Jon writes a check to LocoMotion, Inc., as payment for a golf cart but soon discovers
the cart is broken. He goes to Fairway Bank, the drawee, and orally authorizes Lolly, a
bank officer, to stop payment on the check. This order is valid for
a. fourteen days.
b. fourteen months.
c. fourteen attempts to cash it.
d. fourteen subsequent “on-us” items.
Ruth is a supervisor for Subs & Suds, a restaurant. Tim is a Subs employee. The owner
announces that some employees will be discharged. Ruth tells Tim that if he has sex
with her, he can keep his job. This is
a. harassment on the basis of sexual orientation.
b. not harassment.
c. quid pro quo harassment.
d. same-gender harassment.
The employee union at Top Tech Toys decides to go on strike. Their strike will be legal
if
a. the strikers form a picket line.
b. the strikers form a massed barrier and deny management and nonunion workers
access to Top Tech Toy’ plant.
c. the strikers stay in Top Tech Toy’ plant without working.
d. the strikers violently attack management.
Cook’s Pantry Appliances, a retail store, must use reasonable care on its premises to
warn its patrons of
a. all risks.
b. hidden risks.
c. obvious risks.
d. no risks.
Beth goes to Dr. Carlton for surgery. Carlton says that Beth should be fully healed
within a week. Beth is not healed within a week. With respect to breach of contract,
Carlton is
a. liable.
b. not liable, because surgery is not a proper subject for a contract.
c. not liable, because the statement was an opinion.
d. not liable, but Beth is excused from paying Carlton.
Va-Va-Voom Products, Inc., engages in deceptive advertising when it markets its
product Weight-No-More as able to help consumers lose weight in their sleep.
Va-Va-Voom is ordered to include in all future advertising of Weight-No-More the
statement, “This product will not cause anyone to lose weight while sleeping.” This is
a. a counteradvertising order.
b. a multiple product order.
c. a “cooling-off” law.
d. a validation notice.
Kirk receives an unsolicited credit card in the mail and tosses it on his desk. Without
Kirk’s permission, his roommate Leif uses the card to buy a new laptop for $1,800. Kirk
is
a. liable for $1,000.
b. liable for $500.
c. liable for $50.
d. not liable for any amount.
Mitchell orally agrees to pay Lorena to plant and harvest a quarter of Mitchell’s farm
acreage for four soybean seasons. After Lorena prepares the land and plants the first
crop, Mitchell says that their deal is off. Lorena can most likely recover
a. in quasi contract.
b. nothing.
c. in restitution.
d. on the partie’ existing contract.
Cliff dies without a will. His survivors include his spouse Dana and his two children,
Efrem and Fay. Under applicable laws, Dana will probably receive
a. all of Cliff’s estate.
b. none of Cliff’s estate.
c. one-half of Cliff’s estate.
d. one-third of Cliff’s estate.
Bill and Stacy enter into a contract that falls within the provisions of the UETA. Under
the UETA, “information that is inscribed on a tangible medium or that is stored in an
electronic or other medium and is retrievable in perceivable form” is
a. an e-document.
b. an e-signature.
c. an e-transaction.
d. a record.
Tundi is a partner in YooHoo! Amusement, a new partnership. A YooHoo! debt comes
due. Tundi is
a. not liable for the debt.
b. only liable for the debt up to the amount of his capital contribution.
c. personally liable only to the extent the other partners do not pay.
d. personally liable to the full extent of the debt.
Ceramic Tile Company designs and makes floor tiles. In a product liability suit based
on negligence, Ceramic could be liable for violating its duty of care with respect to
a. neither the design nor the making of the tiles.
b. the design and the making of the tiles.
c. the design of the tiles only.
d. the making of the tiles only.
National Shipping Corporation and Office Software Company (OSC) make a deal for
OSCs products, communicating entirely online. Under the UETA, an electronic record
is considered sent
a. only at a midway point between the sender and recipient.
b. only on coming into the recipient’s control.
c. only on leaving the sender’s control.
d. when it leaves the sender’s control or comes into the recipient’s control.
