In a strict liability case, the courts still consider if the defendant acted in a reasonable
and prudent manner.
a. True
b. False
An agent must obey all instructions of the principal.
a. True
b. False
Larry has the largest pizza business in the city. He learns that Henry is thinking of
opening a competing pizza and pasta delivery business. Larry gives Henry $25,000 to
not open his proposed business in the same city. Which statement is correct?
a. The contract is voidable at Larry’s option.
b. The contract is void for lack of consideration.
c. The contract is illegal and void.
d. The contract is enforceable.
Fraudulent, but not innocent, misrepresentation permits the injured party to rescind a
contract.
a. True
b. False
Recent legislation has stipulated that boards of directors should be made up of more
independent directors who are less likely to simply go along with whatever the CEO
wants.
a. True
b. False
The National Labor Relations Act guarantees employees the right to join unions.
a. True
b. False
Under the statute of frauds, the writing must: be signed by the defendant; and must state
with reasonable certainty the name of each party, the subject matter of the agreement,
and all of the essential terms and promises.
a. True
b. False
Charles and Ellen, an unmarried couple, run an ice cream store. The business is not
incorporated and they have filed no formation papers with the state. Their business is a:
a. sole proprietorship.
b. partnership.
c. joint venture.
d. limited liability company.
Floyd offers to sell his 1967 Ford Mustang convertible to Tim. Before they conclude
their negotiations, Floyd dies. Which of the following is true?
a. Floyd’s heirs must sell the car to Tim.
b. Floyd’s heirs must continue to negotiate the offer and sell the car, if a reasonable
price can be determined.
c. The offer terminates automatically upon Floyd’s death.
d. There is a contract if Tim accepts before learning of Floyd’s death.
Rob works for a federal governmental agency. No policy statements have been reported
to the employees regarding their privacy rights or regarding their use of workplace
computers for personal business. Rob’s supervisor has reason to suspect that Rob has
used his workplace computer to order an illegal substance. Which of the following is
true?
a. Rob’s employer may search Rob’s computer at any time since it was provided by the
employer.
b. Even if Rob’s employer tries to search Rob’s computer, if Rob has deleted any
incriminating information, the employer will be able to find nothing on his computer to
prove Rob was engaged in illegal activity.
c. The Fourth Amendment prohibits unreasonable searches and seizures by the
government, but this amendment does not apply to computers.
d. If Rob has a legitimate expectation of privacy in the information on his computer, his
employer would have to obtain a search warrant in order to conduct a search of the
computer.
Express authority can be created by:
a. words spoken directly to the agent.
b. conduct.
c. written words given to one person to give to another person, the agent.
d. All the above.
Melody is a recent graduate of State Law School. She lands an impressive employment
contract with the firm of Dewey, Cheathem, and Howe, Attorneys at Law, on the stated
provision that she pass the upcoming bar exam. This provision in the employment
agreement is a(n):
a. condition precedent.
b. condition subsequent.
c. implied condition.
d. concurrent condition.
Jim was a mechanic. One day when he attempted to weld a car’s gasoline tank, it
exploded and he was hurt. He filed to collect workers’ compensation. His employer
resisted on grounds that Jim had been negligent and had also violated the express
regulations of the company when he attempted to weld a gasoline tank. Which
statement is correct?
a. Jim cannot recover if it is shown that his negligent conduct caused the explosion.
b. Jim cannot recover if it is shown that he violated the express regulations of his
employer.
c. Workers’ compensation doesn’t apply in situations like this.
d. Jim can recover even if he was negligent and violated the employer’s rules.
Charlene Brown has possession of a check made out to the order of Charlene Brown
(herself) which she received in payment for writing a manuscript for her publisher.
Charlene is a holder in due course and the publisher cannot claim any “real defenses to
payment. Charlene has an unconditional right to be paid for the check.
a. True
b. False
The United States and Singapore have signed the Convention on Contracts for the
International Sale of Goods (CISG). Notren, Inc., a U.S. company, and SWT, a
Singapore company, have entered into a contract under which SWT is to ship party
supplies to Notren. One of the terms of the contract states, “The validity and
performance of this contract will be governed by the Uniform Commercial Code (UCC)
of the state of New York, not the Convention of the International Sale of Goods
(CISG).” The contract will be governed by the:
a. CISG.
b. Uniform Commercial Code of New York.
c. common law.
d. World Trade Law.
