Marcos buys a pneumatic drill from NuTools, Inc. Owen leases a table saw from
Piecework Tools Sales & Lease Company. Later, Marcos and Owen become aware of
defects in the goods that indicate breaches of warranty. An action for breach of warranty
accrues when
a. the seller or lessor tenders delivery.
b. the buyer or lessee becomes aware of the breach.
c. the nonbreaching party notifies the breaching party of the breach.
d. four years have passed since the breach occurred.
Fact Pattern 18-B1
Economy Bank issues a letter of credit in favor of Finish & Refining Company, a U.S.
firm, to facilitate an international sales contract to buy resources from Global Mining,
Ltd., a British company.
Refer to Fact Pattern 18-1. Global Mining is entitled to payment when it
a. enters into the contract with Finish & Refining.
b. verifies that Finish & Refining has the money to pay for the purchase.
c. complies with the terms and conditions of the letter of credit.
d. asks to be paid.
Leif files a petition in bankruptcy. Among his debts are unpaid taxes, fines owed to the
government, student loans owed to Metro University, and support owed to his ex-wife
Nadia. Most likely to be discharged are
a. back taxes accrued within the previous three years.
b. fines outstanding less than eight years.
c. student loans whose payment would impose undue hardship.
d. spousal-support debts unpaid for more than eighteen months.
Ingmar asks Jessie to contract with Jessie’s high school classmates to babysit Ingmar’s
new baby. Jessie orally agrees to do so. This is
a. an agency by agreement.
b. an agency by estoppel.
c. an agency by ratification.
d. not an agency relationship.
Jade signs an advance health directive that states what medical treatment may be used
after a serious accident or illness. She indicates that she wants certain lifesaving
procedures to be undertaken unless the treatment will not result in a reasonable quality
of life. This is
a. a durable power of attorney.
b. a health-care power of attorney.
c. a living will.
d. a living trust.
Solar Power Panels Corporation requires its employees to have a high school diploma,
claiming a connection between a high school education and job performance. In a suit
against Solar Power under the Civil Rights Act of 1964, this is shown to have a
discriminatory effect. Solar Power has
a. an affirmative action defense.
b. a bona fide occupational qualification defense.
c. a business necessity defense.
d. no defense.
Muni Investment Company signs a check payable to Enterprise Lenders, Inc., to buy a
promissory note executed by Fallow Corporation. This check
a. does not constitute sufficient consideration for HDC status.
b. does not satisfy the value requirement for HDC status.
c. satisfies the consideration requirement for HDC status.
d. satisfies the value requirement for HDC status.
Speedboat Corporation refuses to sell its products to Water World, Inc., a recreational
water products dealership. This is a violation of antitrust laws if it
a. has an anticompetitive effect on a particular market.
b. results in lower prices for consumers.
c. provides no economic benefits for consumers.
d. is likely to increase competition.
Paca is declared mentally incompetent. Quelita, Paca’s friend, insists that Paca transfer
her considerable assets to Quelita “for safekeeping.” If Paca makes this “gift,” a court
might conclude that it is not effective on the ground that there was no
a. acceptance by the donee.
b. constructive delivery.
c. donative intent.
d. relinquishment of control.
Miklos employs Nathalie to handle a list of financial transactions on Miklos’s behalf.
This power will terminate on
a. any transaction causing a loss to Miklos.
b. Miklos’s death or incapacity.
c. Miklos’s sixty-fifth birthday.
d. Nathalie’s handling of one of each stipulated transaction.
Daniel is a trustee for a federal bankruptcy court. Daniel’s duties include
a. collecting the debtor’s available estate.
b. establishing priority for the payment of unsecured creditors.
c. operating a debtor’s business to obtain maximum profit for creditors.
d. submitting to an examination under oath by the creditors.
Spicy Salsa, Inc., complains to the Federal Trade Commission (FTC) about an ad
broadcast by Tangy Taco Sauce Company, Spicy Salsa’s competitor. The FTC
investigates and concludes that the ad is deceptive. The FTC’s next step is to
a. conduct negotiations between the competitors.
b. draft a formal complaint.
c. issue a cease-and-desist order.
d. permit Spicy Salsa to broadcast similarly deceptive counteradvertising.