Brad stands in front of Rooster’s Round-Up Café, shouting “fighting words” that are
likely to incite Rooster’s patrons to respond violently. The First Amendment protects
such speech
a. all of the time.
b. none of the time.
c. only if it is noncommercial.
d. only if it is symbolic.
Fact Pattern 31-3
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 31-3. Under the Securities Exchange Act of 1934, Fay is most
likely
a. liable for insider trading.
b. not liable because Fay did not prevent others from profiting.
c. not liable because Fay did not solicit information from Dhani.
d. not liable because Fay does not work for Eureka.
Marvin is a very good businessman. He starts Marvin’s Bike Company in the small
town of Wheatland, South Dakota. There is one other bike store in Wheatland. Through
good business management, Marvin’s Bike Company obtains a great deal of market
power in Wheatland. This acquisition of monopoly power is
a. a per se violation of Section 1 of the Sherman Act.
b. an illegal restraint on trade.
c. not an antitrust violation.
d. a per se violation of Section 2 of the Sherman Act.
Players Video Game Centers, Inc., wants to issue stock of $1 million in a single offer-
ing. Players must provide all investors with material information about itself, its
business, and its securities if
a. all investors are accredited.
b. under any circumstances.
c. any investors are accredited.
d. any investors are unaccredited.
Fern and Gray want to form a limited partnership to manage two restaurants: Café Latte
and Deli Delite. In most states, a limited partnership will be created when
a. a certificate of limited partnership is filed.
b. a partnership agreement is executed.
c. the business for which the firm is formed actually begins.
d. the partners make their capital contributions.
In contemplation of death during risky surgery, Donnelly, a guitarist, gives his guitars to
Cathy. The surgery is successful, and Donnelly does not die. The gift of the guitars is
a. not revoked because it was a gift causa mortis.
b. not revoked because it was a gift inter vivos.
c. revoked because it was a gift causa mortis.
d. not revoked because it was a gift largesse.
With respect to Egor’s 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.
Quotient Financial Corporation is a secured party with a security interest in property
owned by Retail Sales Company. Perfection of this security interest may not protect
Quotient Financial against the claim of
a. a bank.
b. a buyer in the ordinary course of business.
c. a subsequent lien creditor.
d. a trustee in bankruptcy.
Kim’s Pony Rides orders ten saddles from Little Horse Saddles, Inc. The sales contract
states that if the saddles are defective, Kim’s will allow Little Horse Saddles to repair or
replace them instead of rejecting the shipment. When the saddles arrive, they are
defective. In this case, the perfect tender rule
a. does not apply.
b. applies to both parties.
c. applies only to Little Horse Saddles.
d. applies only to Kim’s Pony Rides.
In negotiations with Coastal Distribution Company, Briggs Trucking, Inc., insists that
their contract be drafted according to certain plain language laws. These laws concern
the phrasing of
a. contracts.
b. ads.
c. product instruction manuals.
d. documents of delivery.
Yellowbox, a DVD rental company, would like to change its corporate status to that of
an S corporation to avoid income taxes at the corporate level. To qualify, Yellowbox
must
a. be located in the United States.
b. have more than one hundred shareholders.
c. be a non-profit corporation.
d. have more than one class of stock.
Rural Electric Company submits a bid to build a dam on federal land as part of a federal
project. For this action, an environmental impact statement is most likely
a. prohibited.
b. required.
c. unnecessary.
d. voluntary.
Dave’s uncle tells Dave that if “he feels that Dave deserves it,” he will give Dave
$1,000 when Dave graduates from college. Dave’s uncle’s promise is
a. illusory.
b. enforceable.
c. a forbearance.
d. a preexisting duty.
