Nesbit publishes in a newspaper an account of the sex life of Merinda, who is not a
public figure. The information is true. This is most likely
a. an invasion of privacy.
b. defamation.
c. trespass to personal property.
d. wrongful interference with a contractual relationship.
Pluto accuses Quark, an accountant, of committing defalcation. This is
a. embezzlement.
b. general misconduct.
c. professional negligence.
d. throwing something out of a window.
Ralph and Sven enter into a contract under which Sven agrees to guide Ralphs
expedition through Tibet for which Ralph agrees to pay Sven. This contract may not be
assigned if
a. the assignment will significantly change the risk of nonperformance.
b. the assignment is expressly prohibited by the terms of the contract.
c. the contract is uniquely personal in nature.
d. any of the choices.
Fact Pattern 25-A1
Rollo obtains a check payable to his order from Simone. Rollo signs the back and gives
the check to Trey. Trey writes “Pay to Trey above Rollos signature.
Refer to Fact Pattern 25-1. By writing “Pay to Trey above Rollos signature, Trey
a. avoids the risk of loss from theft of the instrument.
b. relieves himself from liability on the instrument.
c. converts the check into a nonnegotiable instrument.
d. locks the instrument into the bank collection process.
Fact Pattern 30-1B
In January, Jazz Dance Studio owes Kay, its musical director, $1,800 for current wages,
receives $700 as a down payment for dance lessons from Lora, and pays a Music, Inc.,
a sheet music supplier, $1,500 of $3,000 owed. In February, the studio files a petition in
bankruptcy for relief through a liquidation.
Refer to Fact Pattern 30-1B. The highest priority with respect to payment of claims
belongs to
a. Kay and Music, Inc.
b. Jazz Dance Studio.
c. Lora.
d. unnamed general creditors.
Gert, an accountant, contracts to conduct an audit for Hailey. In performing the audit,
Gert fails to detect certain misconduct. Gert is most likely
a. liable if a normal audit would have revealed the misconduct.
b. liable if Gert issues a specifically qualified opinion.
c. not liable if Gert generally disclaims any liability.
d. not liable if the misconduct was due to Haileys negligence.
Veritable Company stores office furniture with Warehouse Storage, Inc. (WSI), under a
contract that limits the warehouse companys liability for lost or damaged property to
$500. The furniture is lost through no fault of WSI. The loss is most likely suffered by
a. Veritable and WSI.
b. Veritable only.
c. WSI only.
d. neither Veritable nor WSI.
Rocco gives Sequoia a computer as a gift. Using the computer, Sequoia develops a new
computer game, for which she obtains intellectual property protection, and forms Titan
Games, LLC, to make and market the game. Sequoias acquisition of the game is by
a. gift.
b. accession.
c. confusion.
d. production.
Reds Sport Equipment Inc. and Sienna Athletic Company are the chief competitors in
their market. They agree that Reds will operate only north of the Mason-Dixon line and
Sienna will operate only south of the same line. Under antitrust law, this is most likely
a. a per se violation.
b. a violation only if their competitors make similar deals.
c. a violation only if their customers agree to honor the deal.
d. not a violation.
Bing signs a note payable to the order of Cameron. Cameron indorses the note and
gives it to Daphne as payment for a debt. Daphne presents it to Bing, who pays it. Bings
payment discharges
a. all of the parties.
b. only Bing.
c. only Cameron.
d. only Daphne.
Uri sells 100 cases of vitamins to Wanda, but before she takes physical possession, the
cases are lost. Under the UCC, the parties rights and obligations with respect to the loss
depend on the concept of
a. identification.
b. insurable interest.
c. risk of loss.
d. title.
With respect to Egors land, Fig has an easement, Gabe has a profit, and Huck has a
license. A right to possess the land is owned by
a. Egor.
b. Fig.
c. Gabe.
d. Huck.
Fact Pattern 3-A2
Fine Dining Corporation files a suit against Eat-at-Joes, Inc. During the trial, Fine
Dinings attorney questions the plaintiffs witness Floyd. Floyd, who is not an expert in
the matter about which he is being asked, can
a. testify about any of the facts in the case.
b. testify about only what he personally observed.
c. offer his opinion about any of the evidence.
d. offer his conclusion with regard to the case.
