties use a standard Ripe Produce
form that contains some of the terms the parties agree on but not others. Some of the
produce spoils before it can be cooked, served, and eaten, or sold. Southeast Asian
refuses to pay for the spoiled goods.
Refer to Fact Pattern 16-1. Southeast Asian contends that the practice in the trade with
respect to payment for spoiled produce justifies its refusal to pay. Southeast Asian is
arguing that the court should take into account
a. the course of dealing.
b. the course of performance.
c. the usage of trade.
d. a rule of construction.
Nazih and Ovidia are limited partners in Physicians Medical Center, a limited partner-
ship. In terms of the firm’s books and information regarding partnership business, Nazih
and Ovidia are entitled to
a. access in proportion to their participation in management of the firm.
b. access to the parts that directly relate to their capital contributions.
c. no access.
d. complete access.
Nero and Omar agree to buy natural gas to sell to Power Fuel Refinery and to share
storage costs until Power Fuel can take delivery. The gas is commingled so that Nero’s
cannot be distinguished from Omar’s. This is
a. a bailment.
b. production.
c. confusion.
d. in violation of the law.
Effortless Workouts, Inc., offers to sell a treadmill to Farouk and sends it to him on a
trial basis. This is
a. a bailment.
b. a delivery ex-ship.
c. a sale on approval.
d. a sale or return.
On July 10, Pet Supply Store orders fifty small dog collars from Quality Collars, Inc. to
be delivered by July 15. On July 13, Quality Collars tenders fifty large dog collars. Pet
Supply rejects the shipment. Quality Collars has
a. no right to cure.
b. until July 15 to cure.
c. until the end of the business day on July 13 to cure.
d. unlimited time to cure.
Gary dies without a will. His survivors include his spouse Helen and his two children,
Irene and John. Under applicable laws, of Gary’s estate, Helen will probably receive
a. everything.
b. nothing.
c. one-half.
d. one-third.
Corporate Bank wants to perfect its security interest in inventory owned by Outdoor
Outfitters, Inc. Most likely, a financing statement should be filed with
a. the bank manager.
b. the county clerk.
c. the U.S. Department of the Interior.
d. the secretary of state.
Sara believes that she was rejected for a position at Trek n” Travel Agency on the basis
of her race. Sara files a suit against Trek n” Travel under the Civil Rights Act of 1964.
To establish a prima facie case of employment discrimination, Sara must show all of the
following except that
a. she is a member of a protected class.
b. she applied and was qualified for the job in question.
c. she was rejected for a position by Trek n” Travel.
d. other persons of her race hold similar positions with other similar employers.
American Coffee Company and Beans Brokers, Inc., enter into a contract for the sale of
a certain quality and quantity of coffee beans, with Beans Brokers to determine the
price. The price must be set according to
a. the concept of good faith.
b. the principle of fair trade.
c. the predominant-factor test.
d. the doctrine of unconscionability.
Grover signs an installment contract with Home Appliance Store to finance the
purchase of new kitchen appliancesstove, refrigerator, dishwasher, microwave, and
toasterovenfor $3,999. This transaction is subject to
a. no federal law.
b. the Fair Credit Reporting Act.
c. the Telecommunications Act.
d. the Truth-in-Lending Act.
Durant obtains a life insurance policy with no cash surrender value or cash value, and
names his daughter Elise as the beneficiary. This is
a. limited-payment life insurance.
b. term insurance.
c. universal insurance.
d. whole life insurance.
Linus hires Mieko to act as his agent to purchase Ngoc’s Southeast Asian Buffet. Linus
tells Mieko to reveal only that she is buying the restaurant on behalf of a third party,
without telling Ngoc’s seller who that third party is. Linus is
a. a disclosed principal.
b. not a principal.
c. an undisclosed principal.
d. a partially disclosed principal.
Qiana and Rex take title to a Shakes n” Burgers restaurant in such a way that if one
dies, the other will be the sole owner. Qiana and Rex own the restaurant as
a. co-owners in fee simple.
b. joint tenants.
c. tenants by the entirety.
d. tenants in common.
Loaf & Biscuit Company operates a commercial dough making and packaging planta
“major source”that emits hazardous air pollutants for which the Environmental
Protection Agency has set maximum levels of emission. The plant does not use any
equipment to reduce its emissions. Under the Clean Air Act, this is most likely
a. a violation.
b. not a violation because dough is not considered a pollutant.
c. not a violation because the plant does not use any equipment.
d. not a violation because the plant is not a mobile source.
Bernard is an expert on exotic flowers. Custom Floral Arrangements, Inc., hires
Bernard to order exotic flowers for its arrangements. Bernard does not examine the
quality of the flowers he orders on behalf of Custom Floral. Bernard has breached
a. the duty of performance.
b. the duty of loyalty.
c. no duty.
d. the duty of notification.
