Because ignorance of the law is not an excuse, a court will never order a remedy in
favor of a party who was unaware that a contract was illegal.
A franchise arrangement is typically used in a situation where there is no trademark or
other intellectual property owned by the franchisor.
Recurrent conditions arise when the parties to a contract agree to render performance
simultaneously.
Future expected rights can be assigned just as present existing rights.
If goods are being shipped by a common carrier trucking company, and the truck is
hijacked by an armed robber and the shipment is destroyed, the common carrier will be
liable for the loss of the goods because the “acts of a public enemy” exception does not
apply in this situation.
Contracts involving fraud in the inducement are void.
A corporation is a legal person for most purposes.
The imposter rule applies when you write a check to someone who does not exist.
Intoxication always makes a contract either void or voidable, depending on the level of
intoxication.
Most businesses started by entrepreneurs are small.
The dollar amount of the controversy must exceed $75,000 for diversity jurisdiction in
federal court.
In a negligence per se lawsuit, the plaintiff must prove: 1) the existence of a statute
applicable to the dispute; and 2) the defendant owed a case-specific, subjective duty of
care.
Grandma has sent you a properly-completed check which states that it is payable for
$500.00 upon your graduation from college. This would be a negotiable instrument if
signed properly.
A mutual mistake of value results in a void contract.
Often even an express agency agreement does not provide enough detail to cover
contingencies that may arise in the future regarding the performance of the agency. In
this case, the agent possesses certain implied authority to act. This implied authority is
sometimes referred to as supplemental authority.
The Uniform Transfers to Minors Act is uniform federal law, and states are required to
follow it according to the Supremacy Clause of the United States Constitution.
Under the Fair Labor Standards Act, an employer cannot require non-exempt
employees to work more than 40 hours per week unless they are paid overtime pay of
one-and-a-half times their regular pay for each hour worked in excess of 40 hours that
week.
A debtor who does not have ownership or possessory rights to property cannot give a
security interest in that property.
An accused person must be formally charged with a crime before he or she can be
brought to trial.
An implied-in-fact contract is one based on the conduct of the parties.
A check is a certified check when the bank writes or stamps the word “certified” across
the face of an ordinary check.
Perfection does not always protect a secured party from third-party claims.
An insurance broker usually works exclusively for one insurance company.
If the collateral is something other than inventory, a perfected purchase money security
interest prevails over a perfected nonpurchase money security interest in after-acquired
property if it is perfected when the debtor receives possession of the collateral, or
within twenty days after the debtor receives possession of the collateral.
Personal property can be acquired or transferred with a minimum of formality.
A court of equity “pierces the corporate veil” when it disregards the corporate entity and
holds the shareholders of a corporation personally liable for the corporation’s debts and
obligations.
When a limited partnership “winds up,” partners receive unpaid distributions before
capital contributions.
A reversion is the right of possession that returns to the grantor after the expiration of a
limited or contingent estate.
Under the 2005 Act, the court must find substantial abuse of Chapter 7 for the court to
disqualify the debtor and deny bankruptcy relief.
Unless otherwise agreed, payment for goods must be in cash at the time of delivery.
The affirmative vote of the majority of the voting shares represented at a shareholders’
meeting constitutes an act of the shareholders for actions other than for the election of
directors.
Price fixing is a conditional violation of Section 1 of the Sherman Act.
A person who acts as a surety is commonly called an accommodation party or co-signer.
“Cumulative preferred” stock permits stockholders to convert their shares into common
stock.
The courts apply the ________ test in determining whether an arrangement is an
investment contract and therefore a security.
A) Howe
B) Lowe
C) Dewey
D) Howey
E) Cheatham
The fact that Basil hires employees to work at a cheese shop he manages, despite the
fact that his employment agreement with the store owner says nothing about him being
able to hire employees, is an example of:
A) port authority.
B) apparent authority.
C) express authority.