Boxys Packaging Materials Company is subject to regulations issued by the
Occupational Safety and Health Administration (OSHA). Like other federal
administrative agencies, the OSHA was created by
a. Congress, through enabling legislation.
b. the Federal Trade Commission, through the rulemaking process.
c. the president, through an executive order.
d. the U.S. Department of Labor, through a final order.
Marquis Companys liabilities exceed its assets, but the firms employees falsify its
books to reflect a positive net worth. Marquis hires Nan & Ollie, an accounting firm, to
prepare a balance sheet, which is certified to show a net worth. Pure Credit Corporation
relies on the balance sheet to make a loan to Marquis. When the firm defaults, Pure
Credit files a suit against Nan & Ollie. Under the Ultramares rule, the accounting firm
is most likely
a. liable because Nan & Ollie owed a duty of care to all third parties.
b. liable because Nan & Ollie owed a duty of care to Marquis.
c. liable because Nan & Ollie owed a duty to any foreseeable user.
d. not liable because Nan & Ollie and Pure Credit were not in privity.
Eagle, Inc., a U.S. firm, contracts with Fong, Ltd., a Hong Kong firm, allowing Fong to
use and profit from Eagles patented products. This is
a. a distribution agreement.
b. a joint venture.
c. direct exporting.
d. licensing.
A Ruth contracts to provide Shelly with fifty hours of telepathic personal coaching. The
state legislature subsequently passes a law making telepathic personal coaching illegal.
This law will
a. discharge the contract.
b. fulfill the contract.
c. not affect the contract.
d. require immediate performance of the contract.
Under a contract with Bucolic Farms, Agro Excavation, Inc., begins digging an
agricultural pond. In mid-project, Agro asks for $15,000 over the contract price,
claiming an increase in the “cost of doing business. Bucolic agrees but later refuses to
pay. Their agreement is
a. unenforceable because Agros performance was a preexisting duty.
b. unenforceable because Bucolics promise was illusory.
c. enforceable.
d. unenforceable because its performance is unforeseeably difficult.
Fact Pattern 1-A1
The Texas Supreme Court decides the case of Livewire Entertainment Co. v. Power
Play Corp. Of nine justices, six believe the judgment should be in Livewires favor.
Justice Bellamy, one of the six, writes a separate opinion. The four justices who believe
the judgment should be in Powers favor join in a third separate opinion.
Refer to Fact Pattern 1-1. These opinions are collected and published in volumes called
a. citations.
b. codes.
c. reporters.
d. reviews.
In business deals, Felipe, the chief executive officer of Glazed Donuts, Inc., follows
duty-based ethical standards. These are most likely derived from
a. a corporate ethics code.
b. a cost-benefit analysis.
c. philosophical reasoning.
d. the law.
Pop Culture Clothiers, Inc., sells t-shirts to Trendwell Stores, Inc., under an existing
contract. When textile costs increase, Trendwell agrees to a price increase, but later
wants to cancel the contract. Trendwell may
a. cancel the contract immediately.
b. cancel the contract only after accepting a final shipment.
c. cancel the contract only on reasonable notice.
d. not cancel the contract.
Prospective Enterprises (PE) employs Quinn to buy property for a possible commercial
development. Quinn secretly buys some of the property and sells it to PE at a profit.
Quinn has breached
a. no duty.
b. the duty of accounting.
c. the duty of loyalty.
d. the duty of notification.
Mariah works in the public relations department of New Trends Sales Company. Her
job includes portraying New Trendss activities in their best light. In this context, ethics
consist of
a. a different set of principles from those that apply to other activities.
b. the same moral principles that apply to non-business activities.
c. those principles that produce the most favorable financial outcome.
d. whatever saves New Trendss “face.
During a union election campaign, Autowerks Repair, Inc., prohibits on-site, work-hour
solicitations by any party, including Mechanics Union, which is seeking the workers
unionization. This violates
a. federal labor law.
b. federal election law.
c. federal solicitation law.
d. no federal law.
Page points a knife at Rays daughter, threatening to hold her hostage and “cut her unless
Ray takes a certain file from Skelter Supplies Corporation, his employer. Charged with
theft, Ray can successfully claim as a defense
a. insanity.
b. duress.
c. entrapment.
d. self-defense.
Mountain Bikes, Inc. (MBI), and Nero enter into a contract for a sale of a mountain
bike. MBI, a merchant who deals in goods of the kind sold, makes implied and express
warranties in connection with the sale. The Magnuson-Moss Warranty Act was
designed to prevent deception in warranties by
a. displacing the UCC as the primary source of warranty rules.
b. making warranties easier to understand.
c. prohibiting disclaimers of warranties.
d. requiring sellers to give written warranties for consumer goods.
