An S Corporation cannot have more than ____ shareholders.
a. 100
b. 75
c. 50
d. 25
Wholesome Bread, Inc. advertised that its honey wheat bread had 25% fewer calories
than a competing brand, Valley Grains. In fact Wholesome’s bread had the same amount
of calories as Valley Grains’ bread. Wholesome Bread’s conduct:
a. does not violate the Lanham Act because of the First Amendment freedom of speech.
b. does not violate the Lanham Act because Wholesome did not act with actual malice.
c. does not violate the Lanham Act because comparative ads are exempt from the law.
d. violates the Lanham Act.
In Anglo-Saxon society, men were put into groups of ten, known as a “tithing and were
individually held responsible for any injury caused by any member of the group. This is
the forerunner of the idea of business partnerships.
a. True
b. False
Strawly Corp. runs an “adult bookstore in Metro City, leasing the building from
MegaCorp. Then, Metro City passes an ordinance prohibiting the sales of the types of
merchandise found in “adult bookstores. Strawly is still bound to the contract.
a. True
b. False
A nonparty to a contract may enforce the contract if the person is:
a. a donee beneficiary.
b. an incidental beneficiary.
c. a creditor beneficiary.
d. Both a and c.
A promise by Derkin Restaurants to buy all of the produce it needs this next year at an
established price from Elfredo’s Produce would be an:
a. enforceable requirements contract.
b. enforceable output contract.
c. unenforceable, illusory contract.
d. unenforceable promise based on past consideration.
Tuan is president and sole shareholder of Entertainment, Inc. Entertainment, Inc. wishes
to borrow money, but to do so, the bank requires Tuan to orally agree to personally pay
the debt of the corporation if Entertainment, Inc. cannot. Tuan’s guarantee to repay is:
a. enforceable under the parol evidence rule.
b. unenforceable because there is no insurable interest.
c. enforceable because of the leading object rule.
d. unenforceable because it is a collateral promise.
Which of the following is most likely to constitute fraud?
a. A false prediction that a painting’s value will rise.
b. A false statement that a used car is “the best deal in town.”
c. A false statement that a $30,000 car attracts members of the opposite sex.
d. Silence as to a toxic waste problem on real property that the buyer would not
reasonably find.
The Presidents of Oxtron, Inc., a U.S. company, and Dunka, Inc. a German company,
met in Munich, Germany. Oxtron and Dunka are direct competitors in over-the-counter
medicines. The presidents agree to fix prices on their major products. This agreement
may violate U.S. antitrust law even though the agreement was made in Germany.
a. True
b. False
The Occupational Safety and Health Administration promulgated a rule requiring
warehouse employees to wear hardhats when in the vicinity of an operating forklift. The
purpose of the hardhats is to protect employees from danger of falling objects. This rule
is:
a. an executive order.
b. a statute.
c. common law.
d. administrative law.
A baseball team ordered 500 wooden baseball bats from Bats, Inc., for delivery on June
1. On May 15, the ball team received 500 aluminum bats instead of the wooden ones.
As of May 16, Bats, Inc.:
a. may cure before June 1.
b. has breached the contract and is liable for damages.
c. has breached the contract only if the baseball team rejects the goods.
d. may cure if done within a reasonable time, even if it is after June 1.
On January 16, Deb offers to sell her waterbed to Colleen for $600. Colleen accepts and
agrees to pay Deb $600 on January 27. Which of the following is correct?
a. Until January 16, the contract was executory.
b. On January 16, the contract was executed.
c. This contract is a unilateral contract.
d. There is no contract until January 27.
A+ Modeling Agency signs a contract with Sandi to do a photo shoot for the local used
car dealers advertising. The contract was probably written by:
a. The owner of A+ Modeling Agency.
b. Sandi.
c. A+ Modeling Agencys lawyer.
d. Sandis lawyer.
As English judges were developing the common law of contracts in the twelfth and
thirteenth centuries:
a. most promises were found to be enforceable.
b. promises were found not binding unless written and sealed.
c. the term “contract became common.
d. changes in the law occurred rapidly.
Buyer is located in Des Moines, Iowa and seller is located in Sacramento, California.
The contract specifies F.O.B. Des Moines. This contract is a:
a. destination contract.
b. sale or return.
c. shipment contract.
d. sale on approval.
Jennifer substantially performs her service contract with Gretchen. Due to Jennifer’s
failure to render complete performance, Gretchen:
a. is discharged from any further contractual obligations.
b. is required to pay the full contract price, minus the value of Jennifer’s defective
performance.
c. is required to pay the full contract price.
d. may declare a material breach and pay only for the value received.