Genevieve, a twenty-year-old, wants to execute a will before she undertakes a moun-
tain-climbing trip on a peak in the Himalaya Mountains. In most states, the legal age for
executing a will is
a. sixteen.
b. eighteen.
c. twenty-one.
d. any age.
Norma files a petition in bankruptcy. She turns her assets over to O”Brien, who sells
them and then distributes the proceeds to Norma’s creditors. O”Brien is a
a. preferred creditor.
b. bankruptcy court judge.
c. bankruptcy trustee.
d. debtor.
Energy Market Corporation wants to build a wind power plant on private land, for
which a federal permit is required. For this action, an environmental impact statement is
a. prohibited.
b. required.
c. unnecessary.
d. voluntary.
Home & Hearth Furniture, Inc., and Inez, a consumer, enter into a contract for a sale of
a suite of bedroom furniture. If the contract includes a clause that is perceived as
grossly unfair to Inez, its enforcement may be challenged under the doctrine of
a. good faith.
b. impracticability.
c. square dealing.
d. unconscionability.
Ferris is refinishing his kitchen floor and needs a floor sander to complete the job.
Ferris’s neighbor Gerda suggests that he call Home Repair Rentals, Inc. Home Repair
leases Ferris a floor sander. In this transaction, the lessor is
a. Ferris.
b. Gerda.
c. Home Repair.
d. none of the parties.
Home Entertainment, Inc., warrants its goods to be free of defects. Ira issues a note to
obtain goods from Home Entertainment that proves defective. If Home Entertainment
presents the note for payment
a. Ira’s best defense would be breach of warranty.
b. Ira must pay the note.
c. Ira’s best defense would be fraud in the inducement.
d. Ira’s best defense would be failure of consideration.
To adjust debts and institute a repayment plan that is less expensive and less
complicated than other options, Buffalo n” Beef Bar-B-Q Restaurant, a small business,
may file a petition in bankruptcy for relief through
a. a liquidation.
b. a reorganization.
c. a repayment plan.
d. a family-farmer bankruptcy plan.
Fresh Dairy, Inc., is the offeror and Gelato Ice Cream Company is the offeree under a
unilateral sales contract in which Hector’s Helado Corporation is also interested. Gelato
is not notified of Fresh Dairy’s performance within a reasonable time. Gelato
a. may treat the offer as having lapsed.
b. must assume that Fresh Dairy has started to perform.
c. must contact Fresh Dairy.
d. must notify Hector’s.
Root & Branch Lumber Company obtains a fire insurance policy from Security
Insurance, Inc., on a $400,000 warehouse. The policy includes an 80-percent
coinsurance clause. Root & Branch insures the property for $320,000. In a fire, the
warehouse suffers $200,000 in damage. Root & Branch can recover
a. $400,000.
b. $320,000.
c. $200,000.
d. $80,000.
Plumbing & Pipes Supply Company issues a promissory note as a demand instrument
with a due date of October 5. Quantum Loan Company accepts the note. Quantum Loan
has notice that the note is overdue if the firm takes the note
a. after October 5.
b. before October 5.
c. on October 5.
d. at any time.
Medical Professionals Supply Source is an unincorporated cooperative. Unincorporated
cooperatives are often treated like
a. business trusts.
b. corporations.
c. joint stock companies.
d. partnerships.
Reno is the beneficiary of a life insurance policy on Sula’s life obtained from
Traditional Insurance Company. The underwriter of this policy is
a. Reno.
b. Sula.
c. Traditional Insurance.
d. the agent or broker through whom the policy was obtained.
Erin indorses a check, “Pay to Farmers Cooperative, Inc., if they deliver the grain by
May 1, 2015.” This is
a. a blank indorsement.
b. a qualified indorsement.
c. a restrictive indorsement.
d. a special indorsement.
