Under the Equal Pay Act of 1963, all of the women on an employer’s staff must be paid
the same as all of the men.
A person who holds all rights in property owns the property in fee simple.
Equity is a branch of unwritten law that seeks to supply remedies of equal measure to
the parties in a legal dispute.
Pure Oil Company enters into a contract with QuikBilt, Inc., to construct an oil pipeline
to withstand specific conditions. If QuikBilt fails to meet this standard, which is
construed as a breach of contract and a breach of a duty of care, Pure might be awarded
punitive damages to
A.establish, as a matter of principle, that QuikBilt acted wrongfully.
B.provide Pure with funds for a foreseeable loss beyond the contract.
C.provide Pure with funds for its loss of the bargain.
D.punish QuikBilt and deter others from similar acts.
Offers may not be revoked before they are accepted.
A promise to pay for an act that has already occurred is enforceable because the event is
certain.
To rescind a contract for fraud, a plaintiff must prove an injury.
Warranties of title do not arise in most sales contracts.
Mens rea refers to the mental state necessary for criminal liability.
Under the UCC, a seller’s tender of goods that do not conform in every way to a
contract is not a valid tender.
A description of collateral as “all the debtor’s assets” is too general to reasonably
identify the subject of a security agreement.
Penalties for aiding or assisting in the preparation of false tax returns are limited to one
penalty per taxpayer per tax year.
A drawer is primarily liable on an instrument.
A fanciful use of ordinary words may be trademarked.
An agency relationship can be formed without consideration.
Ethical reasoning is the process through which an individual rationalizes whatever
action he or she chooses to take.
If a principal does not ratify an authorized contract, the principal is not bound.
The equal dignity rule does not apply to a corporate officer who, in an ordinary business
situation, acts on behalf of his or her firm.
The Sarbanes-Oxley Act of 2002 applies to domestic, but not foreign, public accounting
firms that provide auditing services to “issuers.”
Incorporators appoint a corporation’s first board of directors.
Constructive delivery occurs when property is physically transferred.
State law may mandate that an incontestability clause be included in an insurance
policy.
SEC Rule 10b-5 prohibits the commission of fraud in connection with the purchase or
sale of any security.
Firms are obligated to return a principal amount per share to each holder of common
stock.
Under the UCC, the validity of a contract depends on its price term.
The owner of a fee simple absolute has the right to use property for whatever purpose
he or she sees fit.
An implied contract is implied from the conduct of the parties.
An arbitrary use of ordinary words may not be trademarked.
“Unless otherwise explicitly agreed,” title passes to the buyer at the time and place at
which the seller physically delivers the goods.
State securities laws apply mainly to interstate transactions.
A principal owes an agent a duty of ratification.
International law is the law of a foreign nation and varies from country to country.
The words used in an insurance contract are interpreted against the party who applied
for the policy.
Fact Pattern 26-2
Sid, a director of Tech Software Company, learns that a Tech engineer has developed a
new, exciting video game. Sid buys Tech stock and tells his friend Uri, who also buys
Tech stock. When the new game is released three weeks later, Sid and Uri sell their
stock for a big profit.
Refer to Fact Pattern 26-2. Under SEC Rule l0b-5, Sid would not be liable if he had
waited to buy Tech stock until
A.after Sid told Uri of the new game.
B.after Uri bought Tech stock.
C.after the public release of the game.
D.just before the game was released.
Beachside City enacts an ordinance that bans the distribution of all printed materials on
city streets. Carl opposes the city’s latest “revenue-enhancing” measure and wants to
protest by distributing handbills. In his suit against the city, a court would likely hold
the printed-materials ban to be
A.an unconstitutional restriction of speech.
B.constitutional under the First Amendment.
C.justified by the need to protect individual rights.
D.necessary to protect national interests.
The payment of Yves’s debt to Zac is guaranteed by Yves’s personal property. Their
agreement describes Yves’s subject property by serial number. To establish Zac’s
interest, this is
A.irrelevant.
B.not sufficient.
C.sufficient if it accurately describes the parties’ agreement.
D.sufficient unless it is too tedious to review.
Fact Pattern 17-2
Tom draws a check, on his account in State Bank in New York, payable to Digital
Media, Inc., in San Francisco. Digital deposits the check in its account at First National
Bank. First National deposits the check in the Federal Reserve Bank of San Francisco,
which transfers it to the Federal Reserve Bank of New York. That Federal Reserve Bank
sends the check to State Bank.
