Luke and Maya form Northwest Air Express, a general partnership. The essential
elements of this partnership do not include
a. a sharing of profits and losses.
b. a joint ownership of the business.
c. an equal right to management in the business.
d. goodwill.
Moving & Storage Company holds goods for National Distribution Corporation, which
contracts to sell them to Omni Stores, Inc. The goods are to be delivered without being
moved and are represented by a negotiable bill of lading. The risk of loss passes to
Omni Stores
a. if Moving & Storage refuses to honor the bill of lading.
b. if National Distribution gives the bill of lading to Moving & Storage.
c. if the goods are lost due to an “act of God.”
d. when Omni Stores receives the bill of lading.
Ezra, an accountant, intentionally misstates a material fact to mislead Fruit Packing,
Inc., a client. Fruit Packing justifiably relies on the misstatement to its detriment. Ezra
is most likely liable for
a. actual fraud.
b. constructive fraud.
c. destructive fraud.
d. virtual fraud.
Diet & Health Food stores orders 1,000 boxes of granola bars from Energy Products,
Inc., but fails to specify the varieties. The granola bars are delivered in an assortment of
varieties. Diet & Health may
a. accept all of the granola bars “as is” only.
b. accept all of the granola bars “as is” or reject the entire shipment only.
c. accept only the granola bars that it wants and reject the rest.
d. reject the entire shipment only.
Information Security Inc. pays income and other taxes collected by the Internal
Revenue Service (IRS). Like other federal administrative agencies, the IRS was created
by
a. Congress, through enabling legislation.
b. the courts, through the adjudicatory process.
c. the U.S. Constitution, in Article I, Section 8.
d. the president, through an executive order.
Cricket signs a check payable to the order of Discount Warehouse, Inc., that does not
include a date. This check is
a. negotiable.
b. nonnegotiable, because it does not include a date.
c. nonnegotiable, because it is payable to a corporation.
d. nonnegotiable, because it is signed by the drawer.
Fact Pattern 8-1B
Margo works as an administrator and receptionist in Neon’s Garage Door Store. Neon
withholds federal taxes from Margo’s pay, and controls the methods and details of the
performance of her work. Margo is not authorized to modify the prices or other terms of
a sale at the store. Omar installs Neon’s Garage Door products at the buyers’ locations.
Refer to Fact Pattern 8-1B. At the shop, Margo is
a. an independent contractor.
b. Neon’s employee only.
c. Neon’s employee and agent.
d. Neon’s principal.
Space Trips Inc. files a registration statement with the SEC before making an offering
to the general public. The registration contains false, immaterial statements of which the
investors are unaware. Space Trips is charged with violating the Securities Act of 1933.
Space Trips’s best defense is
a. the investors were not aware of the misrepresentations.
b. the issuer reasonably believed the misstatements were true.
c. the offering was made available to the general public.
d. the untrue statements were not material.
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. Ripe Produce responds that it did not waive payment for
spoiled goods in the parties’ previous transactions. Ripe Produce 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.
Dreem Land Corporation and EZ Investments Company transfer their property to
Financial Managers, Inc., which manages the property and distributes the profits to
Dreem and EZ. This form of a business organization is
a. a business trust.
b. a joint stock company.
c. a joint venture.
d. a syndicate.
Pippin signs a lease on behalf of Quixotic Games, Inc., with Riverview Office Suites.
As part of the lease, Pippin signs a document titled “GUARANTY.” If Quixotic Games
stops paying the rent, it is most likely that liability or loss for the unpaid amount will
rest with
a. no one.
b. Pippin and Quixotic Games.
c. Riverview Office Suites.
d. the other tenants on the same property.
Bowie is a holder of a promissory note obtained from Credit Lenders, Inc. Regarding
the defenses against payment of the note to which Credit Lenders is subject, Bowie, as
an ordinary holder, is subject to
a. more defenses.
b. no defenses.
c. some defenses, but not as many.
d. the same defenses.
Energy Resources, Inc., operates an oil refinery near Forest River, which flows into
Grove Lake. Discharging oil from the refinery into the river can result in
a. penalties and damages.
b. penalties only.
c. damages only.
d. no penalties or damages.