D) implied authority.
E) ratification authority.
When a class of creditors does not approve of a plan of reorganization under Chapter
11, the court can order the plan into effect:
A) using the “equity” method.
B) using the ‘secured creditors” method.
C) using the “cram-down” method.
D) only if the plan is modified so that all classes of creditors consent.
E) using the “unsecured creditor” method.
Which of the following is not true about living trusts?
A) They do not reduce estate taxes any more than a will.
B) In order to fund the living trust, the grantor transfers title of property to the trust.
C) They are subject to property division upon divorcee.
D) The trust documents are a matter of public record.
E) They do not reduce the grantor’s income taxes.
Assuming there is no agreement on the issue, in order to transfer shares owned by a
shareholder, the shareholder must obtain approval of:
A) the board of directors, regardless of whether the transfer is made by sale or gift.
B) the board of directors if the transfer is by sale, but if the transfer is to be made by
gift, no approval is required.
C) the other shareholders, regardless of whether the transfer is made by sale or gift.
D) the other shareholders, but only if the shareholder is selling more than fifty percent
of his or her outstanding shares.
E) neither the board of directors, nor the other shareholders.
Which of the following best describes a merger?
A) two corporations jointly purchase a third corporation and operate it as a joint venture
B) two corporations are combined to form a new third corporation, and the original two
corporations cease to exist
C) two corporations are combined, with one of the original corporations surviving, and
the other ceasing to exist
D) one corporation acquires all of the shares of a second corporation, with both
corporations retaining their separate legal existence, the second a subsidiary of the first
E) one corporation sells substantially all of its assets to a second corporation, with both
corporations retaining their separate legal existence
Which of the following would not be a misappropriation of a trade secret?
A) paying an engineer who is working at a competitor to disclose the trade secret to you
B) buying the competitor’s product, then tearing it apart and analyzing it in your
laboratory to reveal the trade secret
C) hiring a spy to break into a competitor’s offices to acquire the secret
D) asking one of your current engineers to disclose a trade secret of her former
employer, which she then does
E) taking a secret from your own employer
Bob is twenty-five years old and has a forty-year-old uncle who has recently entered his
second adolescence. Bob is close to his uncle, although the uncle does not provide Bob
with any support. Within the past year, Bob’s uncle has obtained a divorce, bought a
large customized motorcycle, and begun smoking and drinking heavily. In addition, he
patronizes bars known for periodic violence. Bob decides that taking out a life
insurance policy on his uncle would be a good investment. In this situation:
A) Bob has an insurable interest in his uncle, because of the close family relationship.
B) Bob has an insurable interest, but only if he is named in his uncle’s will to receive
assets from his uncle’s estate.
C) Bob does not have an insurable interest, because he took out the policy only after his
uncle’s lifestyle change.
D) Bob does not have an insurable interest, because the relationship is too remote, and
he receives no support from the uncle.
E) Bob does not have an insurable interest, because parents and children are the only
persons who can have an insurable interest in the life of another person.
Which of the following would likely not be eligible for a patent?
A) compositions of matter
B) manufacturing processes
C) machines
D) business processes
E) mathematical formulas
An employee who does not honor a strike and works during the strike is a(n):
A) replacement worker.
B) temporary worker.
C) crossover worker.
D) continuous worker.
E) agency worker.
When a court rewrites a contract to express the parties’ true intentions, what remedy has
it used?
A) reformation
B) restitution
C) specific performance
D) substituted contract
E) quasi-contract
Under the Uniform Partnership Act, general partners have ________ liability for torts
and breaches of trust.
A) express and implied
B) legal and equitable
C) joint and several
D) conditional and unconditional
E) reserved and unreserved
Which of the following is not a member of the Association of Southeast Asian Nations?
A) Japan
B) Vietnam
C) Singapore
D) Indonesia
E) Cambodia
Undue influence occurs when one person, the ________ party, takes advantage of
another person’s mental, emotional, or physical weakness and unduly persuades that
person, the ________ party, to enter into a contract.