Refer to Fact Pattern 17-2. Tom’s bank is
A.the cashing bank.
B.the depositary bank.
C.the intermediary bank.
D.the payor bank.
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.
Bob writes a check on his account at County Bank to Dona, a famous singer. The
person claiming to be Dona is an imposter, however, named Edy. Edy indorses the
check to Frank, for whom County Bank cashes it. Ultimately, the loss will most likely
fall on
A.Bob.
B.County Bank.
C.Dona.
D.Frank.
In Export Co. v. Finance Corp., there is no precedent on which the court can base a
decision. The court can consider
A.neither public policy nor social customs and values.
B.public policy but not social customs or values.
C.public policy or social customs and values.
D.social customs or values but not public policy.
Eden, the chief executive officer of Flo-Thru Piping Corporation, wants to ensure that
Flo-Thru’s activities are legal and ethical. The best course for Eden and Flo-Thru is to
act in
A.good faith.
B.ignorance of the law.
C.regard for the firm’s shareholders only.
D.their own self interest.
Caleb is driving a car in which Dotty is a passenger when an accident occurs. Caleb and
Dotty are emotionally rattled, but neither is physically hurt. Caleb is not liable to Dotty
on a negligence theory because
A.both parties were emotionally rattled.
B.Caleb did not apparently intend to cause an accident.
C.Dotty must have been comparatively negligent.
D.Dotty was not injured.
Yoko, Ltd., and Zeno, S.A., transact an international sale of goods. For these parties,
and other international buyers and sellers, the United Nations Convention on Contracts
for the International Sale of Goods spells out the duties that apply
A.if Article 2 of the Uniform Commercial Code does not apply.
B.if a dispute is submitted to the International Court of Justice.
C.if the parties have not agreed otherwise in their contracts.
D.under all circumstances.
Zeke files a petition in bankruptcy for relief through an individual’s repayment plan.
Zeke’s plan must provide for
A.the turnover of his future income to the trustee.
B.his attendance at a credit-counseling briefing.
C.adequate means for the petition’s execution.
D.a preference for one creditor over another.
Diners Corporation, a U.S. firm, signs a contract with Essen, A,G., a German firm, to
give Essen the right to use Diners’ trademark in restaurants in Germany. This is
A.a distribution agreement.
B.a joint venture.
C.direct exporting.
D.licensing.
Odell, Prince, and Quinn are shareholders of Rite 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.
Dom, an EZ Baked Goods salesperson, follows Flora, a salesperson for Goody Pastries,
Inc., as she attempts to make sales to food stores. Dom solicits each of Flora’s
customers. Dom is most likely liable for wrongful interference with
A.a bargaining relationship.
B.a business relationship.
C.a contractual relationship.
D.a customer relationship.
Stan is liable for the conversion of Tyler’s business law textbook
A.if Tyler proves that the book was in Stan’s possession when it disappeared.
B.if Tyler proves that the book is now in a third party’s possession.
C.if Tyler proves that the book was not in his possession when it disappeared.
D.under no circumstances.
Nero signs a check “pay to the order of Olive” drawn on Nero’s account in Plum Bank.
Olive signs the back of the check. Secondary liability on this check extends to
A.Nero and Olive only.
B.Nero and Plum Bank only.
C.Nero only.
D.Plum Bank only.
Natalie is a shareholder of Off-Road Vehicle Company. As a shareholder, Natalie does
not have
A.a right to compensation.
B.dividend rights.
C.inspection rights.
D.preemptive rights.
Mall Stores Corporation owns 95 percent of the shares of Niche Retail Corporation.
Mall Stores combines with Niche Retail, but only Mall Stores continues to exist. This
transaction was
A.a consolidation.
B.a share exchange.
C.a short-form merger.
D.a termination.
Metro Daily and New City Newsstand enter into a contract under which Metro agrees to
deliver a certain quantity of newspapers to New City each day. The contract does not
include a price term. In a suit between the parties over the price, a court will
A.determine a reasonable price.
B.impose the lowest market price.
C.refuse to enforce the agreement.
D.return the parties to the positions they held before the contract.
