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Congress enacts a statute, the Federal Deposit Insurance Corporation (an administrative
agency) issues rules, the Southeast Financial Institutions Association (a private
organizations) issues instructions, South Valley Bank posts a memo with orders for its
employees, and Tina tells her co-worker about a recent news story. Sources of law
include
a. the instructions issued by private associations.
b. the orders posted by employers.
c. the rules issued by federal administrative agencies.
d. the stories released by news agencies.
Opie offers to sell his guitar to Pinky for $200. Pinky agrees. They complete and sign a
printed form and Pinky gives Opie a check for the price. The check is
a. a formal contract.
b. an informal contract.
c. a social contract.
d. no contract.
Brad defends against a breach-of-contract suit by College Credit Corporation by
claiming that their deala student loan accruing interest at a certain rate and payable
beginning on a certain datewas unfair because the consideration for their contract was
inadequate.
Refer to Fact Pattern 10-2. If, as Brad claims, the consideration in this problem is
inadequate, it may indicate a lack of
a. accord in Brad's satisfaction with the value of the deal.
b. voluntary consent.
c. flexibility on the part of College Credit to accommodate Brad's needs.
d. "heft," 'substance," or "weight" in the terms of the contract.
Smitty enters into an illegal bargain with Taylor. Smitty can enforce the contract or
recover its value if he has been induced to enter into the bargain as a result of
a. duress.
b. his desire to obtain the object of the deal.
c. a persuasive 'sell" by Taylor.
d. his belief that Taylor would do right by him.
Domino causes a disturbance at El Nino Cafe. He is arrested and charged with
disorderly conduct, a misdemeanor. A misdemeanor is a crime punishable by
a. a fine only.
b. imprisonment up to one year.
c. imprisonment up to six months.
d. imprisonment up to ten days.
Larry is a shareholder for Custom Colors, Inc. If Custom Colors fails, Larry will
a. be liable for Custom Colors' debts.
b. not be liable for Custom Colors' debts.
c. be able to reclaim his initial investment in Custom Colors.
d. be able to reclaim his initial investment in Custom Colors plus damages.
Tomato Farms (TF) offers to sell Unified Grocers, Inc., a boxcar load of tomatoes. The
offer is sent via fax. An acceptance is required urgently. It would be most reasonable for
Unified to accept via
a. a fax, a letter, or a phone call to TF within two weeks.
b. a fax sent to TF as soon as the offer is received.
c. a letter mailed to TF within two days.
d. a phone call to TF within five business days.
Easton promises to pay Sara $500 in exchange for Sara's $5,000 car. Under the doctrine
of freedom of contract, Easton's consideration is
a. unfair.
b. inadequate.
c. illegal.
d. legally sufficient.
Gerald obtains a mortgage loan from State Bank to purchase a house for $600,000.
Because Gerald makes a down payment of only $25,000, State Bank requires him to
purchase mortgage insurance. After six months, Gerald defaults on the loan. State Bank
can
a. repossess the house but not receive reimbursement from the insurer.
b. repossess the house and receive reimbursement from the insurer.
c. receive reimbursement from the insurer but not repossess the house.
d. do nothing.
Don executes a will leaving half of his farm to his spouse Eva and the rest to his sons,
Frank and Greg, in equal shares. The will disinherits a third son, Hal. Don and Eva
divorce, but Don dies before changing his will. In these circumstances
a. Eva receives half of the farm, and Frank and Greg share the rest.
b. Eva receives half of the farm, and Frank, Greg, and Hal share the rest.
c. Frank and Greg receive the entire estate in equal shares.
d. the state inherits the entire estate.
Quincy draws a check payable to "Replay Stadium" to buy two season tickets to the
next year's State College football games. This instrument is
a. a bearer instrument.
b. an order instrument.
c. valid but nonnegotiable.
d. void.
Andy offers to sell Carol 10 acres of land with a barn. Carol says she will pay Andy's
price, but she wants his tractor included. Carol is now the
a. offeror.
b. offeree.
c. promisee.
d. auctioneer.