A) principal; accessory
B) principal; agent
C) dominant; servient
D) primary; secondary
E) salient; impertinent
In which type of franchise does the franchisee grant franchises or licenses to others?
A) distributorship
B) processing plant
C) re-servicing
D) chain-style
E) area
If an employer breaches an employment contract, the employee owes a duty to mitigate
damages by doing which of the following?
A) pursuing a college degree
B) drawing unemployment benefits
C) engaging in pro se representation in his or her civil action against the employer
D) suing the employer in district, rather than in superior, court
E) trying to find substitute employment
Execution is a(n) ________ court order that permits the seizure of the debtor’s property
that is in the possession of the debtor.
A) equitable
B) quasi-equitable
C) pre-judgment
D) post-judgment
E) collateral judgment
Jane owes Bob $500. Bob requests that Jane sign a document, so Jane signs the
following document: “I owe Bob $500 and will pay on 8/8/12. (Signed) Jane.” This
document is:
A) a draft.
B) a check.
C) a note.
D) a certificate of deposit.
E) not a negotiable instrument.
The failure of a limited liability company to observe ordinary company formalities:
A) is grounds for imposing personal liability on the members of the limited liability
company.
B) is grounds for imposing personal liability on the members of the limited liability
company, but only if it can be shown that in spite of the fact that it was common
knowledge that formalities were not being observed, nothing was done.
C) is grounds for imposing personal liability, but only on a member who owns more
than fifty percent of the limited liability company.
D) is not grounds for imposing personal liability on a member, so long as the member
can show that he or she filed a formal complaint.
E) is not grounds for imposing personal liability on the members of the limited liability
company.
A(n) ________ check is a two-party check for which (1.) the issuing bank serves as
both the drawer and the drawee and (2.) the holder serves as payee.
A) certified
B) accepted
C) cashier’s
D) dishonored
E) ratified
What was the holding in Brandt v. Boston Scientific?
A) The UCC applied because the contract was predominately for services.
B) The UCC did not apply because the contract was predominately for services.
C) The UCC applied because the contract was predominately for goods.
D) The UCC did not apply because the contract was predominately for goods.
E) The UCC did not apply because the parties did not agree to the applicability of the
UCC.
The offeror says, “I’ll sell you my car for $15,000.” The offeree says, “I accept your
offer but will pay $14,000.” What is true at this point?
A) There are two open offers.
B) This was a conditional acceptance.
C) The offeror must sell the car to the offeree if the offeree gives the offeror
$15,000.
D) The only open offer is for $14,000.
E) The offeree’s statement was a revocation of the $15,000 offer.
Which of the following is true?
A) Courts allow rescission of a contract if there is a mutual mistake of value as opposed
to a mutual mistake of fact.
B) Courts allow rescission of a contract if there is a mutual mistake of fact as opposed
to a mutual mistake of value.
C) Courts allow rescission of a contract for either a mutual mistake of fact or a mutual
mistake of value.
D) Courts do not allow rescission of a contract for either a mutual mistake of fact or a
mutual mistake of value.
E) Courts never allow rescission of a contract unless fraud is shown.
Betty has only one child, Michael. Upon her death, she is planning on leaving all her
assets to him by creating a living trust. What is needed to ensure that the distribution of
property goes to Michael?
A) She should transfer title of property to the trust.
B) She should establish another “after death” trust to cover only property.
C) She should have both a will and a living trust.
D) She should have two wills: one covering income and one covering property.
E) She should transfer title of property to the trustee.
