Benny dies without a will, with no surviving spouse or child. Benny’s survivors include
his granddaughter Callie, his nephew Doug, and his cousin Earl. In most states, his
estate would pass to
a. Callie.
b. Doug.
c. Earl.
d. the state.
The Consumer Product Safety Commission (CPSC) wants Monster Toy Company to
produce certain records for review. To obtain the records, the CPSC will issue
a. an order for specific performance.
b. a rule for parol evidence.
c. a formal complaint.
d. a subpoena.
Enterprising Business Corporation may be engaging in conduct that violates the
Sherman Act. To bring an action against the firm under this statute requires that its
conduct have a significant impact on
a. international commerce.
b. Internet commerce.
c. interstate commerce.
d. intrastate commerce.
Lorissa files a petition for bankruptcy. Lorissa’s creditors must file with the court their
proof of claims against Lorissa’s assets within
a. fifteen days of the order for relief.
b. thirty days of the filing of the petition.
c. sixty days of the automatic stay.
d. ninety days of the creditors’ meeting.
The Arkansas state legislature enacts a statute that prohibits the advertising of video
games “because the games might be harmful to minors.” Despite this new statute, the
president of Games Marketing, Inc. (GMI), orders GMI marketers to place ads in any
media. When a GMI ad appears on HDTV, a local television station, GMI and HDTV
are charged with violating the statute. What is the defendants’ best defense against a
conviction?
Fact Pattern 37-2
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 37-2. 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.
Flo agrees to work as Gary’s personal accountant for one year but dies in the sixth
month of the contract. Flo’s estate
a. is discharged from any contractual liability.
b. must find a competent accountant to fulfill the contract.
c. must pay liquidated damages.
d. must refund any money paid to Flo on the contract.
Quality Products, Inc., files a suit against Retail Sales Corporation. Sid is a witness for
Quality. Tod is a witness for Retail. Quality may direct interrogatories to
a. Retail only.
b. Retail, Sid, or Tod.
c. Sid only.
d. Sid or Tod only.
Dependable Appliances, Inc., and Elain enter into a contract for a sale of kitchen
appliances. Dependable, a merchant who deals in goods of the kind sold, notes that its
goods come with an implied warranty of merchantability. Under the UCC, this means
that the goods are reasonably
a. fit for the buyer’s particular purpose.
b. fit for the ordinary purpose for which such goods are used.
c. suitable for resale at an acceptable price.
d. the best quality that money can buy.
Lightning Cycles, Inc., makes Lightning-brand motorcycles and accessories, which are
distributed to authorized dealers, including Macho Motors, Inc. Macho operates
dealerships in several locations. Lightning imposes territorial restrictions on Macho to
insulate other dealers from direct competition. This is
a. a horizontal restraint.
b. a lateral restraint.
c. a vertical restraint.
d. not a restraint.
Fact Pattern 26-1
Eve sells her motorcycle to her brother Floyd for $1,000. Twelve days later, Eve files
for bankruptcy under Chapter 7.
Refer to Fact Pattern 26-1. Regarding the sale of the cycle, the trustee may
a. cancel it as a fraudulent transfer.
b. cancel it as a voidable preference.
c. not cancel it because it is a sale, not a gift.
d. not cancel it, but can sue Floyd’s estate for the return of the $1,000.
Lew angrily accuses Mandy, a broker with New Financial Services, of fraudulently
inducing him to invest in Open Pit Oil Company, whose wells are dry. The reliance that
gives rise to liability for fraud is normally based on a statement of
a. emotion.
b. fact.
c. opinion.
d. puffery.
Bea is a shareholder of Candy Confections Corporation. The right to inspect corporate
books and records is
a. held by Bea only if she is a director.
b. held by Bea, without restrictions.
c. held by Bea, with some restrictions.
d. not held by Bea.
Jack, a minor, takes out an automobile insurance policy and pays a $1,000 premium. If
Jack disaffirms the contract, he can most likely recover
a. $500.
b. $1,000.
c. $1,500.
d. nothing.
Silky Material Corporation in New Jersey sells fifty tons of fabric to Tattered Clothing,
Inc., in Ohio, “F.O.B. New Jersey.” The cost of transporting the fabric to Ohio will be
paid by
a. Silky Material.
b. Tattered Clothing.
c. New Jersey.
d. Ohio.
Fact Pattern 1-1
The Texas Supreme Court decides the case of Livewire Co. v. Power Corp. Of nine
justices, five believe the judgment should be in Livewire’s favor. Justice Bellamy, one
of the five, writes a separate opinion. The four justices who believe the judgment should
be in Power’s favor join in a third separate opinion.
Refer to Fact Pattern 1-1. Bellamy’s opinion is
a. a concurring opinion.
b. a dissenting opinion.
c. a majority opinion.
d. a per curiam opinion.
According to the terms of Carmen’s will, specific gifts are made, and taxes and other es-
tate expenses and debts are paid. The assets of Carmen’s estate that remain are
a. a bequest.
b. a legacy.
c. an abatement.
d. the residuum.
Demi promises to buy a house from Caleb, who promises to vacate the property on June
1. If these promises are in writing, they are most likely
a. enforceable.
b. unenforceable.
c. void.
d. voidable.
Beta Grocers orders by phone twenty cartons of canned beets from Carotene Food
Packers, Inc. After ten cartons are delivered and accepted, Beta repudiates the contract.
Carotene can enforce the contract to
a. any extent because the order was placed orally.
b. no extent because the order was placed orally.
c. the extent of the ten accepted cartons.
d. the extent of the twenty ordered cartons.
