GR8 Stores, Inc., hires Haul-Way Company, a common carrier, to transport 500 Intelo
Game consoles from San Diego to Phoenix. En route, a pothole causes the truck to
crash, damaging the goods. Liability for the damage most likely rests with
a. GR8 Stores and Haul-Way.
b. GR8 Stores only.
c. Haul-Way only.
d. Intelo only.
Metals & Minerals Inc., a resource processor and refiner, generates waste that is
discharged into the air and water, contaminating the environment, which includes
foreign countries. It has been shown that the quickest, most effective, and most efficient
way to reduce pollution is most likely
a. economic development.
b. environmental education.
c. international protocols.
d. persuasive debating points.
Sheryl files a petition in bankruptcy. Sheryl’s non-dischargeable debts include
a. domestic-support obligations.
b. student loans if payment would impose undue hardship.
c. unpaid loans to finance home repairs.
d. unsecured credit-card debt.
Medi-Insurance Company faxes ads to Nancy and other individual consumers without
the recipients’ permission. This is subject to
a. a cease-and-desist order by the Federal Trade Commission.
b. no sanctions.
c. possible fines by the Federal Communications Commission.
d. rescission on the order of the Federal Reserve Board.
Kiefer, Lori, and Moira are shareholders of Nationmade Flags & Banners Corporation.
Before a shareholders’ meeting, they agree in writing to vote their shares together in a
certain manner. Usually, such agreements are held to be
a. invalid and unenforceable.
b. oppressive and irresponsible.
c. suspect and voidable.
d. valid and enforceable.
Cathy is an accountant with Discount Retail Corporation. Efrem buys Discount Retail
stock and loses money on the investment. To recover from Cathy under Section 10(b) of
the Securities Exchange Act of 1934 and SEC Rule 10b-5, Efrem must prove
a. only the purchase and sale of a security.
b. fraud, reliance, materiality, and lack of knowledge about securities.
c. fraud, reliance, materiality, and incompetence.
d. fraud, reliance, materiality, causation, and scienter.
Ruta is a supervisor for Subs & Suds, a restaurant. Tim is a Subs employee. The owner
announces that some employees will be discharged. Ruta tells Tim that for sexual favors
she will give him an excellent performance review and recommend a raise. This is
a. harassment on the basis of sexual orientation.
b. hostile-environment harassment.
c. not harassment.
d. quid pro quo harassment.
Global Trade Corporation is a public company that is poised to issue securities that do
not qualify for an exemption from registration. This means that Global Trade must
a. file a registration statement with the SEC.
b. issue the securities through an online registration site.
c. refrain from issuing the securities to unregistered investors.
d. register the securities with a national stock exchange.
Tully files a petition for bankruptcy. Tully must include with the petition
a. proof of each creditor’s claim.
b. a list of creditors and the amount of the debt owed to each.
c. all of his debit and credit cards to be disposed of by the court.
d an affidavit testifying to his having read the Bankruptcy Code.
Home Enterprises employs Itzak to buy property for a possible residential development.
Itzak secretly buys some of the property and sells it to Home Enterprises at a profit.
Itzak has breached
a. no duty.
b. the duty of accounting.
c. the duty of loyalty.
d. the duty of notification.
Investment Holdings Corporation hires Jerilyn, a business appraiser, to locate
investment possibilities for Investment Holdings. Jerilyn learns of a salsa and hot sauce
manufacturing company available for a reasonable price, but neglects to tell Investment
Holdings. Most likely, Jerilyn
a. breached the agent’s fiduciary duties to the principal.
b. did nothing wrong.
c. failed to take advantage of a business opportunity.
d. assumed that the information was confidential.
Bayou Development Corporation hires Coastal Brokerage Associates to sell the
condominiums in a building at Bayou Development’s resort. The agency will terminate
a. after the condos have been sold.
b. if the prices of the condos must be reduced to sell them.
c. once Bayou Development obtains insurance to cover the property.
d. when Bayou Development pays Coastal Brokerage its first commission.