Garth dies without a will. The distribution of Garth’s property, including his eleven
forested acres near Hope, Arkansas, is prescribed by
a. a court-appointed executor.
b. federal probate statutes.
c. state intestacy laws.
d. Garth’s relatives.
Kathleen sells Richard a racehorse for $1,000. Both Kathleen and Richard think that the
horse is too slow to win any races. Richard then enters the horse in a race, and it wins
easily. He enters it in more races, and the horse soon wins more than $1 million.
Kathleen tries to rescind the contract to sell the horse, claiming that it was worth more
than $1,000. A court will
a. cancel the contract due to Kathleen’s failure to know the horse’s value.
b. cancel the contract due to Richard’s failure to know the horse’s price.
c. cancel the contract due to the difference between the contract price and the horse’s
true value.
d. enforce the contract.
A firm named Scientific Discovery Corporation (SDC) makes an attempt to incorporate
for a purpose other than making a profit. SDC is
a. a foreign corporation.
b. an alien corporation.
c. a nonprofit corporation.
d. not a corporation.
Quality Energy Company, a U.S. firm, and Royal Petro, a Dutch firm, enter into a
contract that includes an arbitration clause. This clause must provide that the arbitrator
will be
a. any specified third party.
b. the American Arbitration Association.
c. the Dutch Arbitration Organization.
d. the International Chamber of Commerce.
Simone is a manager of Rolling Hills Resort LLC, a limited liability company. Rolling
Hills is formed in a state that does not explicitly create fiduciary duties for LLC
managers but does require the exercise of good business judgment. Unless a court rules
otherwise, Simone owes fiduciary duties to
a. Rolling Hills’s members.
b. Rolling Hills’s suppliers.
c. Rolling Hills’s customers.
d. none of the choices.
Rex, an accountant, enters into a contract to provide services to Sofi. Rex does not
finish the work within the contract’s deadline. Sofi pays a penalty as a result of the
missed deadline and hires Trey to complete the job. Rex is most likely liable for
a. nothing.
b. Sofi’s penalty and the cost to hire Trey.
c. Sofi’s penalty only.
d. the cost to hire Trey only.
Milo borrows $125,000 from North State Bank to buy a home. To comply with the
Statute of Frauds, the mortgage must be
a. a highly formal document.
b. a particular form.
c. in the same format as the lender’s other loans.
d. in writing.
The E-Sign Act does not preempt the uniform version of the UETA.
Whether financial statements created by an accountant need to be verified for accuracy
is not a legal question.
If a third party will be affected by a contract, the parties to the contract are in privity
with the third party.
In all contracts, absolute promises are expressly conditioned.
Under the UCC, there are no exceptions to the perfect tender rule.
Corporate officers can usually be removed by the board of directors without cause.
Proximate cause exists when the connection between an act and an injury is strong
enough to justify imposing liability.
An appraisal right is available only when a state statute specifically provides for it.
An oral agreement to form a partnership can never be enforced.
Shippers Dispatch Corporation orders office equipment from Office Outfitters, Inc.,
which has an unperfected security interest in the equipment until it is paid for.
Meanwhile, Shippers Dispatch takes out a loan from Capital Credit, Inc., subject to a
security interest in Shippers Dispatch’s building and equipment, which Capital perfects.
Shippers Dispatch files a bankruptcy petition under Chapter 7. If the petition is granted,
in what order will Shippers Dispatch’s creditors be paid?
A creditor’s composition agreement may be entirely enforceable.
The filing of a petition for bankruptcy will automatically stay most legal actions against
the debtor.
Restrictions on imports may include prohibitions.
A special warranty deed provides the most protection against defects of title.
A professional can be liable for fraud whether or not he or she acted with fraudulent
intent.
In a limited liability partnership, a partner can be exempt from personal liability for the
malpractice of other partners.
If one party’s performance is substantial, the other party’s duty to perform remains
absolute.
A limited liability company must be managed by non-member managers.