Billy Bob had a great job handling the lion show for Wild Events Circus. Billy Bob had
a written contract with Wild Events for three years. The contract was in year two, and
Billy Bob was fully performing his obligations under the contract. Wild Sam, who was
well known as a lion handler, really wanted Billy Bob’s job. Wild Sam told the circus
that he could do a better job than Billy Bob with the lions and that there would be more
attendance at the shows because of his reputation. The circus breached its contract with
Billy Bob and hired Wild Sam. Billy Bob is mad and sues Wild Sam for intentional
interference with a contract. What would be the most likely result?
A) Wild Sam would be held liable to Billy Bob.
B) Wild Sam would not be held liable to Billy Bob because Wild Events Circus, the
employer, would be the only defendant who could be held liable to Wild Sam.
C) Wild Sam would not be held liable to Billy Bob, because the job of lion handler is
not a professional job which is required for the action of intentional interference with a
contract.
D) Wild Sam could be held liable to Billy Bob for punitive damages, but not for
compensatory damages.
E) Wild Sam would be held liable to Billy Bob, but only if Billy Bob can show that he
was a better lion handler than Wild Sam.
According to ________, keeping a promise to abide by a contract is a moral duty, even
if that contract turns out to be detrimental to the obligated party.
A) ethical fundamentalism
B) ethical realism
C) ethical relativism
D) Kantian ethics
E) Rawl’s social justice theory
Whats-a-Matter U., a co-ed school of 1000 total students, has decided to start a football
team and will be playing in Division III against other Division III and the occasional
Division II schools. Since the colors of the school are blue and gold, they decide to
model their uniforms and helmets after those worn by the University of Michigan
Wolverines’ football team. The University of Michigan has approximately 40,000 total
students and is perennially a Division I football power, often on television and
frequently in competition for the college football national championship. Which of the
following statements most accurately describes the potential intellectual property
liability of Whats-a-Matter U?
A) Whats-a-Matter U is infringing on Michigan’s trademark due to the possibility of
deception.
B) Whats-a-Matter U is infringing on Michigan’s trade dress due to the possibility of
confusion.
C) Whats-a-Matter U is infringing on Michigan’s patent based on the design and colors
of the uniform and helmet.
D) Whats-a-Matter U is infringing on Michigan’s copyright based on the fact that “fair
use” does not apply in this scenario.
E) Whats-a-Matter U is not infringing on any of Michigan’s intellectual property rights
because the likelihood that anyone would be tricked, deceived or confused and the
likelihood that Michigan will suffer a monetary injury or loss of enrollment is so remote
as to be non-actionable.
Burglary, at common law, required:
A) breaking and entering
B) intent to commit a felony
C) intent to commit any larceny or robbery
D) breaking and entering, and intent to commit a felony
E) breaking and entering, and intent to commit any larceny or robbery
The Environmental Protection Agency has the power to do which of the following?
A) adopt regulations
B) initiate judicial proceedings
C) adopt regulations and hold hearings
D) adopt regulations and initiate judicial proceedings
E) adopt regulations, hold hearings, and initiate judicial proceedings
Which of the following is not a requirement of a “common law” marriage?
A) The parties must be eligible to be married.
B) The parties must be acting voluntarily.
C) The parties must live together.
D) The parties must obtain a marriage license, although a ceremony is not required.
E) The parties must act as if they are married.
What was the result in Wrench LLC v. Taco Bell Corporation, in which Taco Bell was
sued for allegedly breaching a contract to pay for the idea of using a Chihuahua dog in
commercials?
A) The case was dismissed because there was no contract.
B) The case was dismissed because contracts involving animal performers are
unenforceable due to the unpredictability of animals.
C) The court held that the plaintiffs had established a case of promissory estoppel.
D) The court held that the plaintiff had stated a cause of action for breach of an
implied-in-fact contract.
E) The case was dismissed because the plaintiff could not establish fraud.
An instrument does not have to be payable with interest, but if it is, the amount of
interest being charged may be expressed as either a ________ or a(n) ________ rate.