Dick offers to sell Jane his 1955 Thunderbird convertible. Before Jane can accept the
offer, lightning strikes the car and it is totally destroyed. Which of the following is true?
a. Jane can still accept the offer and John must find a 1955 Thunderbird to sell.
b. The offer is terminated by law.
c. Dick can still revoke his offer so long as he does so before Jane accepts.
d. Jane can still accept the offer. She will be entitled to the insurance proceeds.
Ed was an independent owner of a chain of TV stores. He successfully got customers
into his store by cutting his prices on widely advertised name-brand products in order to
sell other products for which he received a bigger profit. When the manufacturers of
three of the name-brand products discovered Ed’s actions, they agreed secretly to stop
selling him their TVs. The three manufacturers:
a. are doing nothing illegal, as they did not get Ed to agree to anything.
b. are free to agree not to deal with Ed since the public can go elsewhere and will not be
hurt economically.
c. can choose either as a group to deal or not to deal with any retailer they want.
d. are engaged in a rule of reason violation of the antitrust laws if their action harms
competition.
Under what type of securities offering must the issuer determine if the investor is an
accredited, sophisticated, or unaccredited investor?
a. Regulation A offering.
b. Regulation D offering.
c. Public offering.
d. An interstate offering.
Peter, a minor, purchased a car from ACME Motors. Using a fake ID, he misrepresented
his age to be 18. The contract is fully executed. Which of the following is correct?
a. Peter cannot disaffirm the contract because a car is a necessary.
b. Peter cannot disaffirm the contract because of his misrepresentation.
c. Peter can disaffirm the contract, because a minor must be saved from his own poor
judgment, including his lie.
d. Either b or c may be applicable depending on the law of the jurisdiction in which the
contract was formed.
In the case of Lindholm v. Brant, the court ruled:
a. Brant was a BIOC, entitled to keep the painting in question.
b. Brant could not be a BIOC since the seller had a reputation for dishonesty.
c. Brant could not be a BIOC because he did not act in good faith.
d. no entrustment was involved because Malmberg was not a “merchant who deals in
goods of that kind.
Contracts for the sale of fabric, automobiles, computers, furniture, and paper clips
would all be governed by Article 2 of the Uniform Commercial Code.
a. True
b. False
While at the park, Tasha saw a small child fall into the lake. Tasha did not know the
child. Under the common law of most states, Tasha has a legal duty to take reasonable
steps to assist the child if Tasha is able to help and such help will not jeopardize Tasha’s
well-being.
a. True
b. False
Opinion is generally a valid defense in a defamation lawsuit because it is not meant to
be a factual statement.
a. True
b. False
Consumers have been active in requesting government regulation of web data collection
to protect their privacy.
a. True
b. False
Rob agrees to act as an agent for Diane in selling her car. Diane has a duty of loyalty to
Rob.
a. True
b. False
Vick Valve Company makes valves for plumbing fixtures. At the beginning of the year,
it sends out a price list addressing each one, “To our valued customers.” Honest Hank
Hardware orders a variety of valves at the prices quoted on the price list. Vick Valve
must honor the prices on the list and sell the valves to Honest Hank.
a. True
b. False
John loans George money and they sign a written agreement whereby George will
repay John in monthly installments. Is this loan subject to the Truth-in-Lending Act?
a. Yes, if the loan is for more than $1,000.
b. Yes, if John and George live in different states.
c. No, if John is not in the business of offering credit.
d. No, if John and George are related.
Liquidated damages are awarded to parties who have experienced an injury to their
legal rights but have no actual loss.
a. True
b. False
Alpha and Xenon companies are both major international conglomerates. They are
negotiating a contract whereby Alpha will install a computer system for Xenon. One
clause in the contract states that Alpha will not be liable for damages caused by the
negligent installation of the computer system, except that Alpha warrants the system
and will fix any problem for a period of two years following installation. Alpha
completes the installation of the computer system. Xenon loads extensive amounts of
information on the system, but all of it is destroyed because Alpha negligently installed
the memory chips. Alpha fixes the memory, but Xenon incurred significant expenses in
recreating the lost information. Xenon sues for these expenses. Alpha defends with the
noted clause in the contract.
a. Xenon wins; these types of clauses are never enforceable.
b. Xenon wins; exculpatory clauses are sometimes valid, but this one would not be
valid.
c. Xenon wins; this exculpatory clause is not valid because it is unconscionable.
d. Alpha wins; this exculpatory clause is enforceable.
