Elin decides to try to sell her collection of celebrity memorabilia in an auction “with
reserve. If Elin changes her mind, she can withdraw her collection
a. only before the auctioneer announces that the items are sold.
b. only before the auctioneer delivers the items to the buyers.
c. under no circumstances.
d. within thirty days after the auction.
Fact Pattern 18-1
Excel Vehicles, Inc., makes and sells automobiles to auto dealers, including Fine Auto
Sales. Fine sells the cars to consumers and businesses.
Refer to Fact Pattern 18-1. A car in Fines possession is probably
a. a consumer good.
b. an accession.
c. equipment.
d. inventory.
Fact Pattern 23-2
Luann and Mace are partners in Networx, a computer peripherals firm.
Refer to Fact Pattern 23-2. Mace dissociates from Networx. Luann signs a contract with
Physik Drives, a wholesale component supplier, apparently on Networxs behalf. Physik
does not know of Maces dissociation. The contract is binding on
a. Luann, Mace, and Networx.
b. Luann only.
c. Networx only.
d. Physik only.
Inferior Company sells products that are poorly made. Jack, who has never bought an
Inferior product, files a suit against the company, alleging that its products are
defective. The firms best ground for dismissal of the suit is that Jack does not have
a. certiorari.
b. jurisdiction.
c. standing.
d. sufficient minimum contacts.
Danielle delivers her dress to Every Day Cleaners for dry cleaning. Every Days clerk
promises that the dress will be ready within five business days. Danielle agrees to pay
the charge for the cleaning when she picks up the dress. These parties have a contract.
This is
a. an implied bailment.
b. an involuntary bailment.
c. an express bailment.
d. no bailment.
Fact Pattern 9-3
Dex and Carmen are in an auto accident. Dex offers Carmen $2,000 if she promises not
to pursue her potential legal claim against Dex. Carmen agrees. Later, Carmen
discovers that it will cost $1,500 to repair her car and $4,000 to cover the medical
expenses for a latent injury.
Refer to Fact Pattern 9-3. In Carmens suit against Dex to recover her repair and medical
expenses, Carmen will most likely recover
a. half the amount to pay the costs over what Dex already paid Carmen.
b. nothing.
c. the estimated amount to pay those costs and any other liability.
d. the exact amount to pay those costs and no more.
Nico is a passenger in a car driven by Owen, whose negligence causes an accident,
injuring himself. Nico, uninjured, accompanies Owen to Parkside Hospital in an
ambulance. The ambulance is hit by a car driven by Quin, injuring Nico. Nico files a
suit against Owen, whose best defense is
a. assumption of risk.
b. contributory negligence.
c. negligence per se.
d. superseding cause.
Fact Pattern 26-3
Dhani, an accountant for Eureka, Inc., learns of undisclosed company plans to market a
new laptop. Dhani buys 1,000 shares of Eureka stock. He reveals the company plans to
Fay, who buys 500 shares. Fay tells Geoff, who tells Hu. Both Geoff and Hu buy 100
shares. They know that Fay got her information from Dhani. When Eureka publicly an-
nounces its new laptop, Dhani, Fay, Geoff, and Hu sell their stock for a profit.
Refer to Fact Pattern 26-3. Under the Securities Exchange Act of 1934, Geoff is most
likely
a. liable for insider trading.
b. not liable because Geoff did not prevent others from profiting.
c. not liable because Geoff did not solicit information from Dhani.
d. not liable because Geoff does not work for Eureka.
Avatar, Inc., and Bling Corporation sign a contract in which Avatar agrees to deliver
t-shirts emblazoned with video game characters in exchange for Blings promise to pay.
Avatar delivers. The contract is
a. voidable.
b. executed.
c. executive.
d. executory.
Realty Credit Company and Security Mortgage Corporation plan to consolidate. Most
likely, the articles of consolidation will be filed with
a. the county recording office.
b. the local realtors association.
c. the states secretary of state.
d. the federal Bureau of Land Management.
Natural Foods, Inc., orders “Grade A oil from Olive Grove Farms to process and sell to
Pic N Pay Grocers. Olive Grove ships “Grade B oil, which Natural Foods accepts. To
recover damages for the nonconformity, Natural Foods must give notice of the breach
within a reasonable time to
a. Olive Grove only.
b. Olive Grove, Pic N Pay, and the appropriate government agency.
c. Pic N Pay only.
d. the appropriate government agency only.