A) fixed; variable
B) prime; subprime
C) legal; equitable
D) par; non-par
E) commercial; non-commercial
Ten persons formed the Magic City Company, LLC for a term of twenty years, with no
designation as to whether the corporation is “member-managed” or
“manager-managed.” Shortly before the expiration of this period, the members held a
vote on whether to continue the business for an additional five years. The vote was
eight votes in favor and two against continuing. As a result:
A) the limited liability company will continue for an additional five years.
B) the limited liability company will continue as an “at-will” limited liability company.
C) the limited liability company will be dissolved at the end of the original twenty-year
term.
D) the court will assume operational control of the limited liability company upon
expiration of the original term.
E) the limited liability company will continue for an additional twelve months.
Each of the following is a word that has lost its trademark due to generic use except:
A) escalator.
B) nylon.
C) cornflakes.
D) yo-yo.
E) Google.
Which of the following is true regarding a situation where an agent exceeds the scope
of his or her authority in entering into a contract?
A) The agent would never be held liable to the third party.
B) The agent would always be held liable to the third party.
C) The principal would always be held liable to the third party.
D) The principal would never be held liable to the third party.
E) The principal is not liable on the contract unless the principal ratifies it.
Why do we need federal antitrust laws? Would it be better if companies were allowed to
simply engage in free-market competition?
“OJ Everyday” is one of several national distributors of orange juice to retail grocery
stores. OJ Everyday wants to help the Megafood retail stores by selling the orange juice
to them at a lower price than it sells to other retailers. Because OJ Everyday knows that
this would be illegal price discrimination, it provides marketing assistance to
Megafood, but to no one else. For example, OJ Everyday runs national advertisements
that include statements that state that Megafood has a special system to ensure that OJ
Everyday juice is always fresh. These advertisements imply, but do not state, that other
stores might sell outdated items. Discuss this situation.
Increasing numbers of consumer contracts contain arbitration clauses in which the
consumer agrees in advance that any dispute related to the contract will be submitted to
an arbitrator, often chosen by the other party to the contract. Agreements between
consumers and insurance companies, as well as agreements between stockbrokers and
their clients, are two areas where these are increasingly common. What are the
advantages and disadvantages to the consumer of such a clause? Should these clauses
be effective to allow consumers to give up their rights to use the court system? Does it
affect your analysis if you learn that many consumers are not aware of these provisions
or do not understand them when they enter into these agreements? How enforceable
should these mandatory arbitration clauses be?
SnatchUup Corporation has made a hostile tender offer for the shares of Protective
Corporation. The management of Protective has made numerous statements to the
shareholders about horrible consequences if SnatchUup is successful in its bid. Finally,
the management of Protective has entered into an agreement to reacquire all Protective
shares from SnatchUup that SnatchUup already owns. Protective will pay one hundred
and fifteen percent of market value for these shares. In connection with this proposal,
SnatchUup has agreed to drop its hostile takeover attempt. John, a shareholder, has sued
the managers of Protective over its actions. What terms are used for the agreements
reached, and are they legal?
Mary’s grandmother owns a farm with three other tenants in common. Mary’s
grandmother dies, leaving her interest in the will to Mary. The other tenants in common
tell Marry she has no interest in the land because the four jointly owned the land, and
the grandmother’s interest passed to the other tenants upon her death. Discuss the legal
principles involved, whether the other tenants are correct, and how title to the farm will
be held.
Yard Sale Rejects is a retailer that buys unsold items from people who hold yard sales.
Yard Sale Rejects has borrowed money from numerous lenders who have liens on its
inventory. Below is information about the five parties who hold liens on the inventory
of Yard Sale Rejects:
State National Bank has a security agreement on the inventory which attached on
January 10, 2002, but is not perfected.
Fidelity National Bank has a security agreement on the inventory which attached on
February 15, 2002, and was perfected on March 15,Safety National Bank has a security
agreement on the inventory which attached on March 5, 2002, but was never perfected.
