Luke owns a farm near Marshalltown, Iowa, with stands of trees serving as windbreaks.
Luke grows corn on the property. When Luke sells the farm to Nina, if the contract does
not specify otherwise, the sale includes
a. neither the crops nor the trees.
b. the crops and the trees.
c. the crops only.
d. the trees only.
Gunmakers Pride Corporation contracts for the sale of twelve hunting rifles to Hunters
Supply store. Gunmakers delivers nonconforming goods. Acceptance will be presumed
unless Hunters Supply rejects the goods
a. within a reasonable time after delivery.
b. within a reasonable time after ordering the goods.
c. within any time, since hunting rifles are not perishable.
d. before the last day of the current hunting season.
Vela and other farmers in Washington County form a business organization to provide,
without profit, an economic service to its members. This is
a. a business trust.
b. a cooperative.
c. a corporation.
d. a joint stock company.
In 2011, Sara writes Terror at the Track, a novel about racecar driving. Sara does not
register the work with the appropriate government office. Under federal copyright law,
Saras work is protected
a. for ten years.
b. for twenty years.
c. for the life of the author plus seventy years.
d. forever.
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 propertys sale.
b an amount that exceeds the potential proceeds from the propertys sale.
c. the amount of the missed payments, but not more.
d. the full amount of the debt, plus any interest and costs.
Enterprising Business Corporation may be engaging in conduct that violates the
Sherman Act. To bring an action against the firm requires that its conduct have a sig-
nificant impact on
a. international commerce.
b. Internet commerce.
c. interstate commerce.
d. intrastate commerce.
Plastix Produx Company is subject to a decision by the Consumer Product Safety
Commission. Opposed to the decision, Plastix Produx wants a court to review it. First,
however, the firm must use all of the potential administrative remedies. This is
a. an actual controversy at issue.
b. standing to sue.
c. the exhaustion doctrine.
d. the ripeness doctrine.
Natural Gas Company does not use proper filters on its smokestacks, which
consequently pollute the air. Obie, a Natural Gas employee, suffers respiratory illness.
To succeed in a suit against Natural Gas on the ground of negligence, Obie must show
that he suffers from
a. a distinct harm separate from that affecting the general public.
b. a lesser harm than an injunction would impose on Natural Gas.
c. Natural Gass failure to use reasonable care to avert herm to Obie.
d. the same harm as that affecting the general public.
Lebron accuses Moe, an attorney, of committing malpractice. Malpractice is
a. a breach of ethics.
b. a defalcation.
c. a mistake in judgment.
d. professional negligence.
Lara is the chief executive officer of Micro, Inc., which is required to file certain
financial reports with the Securities and Exchange Commission (SEC). Under the
Sarbanes-Oxley Act of 2002, Lara must
a. certify that the reports are complete and accurate.
b. designate a corporate official to assume liability for inaccuracies.
c. do nothing.
d. read the reports and be prepared to answer questions about them.
Fact Pattern 39-1B
Bertram, Claudia, and Dynah form Eat Local, Inc., a closely held corporation, and agree
to restrict the transfer of its stock to anyone else. The agreement provides that if one of
the shareholders dies, his or her shares of stock in Eat Local will be divided to maintain
the proportionate control of the survivors.
Refer to Fact Pattern 39-1B. A reasonable purpose for a stock transfer restriction in a
closely held corporation, like the agreement between Bertram, Claudia, and Dynah, is
a. a desire to limit the participation of outsiders in the firm.
b. a goal to restrain insiders from taking advantage of their position.
c. an attempt to restrain the free flow of commerce among investors.
d. a wish to restrict the transfer of the shareholders physical assets.
Ralph, an investigator for the Securities and Exchange Commission, goes to the offices
of Trust & Worthy Accountants to inspect Trust & Worthys clients business records.
Government inspectors generally have a right to enter business premises
a. only with a warrant.
b. without a warrant.
c. once the issuance of a warrant has been sought.
d. under no circumstances.
Fact Pattern 16-B1
Bayside Construction Company enters into a contract with Clio to remodel
Deweys Home Store, using products from Eagle Building Supplies. Fresh Food
Café is next to Deweys Home Store.