Ginny obtains a health-insurance policy for her family from Hope Insurance Company.
The policy includes an incontestability clause. Under such a clause, after a policy has
been in force for a specified period or time, such as two or three years
a. Ginny cannot contest Hope’s insurable interest.
b. Ginny cannot contest Hope’s refusal to pay a claim under the policy.
c. Hope cannot contest Ginny’s eligibility for continued coverage.
d. Hope cannot contest Ginny’s statements in the application.
Raw Resources Corporation authorizes Stefan, its employee, to oversee its mining
operation. In the course of this employment, Stefan commits a tort. Liability for this tort
most likely rests with
a. neither Raw Resources nor Stefan.
b. Raw Resources and Stefan.
c. Raw Resources but not Stefan.
d. Stefan but not Raw Resources.
Reconstruction Building Services receives a discharge in bankruptcy, even though some
creditors hold judgments on overdue debts against it and others filed actions to collect
on overdue debts before the bankruptcy. Reconstruction’s discharge will
a. absolve the liability of any co-debtors.
b. permit the debtor to enter into reaffirmation agreements.
c. allow the debtor to file a petition for a reorganization.
d. prohibit actions and void judgments regarding overdue debts.
Pam contracts to buy a Quotient-brand computer set-up from Regal Systems for $5,000,
but Regal fails to deliver. Pam buys the computer elsewhere for $6,500. Pam’s measure
of damages is
a. $1,500 only.
b. $1,500 plus incidental damages.
c. incidental damages only.
d. $0.
Timber Products, Inc., and Walt, a consumer, enter into a contract for a sale of plywood.
If the contract includes a clause that is perceived as grossly unfair to Walt, its
enforcement may be challenged under the doctrine of
a. good faith.
b. square dealing.
c. the mirror image rule.
d. unconscionability.
Kristen receives unsolicited merchandise in the mail. Kristen
a. may keep the merchandise without any obligation to the sender.
b. must return the merchandise within five days to avoid payment.
c. must return the merchandise within fifteen days to avoid payment.
d. must return the merchandise within thirty days to avoid payment.
Delia enters into, and fails to disaffirm soon after reaching the age of majority, a
contract with Electronics Stores, Inc. (ESI). Later Delia attempts to disaffirm the
contract. ESI files a suit against her. The court will most likely consider the contract
ratified if it is
a. executed.
b. exculpatory.
c. disaffirmed.
d. rescinded.
Hal’s Hardware store defaults on a debt to Intrastate Bank, which takes possession of
the collateral securing the debt. Intrastate sells the collateral. The proceeds from the sale
are applied first to
a. Hal’s debt to Intrastate.
b. Hal’s debts to other creditors.
c. Intrastate’s fees for the sale.
d. payments Hal’s made on the debt to Intrastate.
Mona, an accountant, prepares for NuTech Corporation a financial statement that omits
a material fact. The financial statement is included in NuTech’s registration statement,
which Pam reads. Pam buys NuTech stock. Under Section 11 of the Securities Act of
1933, for Mona to be liable for the omission, Pam must show that
a. Pam relied on the omission.
b. Pam suffered a loss on the stock.
c. Pam knew about the omission before making her purchase.
d. the omission had no causal connection to her loss.
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.
Dudley, a minor who is under his parents’ care and control, signs a contract to rent an
apartment from Ewan for one year. Before the end of the term, Dudley moves out.
Ewan sues for the rent for the rest of the term. Dudley can
a. avoid liability for the rent but not disaffirm the contract.
b. disaffirm the contract and avoid liability for the rent.
c. disaffirm the contract but not avoid liability for the rent.
d. not disaffirm the contract nor avoid liability for the rent.
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.
Network Industries, Inc., wants to monitor its employees’ electronic communications.
To avoid liability under laws related to employee monitoring, Network should discuss
the monitoring with
a. no one.
b. the employees.
c. the government.
d. the public generally.
Commercial Credit Company has in its possession an instrument dated May 1, 2009.
The instrument is payable to the order of Alpha Company “on June 1, 2009,” for
$5,000. In the upper left corner is an address for Beta Corporation10 Corporate Park
Avenue, Chicago, Illinoisand in the lower right corner is the signature of “Delta, Inc.,
By Eve, President.” In the lower left corner is stamped “ACCEPTED: Beta Corporation
by Frank, President, May 5, 2009.” On the back is the signature of “Alpha Company by
Gail, President.” What type of instrument is this? Is it negotiable? Who, if anyone, is
primarily liable on this instrument on May 1? On May 5? Who, if anyone, is
secondarily liable on this instrument?
Willful violations of the Sarbanes-Oxley Act of 2002 may be subject to criminal
prosecution.
An attorney may be liable in negligence to any third party who the attorney knows will
rely on the attorney’s work.
A debtor need not be insolvent to file for bankruptcy relief.
In many states, a release requires a signed writing.
Equitable remedies include injunctions.
A limited liability company cannot be taxed as a partnership.
To be enforceable, a writing evidencing an oral contract that would otherwise be
unenforceable must include essential terms.
A bailee is a buyer or lessee.
International law is the law of a foreign nation and varies from country to country.
A contract is substantially performed when performance creates substantially the same
benefits as those promised in the contract.
An employer can be liable for an employee’s sexual harassment of a member of the
same gender.
Insurance companies are exempt antitrust laws whenever state regulation exists.
When state regulations affect interstate commerce, commerce must always yield to the
regulations.
In a share exchange, some or all of the shares of one corporation are exchanged for
some or all of the shares of another corporation.
A bankruptcy court may deny a discharge based on the debtor’s conduct.