Steady National Bank has a security interest on a loan to Yard Sale Rejects to buy a
large lot of original pink flamingo yard ornaments, which attached on April, 10, 2002,
and was perfected on May 4, 2002. Serenity National Bank has a security agreement on
the inventory which attached on June 11, 2002, and was perfected on June 20, 2002.
All of the security interests, except the security interest of Steady National Bank,
contain after-acquired property clauses. Indicate the priority of interests of the five
banks in the inventory of Yard Sale Rejects. If any information that is crucial to your
answer is missing, indicate what that information is, and how it would affect your
answer.
Why are there such rigid and short deadlines for banks to decide whether to pay items?
Does the midnight deadline force banks into making payment decisions before they
have adequate information?
When do parties have an insurable interest in goods? Can a buyer and seller have an
insurable interest at the same time? What considerations should be made regarding
insurable interest in making contracts?
Lisa entered into a limited partnership as a limited partner by investing $25,000 in cash.
There were fifty limited partners and twenty general partners. The partners elected a
management committee that included two of the general partners and Lisa as one of the
limited partners. The certificate of limited partnership was completed, but was filed
with the wrong office. This partnership then commenced business by entering into
numerous transactions. Some of the parties it conducted business with assumed that the
partnership was a general partnership, because they searched the records of the
secretary of state and found no certificate of limited partnership or any other record.
Others assumed that it was a general partnership, but had not actually searched the
filings. Still others assumed that it was a limited partnership. Among those who
assumed it was a limited partnership, some assumed that Lisa was a general partner and
others did not. Discuss Lisa’s situation with respect to personal liability for partnership
debts.
Kathy is a director Blackout Incorporated. Blackout has decided to expand, and is
looking for property in a particular county. Kathy owns a piece of property in that
county that is exactly what Blackout is looking for. Kathy informs the other seven
directors of the property, and tells them that she had purchased the property for
$250,000 three years ago. Kathy abstains from the purchase decision, and the other
seven directors vote to purchase the property for $750,000, which is the current fair
market value of the property. If Mike, a shareholder of Blackout, files suit seeking to
recover (for the sole benefit of the corporation) the $500,000 profit made by Kathy,
what will be the likely outcome?
Explain what a “poison pill” is, and how it affects business dealings.
The entrustment rule can have harsh results. Why should the owner not be able to get
back the property when it was sold by the merchant with no authorization of the owner?
Should the rule be changed? What steps can an entrustor take to minimize the risk of
losing the property?
Tasty Corporation, located in Florida, developed a great mix for hot chocolate. Tasty
Corporation wants to market the drink in various European markets. The company has
concerns, however, about the laws of other countries, and cultural differences. Define
the concept of strategic alliances and joint ventures, and whether forming such
arrangements would be a good idea for Tasty Corporation.
How do the American Rule and English rule differ with regard to multiple assignments
of rights?
Why do you think that franchises have become so popular over the past few decades?
Are there any policy implications for the increasing use of franchises?
Does it seem fair that owners of a limited liability company are not personally liable for
debts of the company, even though they benefit from profit made by the company?
Do you agree with the provisions of the Anticybersquatting Consumer Protection Act?
Should alert individuals who purchase valuable domain names be able to sell them to
the highest bidder? If so, in all circumstances or only in certain circumstances?
Two member nations of the World Trade Organization have a trade dispute. One of the
nations has properly instituted a proceeding before the World Trade Organization in an
attempt to obtain relief. Discuss how the case will proceed, and whether there are any
rights of appeal once the World Trade Organization panel has rendered its decision.
Should a plaintiff exposed to the secondhand smoke of his parents while the plaintiff
was a child be able to recover from cigarette manufacturers for smoking-related illness
or health problems? Are there variables that should affect the manufacturers’ liability?
Should such a party be more or less able to recover than the parent for the parent’s own
smoking-related health problems? What effect should the warnings on cigarette
packages have on the outcome?