Refer to Fact Pattern 16-1. Halfway through the project, Bayside refuses to finish the
job. The contract can be enforced against Bayside by
a. Clio only.
b. Clio or Dewey only.
c. Clio, Dewey, or Eagle only.
d. Clio, Dewey, Eagle, or Fresh Food.
Venture Capital, LP, is a limited partnership. Its limited partners include more than 150
sophisticated investors and investment professionals. A Venture limited partner loses his
or her limited liability if he or she
a. acts as the firms manager.
b. does not participate in the firms management.
c. invests in Unified Fund, one of Ventures competitors.
d. votes on the firms sale or dissolution.
Kurt persuades Leo to buy his bicycle by telling Leo that the bike rides “like the wind.
Kurts statement is
a. duress.
b. fraud.
c. puffery.
d. undue influence.
Business Abroad, Inc., a U.S. firm, obtains a judgment in a U.S. court against Quang
Tri, Ltd., a Vietnamese business. Whether the courts judgment will be enforced by a
court in Vietnam depends on the Vietnamese courts application of
a. the act of state doctrine.
b. the doctrine of sovereign immunity.
c. the principle of comity.
d. the World Trade Organization .
The Office of Postsecondary Education, like other federal administrative agencies, is
part of the governments
a. administrative branch.
b. executive branch.
c. judicial branch.
d. legislative branch.
Jill loans her laptop to Kyle. This is a bailment for
a. neither partys benefit.
b. the parties mutual benefit.
c. the sole benefit of the bailee.
d. the sole benefit of the bailor.
Mari buys 500 shares of common stock in National Livestock Traders, Inc. As a
shareholder of record, Mari owns a proportionate interest in terms of
a. control, earnings, and net assets.
b. control only.
c. earnings and net assets only.
d. neither control nor earnings and net assets.
Tracy borrows $30,000 from Secure State Bank. The lender accepts Tracys equity in her
home as collateral, which can be seized if the loan is not repaid on time. With respect to
any proceeding that occurs if Tracy fails to make the payments, this loan is
subordinated. This means that it
a. takes a higher priority.
b. takes a lower priority.
c. has the same priority as the primary mortgage.
d. fluctuates with the market value of the property.
Cornucopia Bank receives a check drawn on the account of Get-Rich Industries, Inc.,
one of the banks customers, at 3 p.m. Friday. Harry, the presenter of the check, is not
one of the banks customers. The bank uses deferred posting with a 2 p.m. cutoff hour. If
it decides to dishonor the check, it must do so by midnight
a. Saturday.
b. Sunday.
c. Monday.
d. Tuesday.
Cassandra accepts what she believes was an offer to work for Destination Vacations,
Inc., as a chef. In determining whether a contract has been formed, an element of prime
importance is
a. the condition of the workplace.
b the duration of the work.
c. the intent of the parties.
d. the subject of the contract.
Ernies Good Eatin Cafe uses a distinctive decor, layout, menu, and style of service. This
restaurants image and overall appearance is
a. a certification mark.
b. a collective mark.
c. a service mark.
d. trade dress.
In the ordinary course of business, Xtra Credit Company sells goods to Yvon and other
consumers on credit under installment sales contracts that typically require at least one
year of monthly payments. Xtra does not disclose all of the credit terms to its
customers. This is most likely to result in
a. a cease-and-desist order.
b. a fine.
c. no sanctions.
d. rescission of the contracts.
Bill offers to sell his Consumer Service Center business to Dina for $100,000. Dina
replies, “The price is too high. I will buy it for $90,000. Dina has
a. accepted the offer.
b. made a counteroffer without rejecting the offer.
c. rejected the offer and made a counteroffer.
d. rejected the offer without making a counteroffer.
Fealty Credit Corporation asks its employees to evaluate their actions and get on the
ethical business decision-making “bandwagon. Guidelines for judging individual
actions include all of the following except
a. an individuals conscience.
b. business rules and procedures.
c. loopholes in the law or company policies.
d. promises to others.
Ultra Kleen, Inc., operates a chain of laundry establishments throughout the United
States. The government entity that is most likely to be involved in regulating the chains
environmental impact is
a. Congress.
b. federal and state regulatory agencies.
c. local chambers of commerce.
d. local police departments.
