Mickey is a director of Fine Art Dealers, Inc. Mickey is trained in art valuation. Fine
Art Dealers makes several purchases in which it pays too much money for artwork.
Mickey approves all the transactions without reading the details. Mickey is most likely
a. liable for breach of the duty of care.
b. not liable for breach of the duty of care.
c. liable for breach of duty of loyalty.
d. liable for violation of the business judgment rule.
A-1 Furnishings, Inc., agrees to lease a desk to Business Resources, Inc. (BRI), which
requests that the desk be left outside City Warehouse for BRI to pick up. Before BRI
retrieves the desk, it is stolen. The loss is suffered by
a. A-1 Furnishings and BRI, but not City Warehouse.
b. A-1 Furnishings, BRI, and City Warehouse.
c. A-1 Furnishings only.
d. BRI only.
City Bank’s financing statement in collateral owned by Delta Waters Corporation will
expire in less than a year. Filed timely, a continuation statement could extend the
effectiveness of the financing statement for
a. one year.
b. two years.
c. five years.
d. ten years.
Fealty Credit Corporation asks its employees to evaluate their actions and get on the
ethical business decision-making “bandwagon.” Guidelines for judging individual
actions most likely include all of the following except
a. an individual’s conscience.
b. business rules and procedures.
c. loopholes in the law or company policies.
d. promises to others.
Tristan promises to paint Katy’s house in exchange for Lila’s promise to plant trees on
Tristan’s property. This is
a. a delegation.
b. an assignment.
c. a third party beneficiary contract.
d. none of the choices.
Eliza is a state court judge. Flora appears in a case in Eliza’s court, claiming that Glover
breached a contract. Which of the following actions may Eliza take?
a. Award damages or issue a decree of specific performance
b. Imprison Glover, but not Flora
c. Imprison Flora, but not Glover
d. Order the parties to pay Eliza to render a favorable ruling
Jason is the creditor in a transaction with Carol, who is the debtor. Which of the
following requirements is not necessary for Jason to have an enforceable security
interest?
a. The collateral must be in Jason’s possession, or there must be a written or
authenticated security agreement.
b. Jason must give value to Carol.
c. Carol must have rights to the collateral.
d. The collateral must be tangible.
Natural Foods, Inc., orders “Grade A” oil from Olive Grove Farms to process and sell to
Pic N Pay Grocers. Olive Grove ships “Grade B” oil, which Natural Foods accepts. To
recover damages for the nonconformity, Natural Foods must give notice of the breach
within a reasonable time to
a. Olive Grove only.
b. Olive Grove, Pic N Pay, and the appropriate government agency.
c. Pic N Pay only.
d. the appropriate government agency only.
Office Suppliers, Inc. and Little Office Shop enter into a contract for a sale of office
supplies. Office Suppliers is the seller. Under a shipment contract, the Office Suppliers
does not have to
a. obtain and promptly deliver or tender to the buyer any documents necessary to enable
the buyer to obtain the goods.
b. deliver the goods to a particular destination.
c. put the goods in the hands of the carrier.
d. promptly notify the buyer when the shipment has been made.
Gena borrows $350,000 from Fish Island Bank to buy a home, which secures the
mortgage. In the seventh year of the loan, Gena stops making payments. After the bank
repossesses the property but before it is sold, Gena may buy it by paying
a. an amount that equals the potential proceeds from the property’s sale.
b an amount that exceeds the potential proceeds from the property’s sale.
c. the amount of the missed payments, but not more.
d. the full amount of the debt, plus any interest and costs.
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.
The police obtain a search warrant and search Dave’s apartment. After yelling
obscenities at the officers, Dave confesses to a crime and implicates his friends. The
Constitution protects against
a. obscene speech only.
b. other’ implication only.
c. unreasonable searches only.
d. obscene speech, other’ implication, and unreasonable searches.
Greta is a member of Hovercraft LLC. As a member, Greta is
a. a manager or officer, but not an owner.
b. an investor, but not a manager, officer, or owner.
c. an owner.
d. a participant, but not an investor, manager, officer, or owner.
Fay is a member of Garden Groves LLC. Like other members of limited liability
companies, Fay’s liability for Garden Groves’s obligations resembles the liability of
a. a member of a joint venture.
b. an owner of a sole proprietorship.
c. a partner of a partnership.
d. a shareholder of a corporation.
Summer Breeze, Inc., contracts for the sale of fifty ceiling fans to Island Décor store. If
Summer Breeze fails to deliver the goods, Island Décor must commence a suit for
breach of contract within
a. four years.
b. not more than one year.
c. not less than four years.
d. thirty days.
On May 1 Jill offers to sell Andrea a herd of sheep. On May 3 Jill mails Andrea a letter
revoking the offer. Andrea receives the letter on May 5. Jill’s revocation of the offer to
sell the sheep became effective on
a. May 1.
b. May 3.
c. May 4.
d. May 5.
Optima Medico Corporation, a U.S. firm, signs a contract with Pharma Beneficial, Ltd.,
a Canadian firm, to give Pharma the right to sell Optima’s products in Canada. This is
a. a distribution agreement.
b. a joint venture.
c. direct exporting.
d. licensing.
Thirty-one days before filing a petition in bankruptcy, Dee transfers property and makes
payments that favor one creditor over another. These are
a. affirmation agreements.
b. preferences.
c. secured interests.
d. unsecured debts.
Jaime, an accountant, contracts to perform services for Kase. Jaime acts in good faith
and conforms to generally accepted accounting principles, but makes a mistake in
judgment. Jaime is most likely
a. liable if Jaime failed to discover a defalcation.
b. liable if Jaime failed to discover a fraud.
c. liable if Jaime failed to discover an impropriety.
d. not liable.