Transworld Import Company and USA Export, Inc., form a business organization to
engage in importing and exporting. Its property is held in the names of the members
and its shareholders have personal liability. This organization is
a. a business trust.
b. a joint stock company.
c. a joint venture.
d. a syndicate.
Organicos Café orders five gallons of PureMaid-brand transfat-free olive oil from
Quico Cooking Supplies, Inc. Quico mistakenly ships soy oil, which Organicos keeps,
despite the nonconformity. The oil is destroyed in a fire. The loss is suffered by
a. all of the parties as tenants in common in equal measure.
b. PureMaid.
c. Organicos Café.
d. Quico Cooking Supplies.
Perfect Poultry Company agrees to sell chicken, turkey, and other meats to Quik
Markets, Inc., to sell to its customers. Normally, their contract would not be enforceable
unless it includes
a. the duration of the deal.
b. the price of the goods.
c. the quantity of the goods.
d. the shipping arrangements.
Denny allows Elbert to store his trailer on Denny’s property for $20 a month while
Elbert works temporarily at a distant job site. Later, Denny notices rainwater collecting
in the trailer and covers it with a tarp at a cost of $50. This cost is most likely borne by
a. Denny and Elbert in equal measure.
b. Denny.
c. Elbert.
d. Cody’s employer.
The credit department of Discount Retail Stores Inc. calls Emmett at work about an
overdue bill. Emmett’s employer objects. Discount Retail’s credit department continues
to call Emmett at work. This is a violation of
a. no federal law.
b. the Fair and Accurate Credit Transactions Act.
c. the Fair Debt Collection Practices Act.
d. the Truth-in-Lending Act.
Oni’s Adventure Travel and Paquito’s Wild River Tours form a joint venture. Oni can
participate in the venture’s management
a. only to the extent that she assumes liability for the venture’s debts.
b. only to the extent of her investment in the venture.
c. to any extent.
d. to no extent.
Ripe Orchards, Inc., employs hundreds of seasonal and permanent workers, both skilled
and unskilled, in three states. Under federal immigration law, Ripe Orchards can hire
illegal immigrants
a. if either the employer or the immigrants file special forms.
b. only if the employer files a special form.
c. only if the immigrants file special forms.
d. under no circumstances.
Oleg takes a PowerMade-brand rototiller to QuikFix Inc. for repairs. Lacking certain
parts, QuikFix ships the rototiller to Repair & Parts Company. While in Repair & Parts’s
possession, the machine is damaged. QuikFix can recover for the damage from
a. no one.
b. Oleg.
c. PowerMade.
d. Repair & Parts.
SmartPhone Company’s ad states that its product is “The Best that Money Can Buy.”
Because of this ad, the Federal Trade Commission is most likely to issue
a. a cease-and-desist order.
b. a counteradvertising order.
c. a multiple product order.
d. none of the choices.
Fact Pattern 25-1B
Open Pit Excavation Inc. operates a rock quarry next to Robyn’s vineyard and winery.
Robyn files a suit against Open Pit, alleging that the quarry is a nuisance and
unreasonably interferes with Robyn’s enjoyment of her property.Refer to Fact Pattern
25-1B. The court is most likely to award Robyn an injunction
a. if letting the pollution continue is equally as harmful as stopping it.
b. if letting the pollution continue is less harmful than stopping it.
c. if letting the pollution continue is more harmful than stopping it.
d. under no circumstances.
Oscar buys a new HD TV from Priceless Retail Mart, using the means that accounts for
more retail payments than any other. This means of payment is
a. a cashier’s check.
b. a debit card.
c. a personal check.
d. digital cash.
Golf & Tennis LLC makes and sells golf clubs, tennis racquets, and related sporting
goods. By selling its products at prices substantially below the normal cost of
production, Golf & Tennis hopes to drive its competitors from the market. This is
a. market power.
b. predatory pricing.
c. price discrimination.
d. none of the choices.
Community Bank receives a check drawn by Dennis. The check lacks a proper
indorsement. Payment can be postponed without dishonor
a. indefinitely.
b. under no circumstances.
c. for thirty days.
d. until the proper indorsement is obtained.