Kathy is the secured party in a transaction with Julie, who is the debtor. The collateral is
a 2007 Chevrolet F150 pick-up truck. Kathy files a financing statement in which she
describes the collateral as “a vehicle.” To perfect Kathy’s interest this is
a. not sufficient.
b. sufficient.
c. sufficient if the financing statement also includes Julie’s signature.
d. sufficient if the financing statement also includes the location of the collateral.
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. Neon hires Professional Janitorial Company to clean the
store. Neon gives Professional Janitorial instructions as to what needs to be cleaned and
when. Professional Janitorial is
a. an independent contractor.
b. Neon’s employee only.
c. Neon’s employee and agent.
d. Neon’s principal.
eCredit Reporting Agency conducts online investigations of consumers’ credit disputes
and litigation and sells the data to merchants, physicians, and landlords. With respect to
the information being reported, a consumer has little recourse unless
a. his or her credit card is rejected.
b. he or she is screened out as an undesirable patient.
c. he or she is screened out as an undesirable tenant.
d. the information is inaccurate.
Slow-Brew Coffee Company sells coffee and related beverages. The company’s ad
contends that ambitious businesspersons “Drink Us & Rise Up in the World!”” The
Federal Trade Commission would consider this ad to be
a. false and misleading.
b. impermissibly vague and general.
c. a deceptive half-truth.
d. none of the choices.
Bess wishes to appeal a decision of a bankruptcy court. Bess may appeal to
a. no courtthere is no appeal from a bankruptcy court decision.
b. a federal district court.
c. the U.S. Supreme Court.
d. a state court.
Dina asks Edie to co-sign a credit application so that she can borrow money and buy a
piano from First Chair, a musical instruments and supplies seller. If, after the loan
agreement is signed, Dina agrees to a higher rate of interest without telling Edie, then
Edie is
a. discharged from the agreement.
b. liable at the higher rate of interest.
c. liable at the lower rate of interest.
d. liable for the principal only.
Guitar Factory Corporation files a registration statement and delivers a prospectus to
the appropriate parties. These items are intended to enable the evaluation of certain
financial risks by
a. market professionals to explain to all investors.
b. government regulators to disclose to the general public.
c. sophisticated investors only.
d. unsophisticated investors.
Debit & Credit Financing, Inc., and Equity Lending Company are secured parties with
security interests in property owned by Fleet Shipping Corporation. Priority between
these security interests is generally determined by
a. the amount of the claim.
b. the custom in the trade.
c. the time of perfection or attachment.
d. the “float” of the liens.
Fact Pattern 2-1B
Bryn, Cornell, and Duke are general partners in Equity Lending, a consumer credit,
mortgage, and investment firm. Their agreement states that it is a breach of the
agreement for any partner to assign his or her interest to a creditor without the consent
of the other partners.
Cornell’s assignment of his interest in Equity Lending to Financial Consultants
Corporation results in
a. nothing with respect to Cornell or Equity Lending.
b. the automatic termination of Equity Lending’s legal existence.
c. Cornell’s liability for all of Equity Lending’s debts.
d. Cornell’s wrongful dissociation and liability for any damages.
Curtis is an employee of Deepwater Drilling, Inc., covered by federal overtime
provisions, which apply only after an employee has worked more than
a. eight hours in a day.
b. forty hours in a week.
c. 160 hours in a month.
d. one year for the same employer.
State and federal transportation agencies may issue regulations that conflict. When a
state regulation conflicts with a federal regulation
a. the federal regulation takes precedence.
b. the state regulation takes precedence.
c. the regulations are mutually void.
d. the regulations are of equal effect.
Cookie Shops, Inc., sells a franchise to Donuts & Desserts, a mall food-court vendor.
Cookie Shops is
a. a franchisee.
b. a franchisor.
c. an agent.
d. a principal.