Fact Pattern 20-2
24-Hour Credit Corporation issues high-cost and high-fee mortgage products to people,
including Benny, who could not easily obtain credit under other loan programs.
Refer to Fact Pattern 20-2. Under federal law, if 24-Hour Credit fails to provide certain
material disclosures with respect to the loan, Benny’s right to rescind the loan
A.expires at midnight on the day the loan is finalized.
B.is immediately revoked.
C.is extended for up to three years.
D.is tolled for the duration of the loan payments.
Delite Toys, Inc., makes EZ Goo, a famous children’s toy. Without Delite’s consent, Fast
Adhesives Company begins to use “ezgoo” as part of the URL for Fast’s Web site. Fast
claims that no consumer would confuse the Web site with the toy. Fast has committed
A.copyright infringement.
B.patent infringement.
C.trademark infringement.
D.no actionable violation.
May is a stockbroker. Due to May’s statements, Nora believes that the price of OK
Goods, Inc. (OKGI), a widely traded stock, is going to increase substantially. Nora buys
500 shares of OKGI at $10 per share, but the price soon drops to $2. Nora can
successfully recover
A.nothing.
B.the amount of the purchase price.
C.the amount of the purchase price plus the expected increase.
D.the amount of the purchase price plus the unexpected decrease.
Community Trust Bank provides Devlin with a mortgage to buy a home. The rate of
interest is fixed for seven years. At the end of that period, a large payment for the entire
balance of the mortgage loan is due. This is
A.a balloon mortgage.
B.a hybrid mortgage.
C.a reverse mortgage.
D.a violation of the law.
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.
A Minnesota state statute restricts certain kinds of advertising to protect consumers
from being misled. A court would likely hold this statute to be
A.an unconstitutional restriction of speech.
B.constitutional under the First Amendment.
C.justified by the need to protect individual rights.
D.necessary to protect national interests.
EZ Credit Company signs an instrument payable to the order of Flem that states, “The
maker of this note at the date of maturity, May 1, 2013, can extend the time of payment,
but for no more than a reasonable time.” This instrument is
A.negotiable.
B.nonnegotiable, because it includes an extension clause.
C.nonnegotiable, because it is not payable at a definite time.
D.nonnegotiable, because it is payable to a specific payee.
Fact Pattern 24-1
Mountaintop Clearview Corporation authorizes Niles, its employee, to oversee its
timber operation. In the course of his employment, Niles disposes of the operation’s
waste illegally. Orson is a Mountaintop shareholder.
Refer to Fact Pattern 24-1. Liability for Niles’s act most likely rests with Orson to
A.no extent.
B.the proportionate extent of the number of shares Orson owns.
C.the amount of Orson’s investment in the firm.
D.the full extent.
Grover Nut Company files a suit against Hud, its former accountant, alleging actual
fraud. Grover must prove
A.intent to deceive.
B.misrepresentation of a non-material fact.
C.the lack of an injury.
D.unjustifiable reliance.
Vision Optical Company and Wide Eyes Open, Inc. decide to combine. Xavier, a Wide
Eyes shareholder, is dissatisfied with the price that he will receive for his stock. In the
absence of fraud or other illegal conduct, Xavier’s exclusive remedy is to
A.exercise an appraisal right.
B.file a suit to delay the process.
C.refuse to agree to the deal, which cannot then proceed.
D.urge other shareholders to insist on a higher price.
Rodeo, S.A., which is based in Spain, enters into a contract for the sale of seven
hydraulic lifts to Tonnage Shipping Company, which is based in the United States. This
contract is governed by
A.Spanish law.
B.the provisions in the laws of both countries that are similar.
C.Article 2 of the UCC.
D.the United Nations Convention on Contracts for the International Sale of Goods.
Dino and Elle engage in a transaction that involves e-documents. The E-SIGN Act
applies if those documents include
A.a divorce decree or a prenuptial agreement.
B.a health-insurance termination.
C.an agreement subject to Article 2 of the Uniform Commercial Code.
D.an eviction or a foreclosure.
Fact Pattern 14-1
Internet Cafes, Inc., contracts to buy all of its requirements for coffee, at a minimum of
1 million pounds per year, from Java Corporation for six years. After three years,
Internet tells Java that it plans to sell its company to Kwik Eateries, Inc. Kwik refuses
to assure Java that it will continue Internet’s contract.