In Export Co. v. Imports, Inc., there is no precedent on which the court can base a
decision. The court can consider, among other things,
a. neither public policy nor social values.
b. public policy only.
c. public policy or social values.
d. social values only.
Corn Candy Corporation (CCC) has a right of action against Bio Farms, Inc. CCC
merges with Agri Sweeteners, Inc., with Agri absorbing CCC. After the merger, CCCs
right of action against Bio Farms can be exercised by
a. CCC.
b. Agri Sweeteners.
c. Bio Farms.
d. no one.
Sam uses duress to force Tanya to agree to pay him for protecting her retail storeTanyas
Trendsagainst vandalism and destruction. Tanya may
a. avoid the contract or choose to carry it out.
b. do nothing once she has agreed to pay.
c. recover from her insurer for the cost
d. recover from the local police for a failure to protect her store.
Sierra Lumber Company and Recycle & Resale, Inc., (R&R) enter into an oral contract
for Sierras sale to R&R of six used forklifts for $2,900 each. Before R&R takes posses-
sion of the goods, this contract is enforceable by
a. Sierra.
b. R&R.
c. any interested third party, such as an R&R customer for the goods.
d. none of the choices.
Sara agrees to cosign a promissory note for Tom to buy a sport utility vehicle. The note
is payable to Uno Bank. Sara is an accommodation
a. drawee.
b. indorser.
c. maker.
d. signatory.
Gladys is a shareholder of Frozen Yogurt, Inc. As a shareholder, Gladys must approve
a. amending the bylaws.
b. declaring a corporate dividend.
c. hiring a chief executive officer.
d. issuing additional shares.
John says to Kris, “I would like to sell you my sports memorabilia collection. This is
not an offer because it
a. does not describe the subject matter specifically.
b. does not include a price term.
c. only expresses an opinion.
d. only invites Kris to negotiate.
A negotiable instrument can function as an extension of credit.
If a debt is in dispute, an accord and satisfaction cannot take place.
A bailment agreement can be express or implied.
A lessee is a party who transfers a right to the possession and use of goods under a
lease.
Under the doctrine of respondeat superior, a principal is liable for any harm caused to
an agent by a third party.
Preferred shares normally have a fixed maturity date on which the firm must pay them
off.
Standard Corporation is a public company whose shares are traded in public securities
markets. Standards officers want to set up and maintain a system of “good corporate
governance. What is “corporate governance? What is its practical significance? What, at
a minimum, should a “good system of corporate governance include?
Pam borrows $5,000 from Quality Auto Sales to buy a car. When Pam does not pay the
loan or return the car, Quality wants to transfers the right to the payment to Rapid
Collection Agency. Rapid agrees to pay Quality for this right, but for a price that is less
than the amount owed. Can Quality transfer this right to Rapid without Pams consent?
If so, and Quality committed fraud in the deal with Pam, could Pam legitimately refuse
to pay Rapid? Explain.
State regulation, when not preempted, may regulate independently the activities that
federal regulation does not cover.
Personal property is sometimes referred to as personally or chattel.
To recover for fraud, a plaintiff must be under twenty-one years of age.
Oral assignments are prohibited.
Under their police powers, states can regulate only public activities, such as political
demonstrations.
In a few states, statutes allow the homestead exemption only if the judgment debtor has
a family.
Theatrical Supplies Company contracts to sell to Unique Costumes, Inc., seven hundred
plastic masks at $1 each to be delivered by October Theatrical knows that Unique will
use the masks to make Halloween costumes. Unique usually makes $7,000 profit from
the costumes sale. Theatrical fails to deliver on October Unique attempts to buy
substitute masks, but must pay $20 for each and take delivery on October 15, cutting
Uniques sales in half. Unique sues Theatrical. What is the measure of recovery?
Reformation is a remedy in which the terms of a contract are altered to reflect the true
intentions of the parties.
To refinance is to pay off an original mortgage and obtain a new one at more favorable
terms.
A promise to pay a debt for which a statute of limitations bars recovery is an
unenforceable promise.
The measure of damages for breach of a construction contract depends on which party
breaches and when.
The members of a limited liability company (LLC) are personally liable for the
wrongful acts or omissions of the LLC.