It is legal for websites to sell source code for viruses.
a. True
b. False
Sprock is a holder in due course on an instrument issued by Klingon. Which of the
following defenses could be successfully raised by Klingon?
a. Forgery.
b. Prior payment.
c. Breach of contract.
d. Fraud in the inducement.
Define the common law. Discuss its conflicting goals and the doctrine created to serve
one of these goals.
Frank’s Furniture Company promised in a written agreement to purchase as much
walnut wood “as it desires” from Forestry Products, Inc. If Frank’s purchased walnut
wood from another source and Forestry Products sued, what is the likely result?
Shirley Rhone suffered injuries when a truck struck the vehicle in which she was riding.
State Auto Mutual Insurance Co. was the insurer involved and provided personal injury
coverage. Shirley went to see Dr. Allen, a chiropractor who provided treatments 32
times over a 3-month period. Dr. Allen billed State Auto in three separate billings. After
paying the first two billings in full, State Auto expressed concern about whether Dr.
Allen’s charges were excessive. State Auto hired Chiropractic Consultants, Inc. to
evaluate Dr. Allen’s billings. The consultants advised that Dr. Allen’s billings were
indeed excessive. State Auto then telephoned Dr. Allen and offered a partial payment to
settle the account. After this conversation, State Auto issued and sent a check for $864
payable to Dr. Allen. On the face of the check, State Auto noted the total amount
allocated to each claim and typed ‘settlement in full.” On the reverse side it said, “The
endorsement of this draft by the payee constitutes a clear release and full settlement of
the claim or account shown on the other side.” Upon receipt of the check, Dr. Allen
cashed the check. He then sought payment of an additional $895. State Auto claims
there was an accord and satisfaction with respect to the amount due for services
rendered by Dr. Allen. What are the requirements of an accord and satisfaction? Were
those requirements met in this case?
Identify seven possible remedies for a buyer when the seller breaches a contract.
How do the tort theories of negligent product liability and strict product liability differ
from each other? List and describe the elements an injured party must establish for
recovery under each cause of action.
Larry wanted to buy a 1957 Cadillac once owned by Reggie Jackson. Larry entered into
a contract with the owner agreeing to pay $102,000. The owner subsequently changed
his mind. If Larry sues, what remedies are potentially available?
Discuss when monopoly power is not a violation of Section 2 of the Sherman Act.
List and discuss the protections afforded criminal defendants by the Bill of Rights.
Sonny had a contract to paint the rides at an amusement park and needed a paint that
would protect against extensive wear, potentially harsh weather, and rust. Sonny asked
for paint samples from several companies, and selected one supplier based on the
quality of the sample. When he received his order, he found that the quality did not
match that of the sample. What recourse does Sonny have?
A principal is bound by contracts that an agent enters into with authority. Discuss the
various types of contractual authority an agent may have.
Identify and explain at least four situations where a written contract is either necessary
or recommended.
Hanson Corporation is concerned that its employees are spending too much work time
talking on the telephone, sending e-mails, and using the Internet for personal uses.
Discuss what steps Hanson may legally pursue to protect its interests in productivity.
Fowler Bros. has applied to Gibralter Bank for a $50,000 loan for its business
expansion. If Fowler Bros. plans to use its account at Gibralter Bank as collateral,
discuss what the bank needs to do for a security interest to attach.
Thomas Reep, was the president of First National Bank in Clarksville. R.L. Moore
approached Reep requesting the bank to open an account in the name of Texas
Continental Express, Inc., a corporation owned by his two sons. R.L. had no affiliation
with the corporation nor any financial interest in it. R.L. promised Reep that he would
open several accounts in First National that would more than amount to the business of
his sons. R.L. assured Reep that if anything came up in connection with the sons’
account, Reep was to contract him directly. Upon these conditions, First National
proceeded to furnish a regular checking account and bank draft services for Texas
Continental. Sometime later, First National paid two drafts overdrawing the account by
$448,942. When Reep contacted R.L. about the overdrawn account, R.L. assured Reep
that money would be deposited in the account. When Reep called back a few days later
to find out why the money had not been deposited, R.L. informed Reep that his wife
had suffered a nervous breakdown the night before and the deal was off. First National
Bank brought suit to enforce R.L.’s promise to pay the debts of Texas Continental. What
is the likely outcome?
Discuss two types of misrepresentation and how they differ. List the three things a party
must show to rescind a contract based on misrepresentation.