Refer to Fact Pattern 14-1. Kwik’s refusal constitutes
A.a justified response based on Kwik’s relation to the contract.
B.an assignment of Internet’s rights under the contract.
C.a reasonable suspension of performance under the contract.
D.a repudiation of the contract.
College Copy Shop (CCS) compiles, copies, and sells reading materials to students on
the instructions of their professors, who indicate which parts of which publications
should be included. These include texts published by Deep Topics, Inc. CCS does not
obtain the permission of Deep Topics, or any of the other original publishers of the
copied materials, and does not pay royalties on the sales of the compilations. Deep
Topics and others file a suit against CCS, alleging infringement of the plaintiffs’
intellectual property rights. Which type of intellectual property is involved in this
situation? What is CCS’s likely defense? How is a court most likely to rule? Explain.
Tune Products, Inc., offers to sell to Unlimited Sales Company one hundred MP3
players at $50 a piece, subject to certain specific delivery dates. Unlimited replies with
a signed purchase order that reads, “Accept your offer for 100 I-appliances at $50 each.
Must be delivered to our warehouse.” Tune does not respond or deliver the goods.
Unlimited files a suit for breach of contract, to which Tune answers that there is no
contract because Unlimited’s purchase order contained additional terms and is not
signed by Tune. Can Unlimited recover? Explain.
Chris promises Dina $40,000 if she graduates from Eagle College. Dina enrolls in
Eagle, attends full-time for four years, and graduates. When Dina asks Chris for
$40,000, Chris says, “I don’t remember promising you $40,000. But if there was a
promise, it’s not enforceable, because we didn’t bargain for it. And even if there was a
promise that would otherwise be enforceable, I revoke it now.” Can Dina enforce
Chris’s “promise”? Why or why not?
Recreation & Sports Equipment Corporation sells a product that is capable of seriously
injuring consumers who misuse it in a foreseeable way. Does the firm owe an ethical
duty to take this product off the market? What conflicts might arise if the firm stops
selling this product?
Bob is shopping in Carl’s Hardware Store when a nail gun in use by Dan, one of Carl’s
employees, fires without warning and hits Bob in the leg. Carl checks the gun and
discovers that it was assembled improperly. Bob files a suit against Eagle Tools, Inc.,
the manufacturer of the gun, for product liability, on the ground of strict liability. What
are the elements for an action based on strict liability? In whose favor is the court likely
to rule and why?
Hawk Corporation begins making and selling motorcycles in 2000 under the mark
“Hawk.” Ten years later, Hawk.com, Inc., a different company selling medical
equipment and supplies, begins to use “hawk” as part of its URL and registers it as a
domain name. Can Hawk Corporation stop Hawk.com’s use of “hawk”? If so, what
must the motorcycle-maker show?
General Equity Corporation enters into a contract with Honi, who agrees to create
artwork for General’s main office building. Honi delays and eventually refuses to
perform. Meanwhile, General contracts to sell the building to Ideal Investments, Inc.,
but before the transaction is complete, Jewel Funds Company offers to pay a higher
price. General refuses to transfer the building to Ideal. In separate suits by General
against Honi and by Ideal against General, each plaintiff seeks specific performance.
How might the court rule in each case, and why?
For twenty years, Ozzie works for Players Paradise, a destination for vacationers from
across the United States, maintaining golf carts. After a steady stream of positive job
evaluations and merit pay raises, Ozzie is promoted to the position of supervisor of
golf-cart maintenance at three of Players’s courses. Five years later, a new employee,
Quentin, is hired to oversee operations at all ten of Players’s courses. Quentin demotes
Ozzie, who is now over the age of forty, to running only one of the three cart facilities,
and freezes his salary. Quentin demotes five other employees over the age of forty and
places one of Ozzie’s former facilities under the supervision of Richie, who is
twenty-three. Ozzie overhears Richie say, “We’re going to have to do away with these
old, senile men.” Less than a year later, Quentin reconsolidates the three cart facilities’
operations under Richie’s charge. Ozzie quits and files a suit against Players for
employment discrimination. Should he prevail? Explain.