As assistant manager of a discount department store, you have been asked to review the
store’s policy concerning shoplifters. (a) Discuss the legal standard used in most states
governing the detention of suspected shoplifters. (b) In reviewing the store’s policy,
discuss some of the items that you will consider.
Country Bank, located in Indiana, loaned Chmelik $5,000 and obtained a security
interest in a copyright Chmelik owns. Chmelik lives in Illinois, but works in Indiana. In
order to perfect its interest, Country Bank files a financing statement in Indiana. The
financing statement provides Chmeliks correct name, his business address, and a
reasonable description of the copyright used as collateral. Is the financing statement
sufficient?
a. Yes, it meets the UCC requirements for contents and filing.
b. No, if the debtor is an individual, the secured party must file in the state of the
debtors principal residence, which in this case would be Illinois.
c. No, the contents of the financing statement are incomplete.
d. Both b and c are correct.
Marco sells goods to Byron for his personal use on the basis that the goods may be
returned if Byron is not satisfied with them. The sale is:
a. a ‘sale or return.”
b. a ‘sale on approval.”
c. a consignment.
d. outside the UCC.
Barb has been a children’s day care provider for several years in the small town of
Sallton. She has decided to give it all up and move to the big city for excitement and
adventure. She sells her business to Ken, agreeing not to open a competing business
within five miles of Sallton for a period of nine months. After five months of the big
city life, Barb is broke and moves back to Sallton. She opens a small day care business.
Ken sues on the noncompete clause. What is the most likely result?
a. Ken wins. The agreement is enforceable.
b. Barb wins. The agreement is denying her the right to do the only thing she knows
how to do.
c. Barb wins. The agreement is not enforceable because it is not ancillary to a legitimate
bargain.
d. Barb wins. The agreement is not reasonable as to time.
A sales representative at Oxtren, Inc orally told the purchasing agent at Wety, Inc. that
its industrial saw is exceptional. Which statement is correct concerning the claim that
the saw is exceptional?
a. The claim is an express warranty.
b. The claim is an implied warranty of merchantability.
c. The claim is not a warranty because it is not in writing.
d. The claim is not a warranty because it is sales puffery.
If a court orders rescission and restitution of a contract under which Nala sold a
baseball card to Shirley in exchange for $450:
a. Shirley must return the baseball card.
b. Nala must return the $450.
c. Both a and b.
d. Neither a nor b.
A homeowner has a contract with a firewood supplier to bring a rick of hardwood at the
beginning of each month from October through March. If the supplier has brought a
mixture of hard and soft woods for the first three deliveries, the homeowner cannot
reject a delivery in January just because it includes some soft wood.
a. True
b. False
“Hacking” is:
a. gaining unauthorized access to a computer system.
b. a major crime.
c. illegal under the federal Computer Fraud and Abuse Act, which applies to any
computer attached to the Internet.
d. All of the above are correct.
A United States district court is:
a. the primary federal trial court.
b. an appellate court.
c. a small claims court only.
d. none of these.
Byron bought a 50′ yacht from Myrtle’s Marina by entering into a note and security
agreement promising the yacht as collateral for the purchase money security interest.
When Byron faced some tough financial times, he failed to make three monthly
payments. Myrtle’s Marina repossessed the yacht by removing the yacht engine and
advertised a public auction of the yacht. Byron appealed to his good friend Charles and
managed to pay off the debt balance and the Marina’s expenses of repossessing and
advertising the sale. Byron’s actions represent:
a. strict foreclosure.
b. redemption.
c. silent bidding at the auction.
d. an artisan’s lien.
In analyzing a situation to determine how to act ethically, a business manager should:
a. gather background information by either talking firsthand with the people involved or
by talking to those who gained information informally through the company
“grapevine.
b. narrowly focus on a single issue.
c. determine whether an alternative violates important values.
d. All of the answers are correct.
Primary methods of alternative dispute resolution include litigation and mediation.
a. True
b. False
Ricardo has agreed to sell his family farm to Walter for a price of $450,000. Even
though both sides agree on the terms, it is still worth the money for Ricardo to hire a
lawyer to write the contract.
a. True
b. False
The biggest change in litigation in the last decade is:
a. an explosive rise of electronic discovery.
b. a decrease in the use of discovery.
c. the replacement of interrogatories with depositions.
d. the use of juries in appellate courts.
Some courts have held that employee handbooks create binding contract terms.
a. True
b. False
Claims for personal injury are generally assignable.
a. True
b. False