Cold Stuf, Inc., makes snowboards, which it sells to Deep Freeze Sports Store (DFS).
DFS sells Cold Stuf boards to consumers, including Ed. Ed is injured while using the
board. In a product liability suit based on strict liability, Ed may recover from
a. Cold Stuf only.
b. Cold Stuf or DFS.
c. DFS only.
d. no one.
Mavis, an advocate of a certain religion, publishes an article in New Times magazine
insisting that Congress base all federal law on her religions principles. The First
Amendment guarantees Maviss freedom of
a. religion only.
b. speech only.
c. religion and speech.
d. neither religion nor speech.
Dahlia borrows $125,000 from Clearview Credit Union to buy a home. The interest rate
and other terms that are required to be disclosed under federal law must be
a. based on uniform formulas of calculation.
b. expressed in lenders language.
c. set out in a formula unique to each loan.
d. stated in “legalese.
Ozzy is an officer of Prudent Financial Corporation. Ozzy serves in a representative
capacity for Prudent Financials owners. With respect to binding Prudent Financial to
contracts, Ozzy is
a. an agent and has the authority.
b. an agent but does not have the authority.
c. not an agent and does not have the authority.
d. not an agent but does have the authority.
Dina and Elle agree that Elle can satisfy a preexisting debt owed to Dina by paying the
money directly to Fava. The designation of this contract as a third party beneficiary
contract is determined by the intent to benefit
a. Dina, Elle, and Fava.
b. Dina only.
c. Elle only.
d. Fava only.
Olin convinces Pia, who has no artistic ability, that Pia has considerable talent and
induces Pia to pay Olin $10,000 for art lessons. When Pia realizes the truth, she files a
suit against Olin. Pia is most likely to recover on the basis of
a. fraud.
b. mistake.
c. undue influence.
d. none of the choices.
Mona offers Ned, a building inspector, money to overlook the violations in her new
warehouse. Ned accepts the money and overlooks the violations. Mona is charged with
the crime of bribery. The crime occurred when
a. Mona decided to offer the bribe.
b. Mona offered the bribe.
c. Ned accepted the bribe.
d. Ned overlooked the violations.
Velma borrows $110,000 from Watershed Bank to buy a home. If she fails to make
payments on the mortgage, the bank has the right to repossess and auction off the
property securing the loan. This is
a. a short sale.
b. forbearance.
c. foreclosure.
d. the equitable right of redemption.
Made4U Goods, Inc., asks its employees, many of whom are members of the National
Machinists Union, to apply the utilitarian theory of ethics. This theory does not require
a. a choice among alternatives to produce the maximum societal utility.
b. a determination of whom an action will affect.
c. an assessment of the effects of alternatives on those affected.
d. the acquiring of the means of production by workers.
Nina wants to transfer a check to Opie. The check is not defective if it
a. has an obvious irregularity on its face.
b. has been previously honored.
c. is incomplete so that an element of negotiability is lacking.
d. is overdue.
Laurel borrows $150,000 from Marketplace Mortgage Loans to buy a home. The
financing documents require Laurel to maintain the property, obtain homeowners
insurance, and pay all property taxes and other assessments through the lender. With
respect to these terms, a court is most likely to
a. enforce them.
b. refuse to enforce them.
c. rescind them.
d. rewrite them.
Mariah takes off her ring and places it on her desk while she works. Without her
knowledge or consent, her coworker Nita picks up the ring, puts it on, and walks away.
Nita has likely committed
a. burglary.
b. forgery.
c. larceny.
d. no crime.
In Harleys suit against Irma, the parties meet before going to trial, and each partys
attorney argues the partys case before the other party. A third party renders an opinion
as to how a court would likely decide the dispute. This is
a. a mini-trial.
b. arbitration.
c. a summary jury trial.
d. early neutral case evaluation.
Hawaii enacts a state law that violates the U.S. Constitution. This law can be enforced
by
a. no one.
b. the federal government only.
c. the state of Hawaii only.
d. the United States Supreme Court only.