Hi-Tech Company contracts to sell fiber optic cable to Internet Services, Inc. Hi-Tech
may bring an action to recover the purchase price and incidental damages if Internet
a. accepts the cable and pays for it.
b. accepts the cable but does not pay for it.
c. rejects the cable.
d. revokes acceptance of the cable.
Southern Distribution, Inc., signs a receipt for goods that will also serve as a contract
for the good’ transport. This is
a. a bill of lading.
b. a destination contract.
c. a shipment contract.
d. a warehouse receipt.
Virgil borrows $175,000 from United Finance Bank to buy a home. Federal law
regulates primarily
a. mortgage terms that must be disclosed in writing.
b. oral representations with respect to the terms of a loan.
c. the lowest prices for which real property can be sold.
d. who can buy real property, where they can buy it, and why.
Amelia executes a separate written instrument to amend her prior will. This separate
document is
a. a codicil.
b. a holographic will.
c. a living will.
d. a nuncupative will.
Lew, a member of a protected class, applies for a job with Mit-E Construction
Company, but fails Mit-E’s employment test and is not hired. Lew believes that the test
has an unintentionally discriminatory effect. If so, this is
a. reverse discrimination.
b. disparate-impact discrimination.
c. disparate-treatment discrimination.
d. not discrimination.
An Iowa state statute requires amusement parks to maintain equipment in specific
condition for the protection of patrons. Jack’s Fun Park fails to maintain its equipment.
Keely, a patron, is injured. Jack’s has committed
a. abuse of process.
b. battery.
c. false imprisonment.
d. negligence.
Whirlwind Financial Corporation sends its executives to a resort in Mexicoat taxpayer’
expenseto consider using the firm’s cash to buy back its stock and thereby prop up the
value. Many of its competitors are doing the same thing. One of the best ways to learn
about the ethical responsibilities inherent in operating a business is to look at
a. the mistakes made by other companies.
b. the benefits of pursuing profit despite the appearance of impropriety.
c. the prevalence of a practice among other corporations.
d. who is footing the bill for a particular action.
Valley View Farms enters into a contract to sell Sarah’s Corner Shop a truckload of eggs
from free range chickens. Valley View then fails to deliver the eggs to Sarah’s Corner
Shop. Sarah
a. must still pay for the eggs or she will be in breach of contract.
b. does not have to pay for the eggs because Valley View failed to perform.
c. must still pay for the eggs, but can file suit against Valley View for breach of
contract.
d. does not have to pay for the eggs, but cannot file suit against Valley View for breach
of contract.
Feta is a partner in the game design firm GR8 Games, Inc., which obtains key-person
life insurance on Feta in the amount of $1 million from Halo Insurance Company. Feta
quits GR8 Games to join Icy Applications, Inc. Feta dies. Under the principle of
insurable interest, Halo must pay the $1 million to
a. Feta’s spouse Jo.
b. GR8 Games.
c. Icy Applications.
d. no one.
Ryder and Sergei are partners in Timberline Gear, which sells mountain- and
rock-climbing equipment. Ryder manages the business. Unless the partnership
agreement states otherwise, Ryder is
a. entitled to compensation in proportion to his effect on the business.
b. entitled to compensation in proportion to his effort.
c. entitled to compensation in proportion to his capital contribution.
d. not entitled to compensation.
Kirby is a manager of Jumpstart Fitness LLC, a limited liability company. Jumpstart is
formed in a state that imposes fiduciary duties on LLC managers. Kirby owes these
duties to
a. Jumpstart’s members.
b. Jumpstart’s suppliers.
c. Jumpstart’s customers.
d. none of the choices.
Vending Products Company operates a vending machine manufacturing plant on
Wandering River. Discharging pollutants from the plant into the river can result in
a. civil penalties and criminal penalties.
b. civil penalties only.
c. criminal penalties only.
d. no penalties.
A limited liability company can be taxed as a corporation.
Adequacy of consideration refers to how much consideration is given.
Employers can treat their employees more or less favorably based on their religious
beliefs or practices.
It is legal to charge any interest rate for an ordinary loan.
In a sole proprietorship, the owner receives 90 percent of the profits and the
government receives 10 percent.
A check can be retained at its place of deposit and only its image can be presented for
payment under an electronic presentment agreement.
Sierra borrows $175,000 from Regional Home Finance Corporation to buy a home. The
loan is a twenty-year, 3/1, adjustable-rate mortgage, with an initial interest rate of 4.0
percent for three years and potential increases of up to 3.0 percent to a cap of 10
percent. Before the loan is completed, the lender discloses the amount of the loan
principal, the initial interest rate, the initial annual percentage rate, and associated fees
and costs. Not disclosed are material details about the amounts of the payments when
the interest rate changes. Before the first increase takes effect, Sierra decides that she
wants to rescind the loan. What is a “twenty-year, 3/1, adjustable-rate mortgage”? Can
Sierra rescind this loan? Why or why not?
A covenant not to compete is never enforceable.
A circular letter”Dear Mr. or Ms. Jones, This is our biggest sale ever!”is not evidence of
an intent to enter into a contract.
Under the UETA, a typed name at the end of an email message is not considered an
e-signature.
In a limited partnership, a limited partner is liable for all partnership debts.
An instrument payable “with ten hours of services” is negotiable.
A party to a licensing agreement generally agrees to pay royalties on some basis.
The privacy rights of private-sector employees are governed by state law, which varies
widely.
An adhesion contract is a contract drafted by one party and presented to another on a
take-it-or-leave-it basis.
A beverage company that competes with Coca-Cola Company cannot call its products
“Koke.”
A spendthrift trust provides for a beneficiary’s transfer of his or her right to future
payments of trust funds.