In May 2012, National Biotech Corporation generally advertises that it will make a $4
million offering of stock in June. National makes the offering as advertised and, ten
days after the first sale, notifies the Securities and Exchange Commission (SEC). All
buyers of the stock are given material information about the company, its business, and
the stock. Before the end of the year, the offering is completely sold out. The buyers
include forty unaccredited investors and fifty accredited investors. National does not
register the offering. The SEC files a suit against National, seeking civil sanctions on
the ground that this offering was not exempt from registration. National argues that the
applicable exemption is Rule 505 of Regulation D of the Securities Act of 1933 and that
because of this exemption, any resale of the stock is also exempt. Who is correct?
Eppie gives a check to Fund Investments to buy 100 shares of stock in GR8 Tech
Corporation for Eppie. The price of the shares is constantly fluctuating. Fund
Investments asks Eppie to leave the amount of the check blank and allow it to fill in the
price when making the purchase. Eppie agrees. Fund Investments buys the stock when
the price is $4,000, but fills in the check for $5,000. The check is negotiated as payment
for a $5,000 debt to Hasty Accounting Services, which takes the check in good faith and
without notice of Fund Investments’s act. Hasty later learns that Fund Investments was
not authorized to fill in the check for $1,000 over the price. Is Hasty an HDC? If so, for
how much?
Sara needs $1,513 to buy textbooks and other school supplies. Tomas agrees to loan
Sara $1,513, accepting as collateral Tomas’s car. They put their agreement in writing
and sign it. Sara keeps possession of the car. Does Tomas have an enforceable security
interest? How can Tomas let other creditors know of his interest in the car?
Dieter’s will provides for a distribution of his assets on his death. Who will “distribute”
Dieter’s property, and what are the steps involved?
Marbled Meats Corporation (MMC) proposes to combine with Natural Farms, Inc., and
asks MMC shareholders to vote on the proposal. Omar, an MMC shareholder, votes
against it, but is outvoted by the other shareholders. Is there an action that Omar can
take to avoid being forced to go along with the transaction? If so, what can he do? After
the combination, Natural Farms ceases to exist. MMC is the surviving firm. What type
of combination is this?
Patty, who is divorced, owns a house. She has no reasonable expectation of benefit from
the life of Quinn, her ex-spouse, but she applies for insurance on his life anyway. She
also obtains a fire insurance policy on the house, which she later sells. Five years later,
Quinn dies and the house is destroyed in a fire. Can Patty obtain payment on either the
death of Quinn or the loss of the house? Explain.
Discount Mart, Inc., files a suit in a state court against Elements Computer Corporation,
alleging that Elements breached a contract to sell 500 notebook computers to Discount.
During the course of the suit, Discount files a motion for judgment on the pleadings,
Elements files a motion for a directed verdict, and both parties file motions for
summary judgment. When and for what purpose are each of these motions made?
Sally and Tom decide to go into business, selling discounted merchandise through their
Web site “e-Buy.” They sign a partnership agreement that requires Sally to contribute
$12,000 and Tom to contribute $8,000 in capital to start the firm. The agreement also
states that only Sally will have the authority to bind the partnership in deals with third
parties, but the agreement says nothing about the management of the firm or a division
of profits. Without Sally’s knowledge, Tom tells United Computer Products, Inc., that
he represents the firm and signs a contract with United to buy hard drives for resale on
e-Buy. In the first year, e-Buy makes a profit of $50,000. What are the partners’ rights
with respect to the management of the firm? Is the partnership bound to the contract
with United? Do the partners split the first year’s profits? If so, how much is each
entitled to?
Guy is Hot Java Company’s majority shareholder. Guy decides to sell his Hot Java
stock. The sale will be an effective transfer of the control of the company. Does Guy
owe a duty to Hot Java or its minority shareholders in this situation?
Ellen contracts to buy six cases of vintage Fertile Valley wine from Grapes & Vines
Winery for $1,200. The contract states that delivery is to be made at Ellen’s residence
“on or before May 1, to be used for daughter’s wedding reception on May 2.” On May
1, Grapes & Vines’s delivery van is involved in an accident, no wine is delivered that
day, and no one from Grapes & Vines tells Ellen. On the morning of May 2, Ellen buys
the wine from Happy Hill Winery. That afternoon, just before the reception, Grapes &
Vines tenders delivery of the wine at Ellen’s residence. She refuses tender. Grapes &
Vines sues her for breach of contract. How is the court most likely to rule?