Miranda delivers her bridesmaid’s dress to Nina for alterations. Nina promises that the
dress will be ready within five business days. Miranda agrees to pay the charge when
she picks up the dress. This is
a. an implied bailment.
b. an involuntary bailment.
c. an express bailment.
d. not a bailment.
Fact Pattern 14-1B
Charlton is the maker of a $200,000 promissory note payable to Development & Sales
Corporation. Development & Sales indorses the note to Equity Lenders, which in turn
indorses it to First Select Investors, which then indorses it to Global Bank, the present
holder.
Refer to Fact Pattern 14-1B. Global Bank properly presents the note to Charlton for
payment, but he dishonors it. With timely notice to the proper parties, Global Bank may
collect payment on the note from
a. Development & Sales, Equity Lenders, or First Select.
b. Development & Sales or Equity Lenders only.
c. First Select only.
d. no one.
Trixie signs a $1,500 note payable, at 4.25 percent interest, on October 1 to Urban Bank
and writes on its face that it is “nonnegotiable.” This note is
a. negotiable.
b. nonnegotiable, because it is dated.
c. nonnegotiable, because it is payable with interest.
d. nonnegotiable, because it includes the notation “nonnegotiable.”
Eden Valley Ranch and Farm Supply Corporation enter into a contract for a sale of
fencing materials. Farm Supply, a merchant who deals in goods of the kind, makes
implied and express warranties in connection with the sale. Under the UCC, if these are
inconsistent
a. all implied warranties displace all express warranties.
b. all express warranties displace all implied warranties.
c. the implied warranty of fitness for a particular purpose takes precedence.
d. the implied warranty of merchantability takes precedence.
Blayne is an employee of Chemical Refinery, Inc. Blayne is threatened with a discharge
when he refuses a transfer to a Chemical Refinery department in which several
employees suffered serious injuries from exposure to hazardous chemicals. Blayne may
be entitled to protection from discharge under
a. no law.
b. the Family and Medical Leave Act.
c. the Occupational Safety and Health Act.
d. the state workers’ compensation act.
Repo Motors Company uses ‘self-help” repossession when its debtors default on their
loans. This simplifies the process of repossession because
a. it can be done without judicial process.
b. it is less stressful for debtors.
c. it provides an incentive for confrontations with debtors.
d. the UCC clearly defines what constitutes “breach of the peace.”
Edgar possesses a check that is “payable to cash.” Fawn steals the check and delivers it
to Godfrey, an innocent third person. All rights to the check are
a. Edgar’s.
b. Fawn’s.
c. Godfrey’s.
d. lost.
Bread & Bagels Corporation wants to purchase all of the assets of Coffee & Tea Inc.
Dolly is a Coffee & Tea shareholder. The approval of Dolly and other Coffee & Tea
shareholders is necessary
a. in all circumstances.
b. in no circumstances.
c. only if Coffee & Tea will be paid with unauthorized, unissued stock.
d. only if Bread & Bagels agrees to assume Coffee & Tea’s liabilities.
StartUp Investors, LLC, is a limited liability company without a written operating
agreement. Among the members, a dispute arises concerning the division of profits.
Under most LLC statutes, the profits will be
a. distributed according to the members’ proportionate shares of ownership in the firm.
b. divided equally among the members.
c. forfeited to the state.
d. reinvested in the business until the dispute is resolved.
Riverwalk Restaurants Corporation is a noninvestment company that wants to issue
stock of $3 million in a twelve-month period. Riverwalk, with less than $20 million in
annual sales, qualifies as a small business issuer. Before Riverwalk sells the stock, it
must provide investors with
a. an offering circular.
b. a notice of the issue.
c. a red herring prospectus.
d. a tombstone ad.
A symbol can serve as a valid signature.
A business organization cannot obtain insurance on the life of a person, even on the life
of an individual who is important to that organization.
The law considers all new, single-owner businesses to be sole proprietorships unless the
owner affirmatively adopts some other form.
For a plaintiff to recover damages under Section 10(b) of the Securities Exchange Act
of 1934 and SEC Rule 10b-5, proof of intent is necessary.
A sight draft may be payable on acceptance.
An order instrument must identify the payee with certainty.
In an opinion, an auditor can include a general statement disclaiming any liability for
false or misleading financial statements.
A stop-payment order is an order by a customer to his or her bank not to pay a certain
check.
An instrument is nonnegotiable unless the word “negotiable” is printed on it.
Once a registration statement has been filed, a waiting period begins while the
Securities and Exchange Commission reviews the statement.
When deciding which form of business organization to choose, businesspersons
normally consider only one factor.
Any activity that substantially affects interstate commerce falls outside the scope of
antitrust laws.
General descriptions take precedence over inconsistent samples.
One can join a partnership even if all other partners do not consent.
The testator’s signature must appear on the will.
In a merger, the surviving corporation inherits the disappearing corporation’s rights.