Fact Pattern 3-A2
Fine Dining Corporation files a suit against Eat-at-Joes, Inc.
The attorney for Eat-at-Joes also questions Floyd. This is
a. a cross-examination.
b. a direct examination.
c. an interrogatory.
d. a request for admissions.
Before adopting new regulations to govern Internet-based phone services, the Federal
Communications Commission may not
a. hold hearings to acquire facts pertinent to the proposed rules.
b. ignore the Administrative Procedure Act to streamline proceedings.
c. order manufacturers to provide certain documents.
d. solicit testimony from interest groups and consumers.
Valley Commercial Space, Inc., orally contracts for a lease of its facilities to Willis for
the use of his start-up driftboat company. Willis pays part of the price, takes possession,
and improves the property for his boatbuilding enterprise. The contract is most likely
enforceable by
a. Valley and Willis.
b. Willis but not Valley.
c. any interested third party, such as a driftboat customer.
d. no one.
Jenna is fifteen years old. Under the Fair Labor Standards Act, Jenna cannot work
a. in the entertainment industry.
b. in a hazardous occupation.
c. for her parents.
d. in the delivery of newspapers.
Fact Pattern 29-1B
Calls Farm & Ranch Supply, Inc., uses its inventory as collateral for a loan from Deland
County Bank. The bank files a financing statement with the secretary of state in the
state in which Calls was chartered. One year later, Calls changes its name to Big Cs,
Inc.
Refer to Fact Pattern 29-1B. Deland County Banks perfection will remain effective for
a. four months after the date of the name change.
b. five business days after the date of the name change.
c. six years after the date of the original filing.
d. no time.
Little City Company operates a public water supply system. Little must send to every
household that it supplies with water an annual statement describing
a. Littles financial situation and material facts that might affect it.
b. other businesses in which Little is involved and to what extent.
c. parties who might be held liable if pollution problems arise.
d. the source of the water, and any contaminants and health concerns.
A patent applicant must demonstrate that an invention is “commercially practicable to
receive a patent.
If an employee presents false documentation of eligibility to work in the United States,
his or her employer is subject to deportation.
Liability under Section 10(b) of the Securities Exchange Act of 1934 has been extended
to include certain “outsiders.
Jean leaves her prom dress with Kwik n Kleen Launderers to be cleaned and altered for
the dance. On its return, the dress is greasy and smells bad, and the alterations burst at
the seams. Who suffers the loss and why?
In a sale or return, a buyer takes goods primarily for resale, with a right to return any
goods that fail to sell.
Under the doctrine of respondeat superior, an agent is liable for any harm caused to a
principal by a third party.
Environmental clean-up efforts include control of toxic chemicals used in agriculture
and in industry.
A contract is discharged when a change in the law renders the performance illegal.
An instrument is nonnegotiable unless the word “negotiable is printed on it.
An agents implied authority can contradict his or her express authority.
Discount Stores, Inc., borrows $5,000 each from EZ Loan Corporation, First National
Bank, and Great Products Corporation. Discount uses its “present inventory and any
thereafter acquired to secure the loans from EZ Loan and First National. EZ Loan
perfects its interest on April 1, followed by First National on April 5. Discount buys
new inventory on April 10 from Great Products and signs a security agreement, giving
Great Products a purchase-money security interest in the new inventory. On the same
day, Great Products perfects its interest and notifies EZ Loan and First National.
Discount takes possession of the new inventory on April 15. On April 20, Discount
defaults on all of the loans. Whose security interest has priority?
A floating lien “floats with an item of property, such as a specific piece of inventory, as
its ownership transfers from seller to buyer.
Independent contractors have no control over the details of their work performance.
To be negotiable, an instrument must have conditional promises attached to it.
An amendment to the articles of incorporation can create a new position on the board of
directors.
Agency relationships normally are consensual.
A suspect cannot be tried twice in the same court for the same crime.
The Statute of Frauds requires that statutes must be in writing.
Pricing information is not a trade secret.
Only experts can submit comments on a proposed administrative rule.