Ollie obtains a health-insurance policy for his family from Protection Insurance
Company. The policy includes an incontestability clause. Under such a clause, after a
policy has been in force for a specified period or time, such as two or three years
a. Ollie cannot contest Protection’s insurable interest.
b. Ollie cannot contest Protection’s refusal to pay a claim.
c. Protection cannot contest Ollie’s eligibility for continued coverage.
d. Protection cannot contest Ollie’s statements in the application.
Efron borrows money to pay his tuition and signs a note payable to First Citizens Bank.
The bank assigns the note to Guaranty Bank. The assignment
a. does not affect Efron’s obligation to pay the note as promised.
b. frees Efron of the obligation to pay the note.
c. results in Guaranty Bank’s co-liability on the note with Efron.
d. results in Guaranty Bank’s co-liability on the note with First Citizens Bank.
Fried Food, Inc., operates a commercial frying plant, discharging pollutants into the air.
Greg reports the violations to the Environmental Protection Agency. Greg
a. is not entitled to a payment.
b. may be paid up to any amount.
c. may be paid up to $1,000.
d. may be paid up to $10,000.
Sasha contracts to buy a franchise from TrustMe Financial Consultants, Inc. The
contract is silent on the issue of territorial rights. When TrustMe allows a competing
franchise to be established near Sasha’s office, she suffers a significant loss in profits.
This is most likely a violation of
a. no law.
b. the ban on certain types of anticompetitive agreements.
c. the Federal Trade Commission’s Franchise Rule.
d. the implied covenant of good faith and fair dealing.
Bee Hive Honey, LLC’s members include Chad, Dolores, and others. For purposes of
suing and being sued, Bee Hive Honey is
a. an aggregate of Chad, Dolores, and the other members.
b. a natural person in the members’ “family.”
c. a legal entity apart from the owners.
d. a non-participating third party.
Kenneth has a periodic tenancy that requires him to pay rent weekly. Kenneth wishes to
terminate his tenancy. Under the common law, he must give his landlord notice of at
least
a. one week.
b. two weeks.
c. thirty days.
d. sixty days.
Generally, all contracts are assumed to be shipment contracts if nothing to the contrary
is stated in the contract.
Gene leaves her Honda Fit with Intown Motors for routine maintenance. On its return,
the interior of the car is greasy and the exterior is scratched and dented. Who suffers the
loss and why?
A franchisee ordinarily does not pay a fee for a franchise license (the privilege of being
granted a franchise).
When a buyer has breached a sales contract, and the goods are in his or her possession,
the seller can sue to recover the purchase price, but not incidental damages.
To constitute an express warranty, a representation must be in writing.
The intent to associate is a key element of a partnership.
A warranty of good title means that a seller warrants that he or she has valid title to the
goods and that transfer of the title is rightful.
A person who signs an instrument without authorization can be held personally liable
for payment by a holder in due course.
An insurance company may require an applicant to give the company permission to
access the applicant’s private medical records and credit ratings, for the purpose of
evaluating the risk.
Eminent domain is the condemnation power of government to take land for public use.
Express warranties always displace inconsistent implied warranties with no exception.
Most states do not permit the corporate articles or bylaws to authorize compensation for
directors.
Candy & Caramel Company wants to sell its products in normal-sized packages labeled
“Super Size.” Darn Yarn, Inc., wants to advertise its sweaters as having “That Wool
Feel,” but does not want to specify on labels that the sweaters are 100 percent polyester.
What stops these firms from marketing the products as they would like?
A principal whose identity is totally known by a third party with whom an agent
contracts on the principal’s behalf is an undisclosed principal.
Administrative agencies at various levels of government work together and share the
responsibility of enforcing particular regulations.
A short-form merger requires the approval of the shareholders of both corporations.
A party seeking court review of an administrative action must first exhaust all of his or
her administrative remedies before seeking court review.