Halley, a lawyer on the staff of International Group, applies the utilitarian theory of
ethics in business contexts. Utilitarianism focuses on
a. moral values.
b. religious beliefs.
c. the consequences of an action.
d. the nature of an action.
Congress intends to enact a law to criminalize the distribution of illegal child
pornography on the Internet. Most likely to be held constitutional is a statute that
prohibits
a. offers to provide, and requests to obtain, child pornography.
b. the possession of virtual child pornography.
c. the possession of real and virtual child pornography.
d. a substantial amount of protected speechespecially pornography.
Bren leases an apartment from Cris for one year. After two months, she sublets the
premises for the next six months to Dee, without obtaining Criss consent. Dee pays the
rent for only four months. For the last two months of Dees six-month term, Bren is
a. liable for the rent, because Dee defaulted.
b. liable for the rent, because the sublease lacked Criss consent.
c. not liable for the rent, because Bren does not own the apartment.
d. not liable for the rent, because Bren sublet the premises to Dee.
Fact Pattern 18-2
General Leasing Company (GLC) buys equipment for use as inventory, borrowing $1
million from Helpful Finance Corporation for a security interest in the equipment. The
next day, GLC borrows $513,000 from Interstate Bank, also for a security interest in the
equipment. GLC defaults on the loans.
Refer to Fact Pattern 18-2. Suppose that Helpful perfects its security interest when GLC
takes possession of the equipment. In that circumstance, the party with priority to the
collateral on GLCs default would be
a. GLC.
b. Helpful and Interstate proportionately.
c. Helpful only.
d. Interstate only.
Thelma signs a check “pay to the order of Uri drawn on Thelmas account in Verity
Bank. Thelma has $400 in her account but the amount of the check is $500, which the
bank pays. This is
a. a dishonored check.
b. an overdraft.
c. a postdated check.
d. a stale check.
Fact Pattern 10-2
Grover contracts to sell two tracts of land to Hank. Both parties believe that the two
tracts are adjacent, but in fact they are not. Grover is still willing to sell the land, but
under these circumstances the deal would adversely affect Hank.
Refer to Fact Pattern 10-2. Because of the parties belief about the adjacency of the
property, their contract is
a. unavoidable.
b. unconscionable.
c. unenforceable.
d. voidable.
Umberto and Tiara, who are married, borrow $110,000 from Sterling Credit Union to
buy a home. The loan is a fixed-rate mortgage at 5.25 percent with a thirty-year term,
subject to an acceleration clause, and secured by the home, which is their principal
residence. When Umberto and Tiara have paid off $10,000 of the mortgagestill owing
$100,000they lose their jobs and stop making payments. Sterling Credit makes
numerous attempts to contact the couple, but they do not respond. Meanwhile, the
market value of their home has declined to $85,000. After six months, Sterling Credit
decides to take steps to recover the unpaid amount of the loan. What are the lenders
options? Which option seems most likely? Why? What are the steps are involved?
Privity of contract between the plaintiff and the defendant is required to bring a product
liability suit based on negligence.
Concurrent jurisdiction exists when both federal and state courts have the power to hear
a particular case.
Businesspersons who would choose to act unethically may be deterred from doing so
because of public opinion.
If goods fail to conform to a contract in any way, the buyer or lessee must reject them.
Service of process is the process of obtaining information from an opposing party
before trial.
A product is unmerchantable if an accident could arise in connection with the goods.
The words used in an insurance contract are interpreted against the party who applied
for the policy.
Usually, a private equity firm buys an entire corporation and may later reorganize it as a
publicly held corporation.
Parents are ordinarily liable for the contracts made by their minor children, even if the
children acted on their own.
Advertisements can include express warranties.
Downloading software or music into a computers random access memory without
authorization is copyright infringement.
A testator is a decedent who dies without a will.
If a price quotation contains a mistake in the adding of a number of figures, the contract
may not be enforceable.
The holder of an artisans lien can foreclose and sell the property subject to the lien to
satisfy the debt.
Whistleblower statutes protect employers who retaliate against their employees for
“blowing the whistle.
Sales of securities must occur within five days of registration.
The average prime offer rate is the rate offered to the least qualified borrowers as
established by a survey of potential borrowers.