Digital Devices is a retail seller of entertainment media. Digital Devices sells a 3D HD
TV set to Edmund. Edmund cannot pay cash, so he signs a security agreement, paying a
certain amount down and agreeing to pay the balance in twelve equal installments. The
security agreement gives Digital Devices a security interest in the set. Edmund makes
six payments on time then goes into default because of unexpected financial problems.
Digital Devices repossesses the set. Can the creditor keep it in full satisfaction of the
debt? Explain.
Rafaela Art Gallery and Sequoia Exhibitions form a joint venture. When a dispute
arises, Rafaela files a suit against Sequoia. The court is most likely to apply the same
principles to this joint venture as it applies to
a. business trusts.
b. cooperatives.
c. corporations.
d. partnerships.
County Dentists Clinic offers to buy from Dental & Medical Supplies Company a
certain quantity of floss and other items for a certain price. Dental & Medical can ac-
cept the offer by
a. a material alteration of the terms within a reasonable time.
b. a promise to ship or a prompt shipment of the goods.
c. a prompt shipment of the goods only.
d. a shipment of nonconforming goods with a notice of accommodation.
Dental Clinic obtains an insurance policy that protects its members against negligence
claims by their patients. This is
a. casualty insurance.
b. employer’s liability insurance.
c. malpractice insurance.
d. workers’ compensation insurance.
Rafi, a director of Super Service Station Corporation, does not attend a board meeting
for three years. During that time, Twyla, Super’s president, makes improper loans that
cost the company $100,000. Rafi is most likely
a. liable for negligence or mismanagement.
b. liable for violation of the business judgment rule.
c. not liable because missing meetings is an honest mistake.
d. not liable because missing meetings is only poor judgment.
Builders Construction files a voluntary petition for bankruptcy. In listing its assets,
Builders intentionally omits certain assets, including plots of undeveloped real estate.
After Builders is granted a discharge, Commercial Electric Company, one of Builders’
unsecured creditors whose claims were discharged, learns of the fraud. Commercial
Electric can
a. do nothing.
b. enforce its claim against Builders.
c. file an involuntary petition for bankruptcy against Builders.
d. take possession of the stones with or without a breach of the peace.
Patsy files a petition in bankruptcy. At the moment of filing
a. an automatic stay goes into effect.
b. Patsy’s debts are discharged.
c. Patsy’s petition is dismissed.
d. Patsy’s property is distributed to her creditors.
A firm may be a monopolist even though it is not the sole seller in a market.
A warranty of title cannot be disclaimed.
A blank indorsement can consist of a mere signature.
Labor law regulates the circumstances and conduct of strikes.
If a buyer or lessee fails to reject the goods within a reasonable amount of time,
acceptance will be presumed.
Malpractice is professional negligence.
A well-known seasoned issuer cannot file a registration statement until after it
announces a new offering.
If an employee presents false documentation of eligibility to work in the United States,
his or her employer is subject to deportation.
Business has little incentive to try to influence the regulatory environment through
lobbying.
When a buyer or lessee is a consumer, any limitation of consequential damages for
personal injuries resulting from consumer goods is prima facie unconscionable.
In a manufacturing arrangement, a franchisor transmits to a franchisee the essential
ingredients or formula to make a particular product.
An involuntary bankruptcy occurs when the debtor forces his or her creditors into
bankruptcy proceedings.
Nichelle, Owen, and Porter organize a nonprofit businessQuality Markets, Inc.to buy
groceries from wholesalers and sell them to consumers who buy a membership in
Quality Markets. Because the firm is a nonprofit entity, it is able to sell the groceries for
less than a commercial grocer could. What form of business organization is Quality
Markets? Is it significant that Quality Markets is incorporated?
A principal cannot be estopped from denying that an agent has authority.
In the absence of any specific agreements, the buyer or lessee must make payment
subsequent to receipt of the goods.
A merger involves the legal combination of two or more corporations, after which both
continue to exist.
Ratification involves a question of intent, and intent can be expressed only by words.
An agent’s authority to act on behalf of a principal must be apparent to be real.
Intangible personal property may be bailed.
Marketable title means that the grantor’s ownership is saleable even if there are
encumbrances or defects.