Marshall's Mattress Company advertises a special sale on mattresses on its website. The
mattresses are normally sold for $1,000, but are advertised on the website for $499. The
sale price does not, however, include shipping costs. Marshall's charges $250 for
shipping any mattress. To avoid any claims of deceptive advertising, Marshall's should
a. be sure that it has clear and conspicuous disclosure of the shipping costs.
b. list the shipping cost in small print at the bottom of the Web page.
c. list the shipping cost on the last Web page.
d. avoid listing the shipping cost anywhere on the website.
Beef Burgers, Inc. contracts to buy five hundred steers from Fattening Feedlots. Before
Fattening Feedlots can deliver the steers, there is an outbreak of disease in the feedlot,
and all the cattle are quarantined. In this case the perfect tender rule
a. applies to both parties.
b. does not apply.
c. applies only to Beef Burgers.
d. applies only to Fattening Feedlots.
Carl pledges $1,000 to the Disaster Relief Organization (DRO). On the basis of the
pledge, DRO orders additional rescue equipment. Carl fails to pay. In DRO's suit, a
court may enforce the pledge
a. according to the preexisting duty rule.
b. as an illusory promise supported by past consideration.
c. on a theory of accord and satisfaction.
d. under the doctrine of promissory estoppel.
Craig decides to sell his Double-D Ranch in an auction "without reserve." If Craig
changes his mind at the auction, he can withdraw his property
a. only before the auctioneer announces that the ranch is sold.
b. only before the auctioneer delivers the deed to the buyer.
c. under no circumstances.
d. within thirty days after the auction.
Fact Pattern 42-1
Cardio, Inc., makes and sells Drawdown, the most prescribed name-brand heart
medication. Emitate Corporation has the potential to make a generic version of the
same drug.
Refer to Fact Pattern 42-1. A court would most likely rule that the agreement between
Cardio and Emitate is
a. a deal that neither restrains trade or harms competition.
b. a legal restraint of trade.
c. a per se violation of the Sherman Act.
d. subject to analysis under the rule of reason.
Edgar, Jon and Phoebe do business as Reliable Movers. Phoebe develops a debilitating
illness and can no longer work. Phoebe
a. may dissociate from the partnership.
b. may not dissociate from the partnership without Edgar and Jon's consent.
c. must pay damages to Edgar and Jon for the loss of her work.
d. may terminate the partnership.
The state of Illinois enacts a usury statute. The purpose is to
a. establish a maximum rate of interest that may be charged for loans.
b. establish a minimum rate of interest that may be charged for loans.
c. prevent the misuse of money advanced as loans.
d. prevent the misuse of money paid back on loans.
Katie buys a car when she is seventeen. When she is twenty-five, Katie tries to
disaffirm the contract and recover all her car payments. A court will likely find that the
contract was
a. ratified and Katie cannot recover her payments.
b. not ratified and Katie can recover her payments.
c. not a valid contract because Katie was a minor when she entered into it and she can
recover her payments.
d. ratified, but Katie can still recover her payments because she was a minor when she
entered into the contract.
Jolie signs a contract with Keaton, an unlicensed physician, to perform a medical
procedure. This contract is enforceable by
a. Jolie.
b. Jolie's medical insurance company.
c. Keaton.
d. no one.
Ron defaults on his mortgage from Acting Bank. Acting Bank proceeds to foreclosure.
There is no court supervision of the foreclosure process. This is
a. forbearance.
b. judicial foreclosure.
c. prepackaged bankruptcy.
d. power of sale foreclosure.
Olivia, a minor, signs a contract to buy a bike from Phil, the owner of SuperCycles Bike
Store. Olivia's right to disaffirm the contract
a. does not change the fact that Phil is bound by the contract.
b. does not yet exist because Olivia is still a minor.
c. gives Phil, an adult, the right to disaffirm the contract.
d. is not valid because a bike is a "necessary."