Jackson County enacts an ordinance to limit the number of new homes that can be built
within certain acreage. Klaus, the owner of a farm that he had hoped to subdivide and
sell as a single-family housing development, files a suit against the county, alleging an
unconstitutional taking without compensation. The court is most likely to rule in the
county’s favor if the purpose of the ordinance is to
a. further major developers’ interests.
b. impose preservation costs on property owners.
c. increase local tax revenue.
d. preserve local natural resources.
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. Ripe Produce files a suit against Southeast Asian, claiming
that the buyer assumed the risk of the spoilage of the unsold goods. The court may
allow evidence of this term if it finds that the parties’ contract is
a. fully integrated.
b. not fully integrated.
c. not supported by consideration.
d. a complete and final statement of their agreement.
James works at Kay’s Breakfast Café. After work, in the parking lot, James finds a
diamond ring lost by Lani. Title to the ring is possessed by
a. James.
b. Kay’s.
c. Lani.
d. the state.
Rondi holds herself out as possessing special accounting skills. As an agent, she must
exercise the degree of skill or care expected of
a. a person having those skills.
b. an average, unskilled person.
c. a reasonable person.
d. the principal.
Mix n” Match Clothing Corporation gives notice to Neely that Mix n” Match is
terminating their franchise arrangement. Winding up the business requires
a. a new franchise agreement.
b. nothing more than closing immediately.
c. Neely’s death, disability, or insolvency.
d. the return of Mix n” Match’s property.
Stanley’s debt to Town Bank is past due. Town Bank obtains a judgment against Stanley
to collect the debt, but he refuses to pay. Town Bank asks the court to order Stanley’s
employer to pay a portion of his paycheck to the bank. This is a request for
a. a mechanic’s lien.
b. an order of garnishment.
c. an order that would violate most state laws.
d. a writ of attachment.
Martha has a checking account with Homeplace Bank. Martha signs a check “payable
to Phillipa” drawn on Martha’s account. Homeplace Bank is
a. the payer.
b. the drawee.
c. the drawer.
d. the payee.
Godwin is a director on the board of Health Insurance Corporation. On the receipt of
notice of a board meeting, Godwin attends the meeting and takes part in the discussion
of business matters and votes on corporate issues. Godwin is entitled to be notified of,
and to take part in, these meetings
a. under the director’s right to participation.
b. under the director’s right to compensation.
c. under the director’s right to indemnification.
d. only on his own initiative.
In most states, an individual cannot hold more than one corporate office and be both an
officer and a director of the corporation.
Brett boards her horse Charley at Dallas’s Equestrian Stables. Brett sells the horse to
Flem and tells Dallas, “I sold Charley to Flem.” Dallas says, “Okay.” That night,
Charley is kicked in the head by another horse and dies. Who suffers the loss?
Unless a contract provides otherwise, an installment contract is breached when only one
nonconforming installment impairs the value of the whole contract, no matte how slight
the impairment.
A disclosed principal is liable to a third party for a contract made by the agent acting
within the scope of his or her authority.
The Consumer Product Safety Commission is the primary agency that issues
regulations on food labeling.
The Securities and Exchange Commission (SEC) requires companies to file certain
information electronically so that it can be posted on the SEC’s EDGAR database.
A principal or employer normally is not liable for an agent’s crime even if the crime was
committed within the scope of authority or employment.
Common carriers can contract away their liability for damaged goods.
If no children or grandchildren survive a decedent who dies without a will, a surviving
spouse receives the entire estate.
A restrictive indorsement does not destroy negotiability.
A warranty against infringement is a promise by the seller that the product is free from
any patent, trademark, or copyright claims of a third person.
An indorser is secondarily liable on an instrument.
Apparent authority usually comes into existence through a principal’s pattern of conduct
over time.
The UCC requires that a financing statement be filed under the name of the creditor.
Even if the bank pays a check in spite of a stop-payment order, the bank will not be
obligated to recredit the customer’s account.
Title VII of the Civil Rights Act of 1964 prohibits only intentional discrimination.
Statements of fact made during the bargaining process are express warranties.
In choosing a form of business organization for a new enterprise, important factors
include the ability to raise capital.
There are no limitations on the shelter principle.