Presley agrees to sell his Omni Sports Equipment store to Nola. As part of the sale,
Presley promises never to open a similar, competing store anywhere. This promise is
most likely
a. invalid because it is part of a sale of an ongoing business.
b. invalid because of the unreasonable terms of area and time.
c. valid because it is part of a sale of an ongoing business.
d. valid if Presley and Nola are reasonably intelligent.
Elias repays his debt, incurred to buy consumer goods, to Fidelity Bank and
immediately files a written request for a termination statement. Fidelity
a. must comply within one month of receipt of the letter.
b. must comply within twenty days of receipt of the letter.
c. must refund $500 to Elias.
d. need not comply.
Mineral Mining Corporation is a U.S. employer. Mineral, and other U.S. employers,
must perform I-9 verifications for
a. a random selection of new hires.
b. every other new hire.
c. new hires with certain racial or ethnic characteristics.
d. each new hire.
Margaret mows the lawn for her parents. After she has finished mowing the lawn,
Margaret's father tells her he will pay her $50. This contract is
a. unenforceable because Margaret has already mowed the law and past consideration is
no consideration.
b. enforceable because Margaret's father has a moral obligation to keep his promise to
her.
c. unenforceable because minors may not enter into contracts.
d. unenforceable due to the preexisting duty rule.
Independent regulatory agencies such as the Federal Trade Commission are
a. not part of the government's executive branch.
b. outside the major departments of the government's executive branch.
c. subagencies of executive agencies.
d. subject to more executive authority than executive agencies.
At 1 a.m., on the sidewalk in front of Ace Credit Corporation, which is closed, Ben
buys a $500 promissory note for $50 from Curt. When presented with Ben's demand for
payment, Diann, the maker of the note, could successfully claim that Ben
a. acquired the note with notice that it was overdue.
b. did not acquire the instrument in good faith.
c. did not give value for the instrument.
d. none of the choices.
Consumer Shops, Inc., signs a lease for a storefront owned by Downtown Building
Company. Unlike a purchaser of real property, Consumer Shops
a. acquires only temporary possession of the premises.
b. enjoys exclusive possession of the premises.
c. holds only temporary title to the premises.
d. retains temporary, exclusive possession and title to the premises.
Pastry Dough, Inc., sends its catalogue to Octavio and includes a "personalized" letter
inviting him to buy any item in it at the advertised price. This is
a. an offer because of the "personalized" letter.
b. an offer because there is no room for price negotiation.
c. an offer only if Octavio previously bought items from Pastry Dough.
d. not an offer.
Rural Holding Company (RHC) possesses farmland. RHC has the right to use the
property, including harvesting the crops, for ten years. RHC does not have the right to
extract the coal under the land. This is
a. a constructive eviction.
b. a leasehold estate.
c. an implied warranty of habitability.
d. an assignment.
A buyer in the ordinary course of business has priority over any security interest created
by the seller.
Any party to a case may appeal the order of an administrative law judge to the board or
commission that governs the agency.
A security interest cannot be perfected without the filing of a financing statement.
The Home Ownership and Equity Protection Act of 1994 created a new category for
low-cost and low-fee mortgages.
Objective impossibility discharges a contract.
A merchant is a person who deals in goods of the kind involved in the sales contract or
who holds herself or himself out as having skill or knowledge peculiar to the practices
or goods being purchased or sold.
In contract law, intent is determined by the objective theory of contracts.
The extreme risk of an activity is a defense against imposing strict liability.
There are exceptions to the preexisting duty rule.
An accord and satisfaction is a common means of settling a claim.
An alien corporation is a corporation formed in another country.
Most of the customers in any business are buyers in the ordinary course of business.
A partnering agreement cannot indicate the parties' intent with respect to subsequent
contracts.
A will can be an informal document and need not follow state requirements.
To succeed in a strict product liability suit, an injured plaintiff must show that a
product's defect was the proximate cause of the injury.
A default judgment is a judgment entered against the party who brought the claim
before the court.
The dangers associated with using sharp knives are so commonly known that
manufacturers need not warn users of those dangers
