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. Later, Bertram dies. With respect to the stock transfer
restriction agreement, Bertrams death most likely
a. triggers the division provision.
b. invalidates the entire agreement.
c. voids the division provision only.
d. violates the entire agreement.
The Equal Employment Opportunity Commission (EEOC) orders First Financial
Company to reveal certain information. First Financial complains to a court, arguing
that the order is an abuse of the EEOCs discretion. Like other agencies, the EEOC can
use a subpoena to
a. obtain any information, without limits.
b. obtain assurances that the law is not being violated.
c. obtain documents, but not to compel a party to testify.
d. pressure a party to settle an unrelated matter.
Eva borrows $10,000 from First National Bank to remodel a room in her home. This
transaction is subject to
a. the Consumer Leasing Act.
b. the Magnuson-Moss Warranty Act.
c. the Truth-in-Lending Act.
d. the Uniform Commercial Code.
Shelby offers to make digital copies of Relay Companys business conference
videotapes, CDs, DVDs, and other media for $500. Under the mailbox rule and the
Uniform Electronic Transactions Act (UETA), Relays acceptance by e-mail will be
considered effective when
a. received.
b. sent.
c. followed up by a confirmation letter sent by regular mail.
d. composed on a Relay computer.
Bilt-Well Construction Corporation makes a side payment to a government official in
Nigeria to obtain a contract. In the United States, this is
a. illegal and unethical.
b. illegal but not unethical.
c. unethical but not illegal.
d. legal and ethical.
Klee wants to make and sell a computer operating system under a trademark. To obtain
the most protection under the law, Klee should choose a mark that is
a. distinctive.
b. similar to an existing mark.
c. the same as an existing mark.
d. non-distinctive.
Boris pushes Cordelia. She falls and breaks her arm. Boris is liable for the injury
a. if he intended to push Cordelia.
b. only if he did not intend to break Cordelias arm.
c. only if he had a bad motive for pushing Cordelia.
d. only if he intended to break Cordelias arm.
First Community Bank agrees to accept a check by setting aside sufficient funds to
cover the amount. This check is considered
a. cashed.
b. certified.
c. deposited.
d. provisionally credited.
Homer is an officer of Integrity Corporation. With respect to binding Integrity to
contracts, Homers authority
a. may be actual or apparent.
b. must be actual and apparent.
c. must be actual and not apparent.
d. cannot be actual or apparent.
Reba is a director of Quantum Mechanix Corporation. Rebas rights, as a director, do not
include a right to
a. indemnification.
b. inspection.
c. participation.
d. self-dealing.
Dru signs a check payable to Excel Services, Inc., and gives it to Excel, leaving the
amount blank but authorizing Excel to fill it in for $1,000. Excel fills in $1,500 and
negotiates the check to Friendly Credit Corporation, an HDC. Friendly Credit can
enforce the check for
a. $0.
b. $500.
c. $1,000.
d. $1,500.
Jim and Kiley are architects and members of J&K, P.C., a professional corporation. Jim
supervises Luc, an employee of the firm. As a member, Jim
a. is personally liable for any tort committed by Kiley.
b. has limited liability for any of Kileys acts of malpractice.
c. has no liability for any torts committed by Kiley or Luc.
d. may be personally liable for malpractice committed by Luc.
Jim organized, and owns and operates, Jims Landscaping Service in the simplest form
of business organization. This is
a. a corporation.
b. a limited liability company.
c. a partnership.
d. a sole proprietorship.
OK Investments, Inc., files a financing statement to provide notice of its security
interest in the property of Pancake House Restaurant. The initial effective term of a
financing statement is a period of
a. five days.
b. five months.
c. five weeks.
d. five years.
Doctors Hospital Corporation employs seven thousand workers in seven locations.
These employees have the right to
a. demand that Doctors Hospital Corporation be a closed shop.
b. make “hot-cargo agreements.
c. organize.
d. refuse to bargain with Doctors Hospital Corporation.
Val, the owner of Wild Wheels, a bicycle store, trusts Xavier to manage the stores daily
cash flow. One night, without Vals knowledge or consent, Xavier takes and keeps $500
from the receipts. This is most likely
a. embezzlement.
b. larceny.
c. robbery.
d. no crime.
GR8 Products, Inc., warrants its goods to be free of defects. Heck issues a note to
obtain goods from GR8 that prove defective. If GR8 presents the note for payment
a. Hecks best defense would be breach of warranty.
b. Heck must pay the note.
c. Hecks best defense would be fraud in the inducement.
d. Hecks best defense would be failure of consideration.
Boris programs software to prompt a computer to continually crash and reboot. Boriss
goal is to install this program on various companies computer systems without the
companies knowledge. The program can reproduce itself, but must be attached to a host
file to travel from one computer network to another. This program is
a. a hacker.
b. a bot.
c. a virus.
d. a worm.
Rosa and Sally agree to guarantee Timons debt. Rosas maximum liability is $30,000,
and Sallys is $20,000. Timon owes $20,000 and is in default. Rosa pays the creditor the
entire amount. In the absence of an agreement to the contrary, Rosa can recover from
Sally
a. $8,000.
b. $10,000.
c. $20,000.
d. 0.
Spa Serena LLC makes and sells beauty salon supplies. By selling its product at prices
substantially below the normal cost of production, Spa Serena hopes to drive its
competitors from the market. This is
a. market power.
b. predatory pricing.
c. price discrimination.
d. price-fixing.
First National Bank may subject its employees to lie-detector tests when investigating
a. health and medical conditions.
b. losses attributable to theft.
c. prior work history.
d. suspected drug use.
Blythe, an accountant for Credits & Debits, acquires a negotiable instrument from Eton
by promising to pay its face value in thirty days. Blythe acquires the status of an HDC
when she
a. acquires possession of the negotiable instrument.
b. agrees with Eton to buy the negotiable instrument.
c. pays the face value due on the instrument.
d. transfers the instrument to another party.
Genetic Seed Company hires Howie to work on Genetics shipping dock, accepting
deliveries and dealing with other companies drivers. With respect to Genetic, Howie is
most likely
a. an agent.
b. an independent contractor.
c. a principal.
d. a work for hire.
Fact Pattern 14-B1 Gert contracts to sell two tracts of land to Hank. Both parties believe
that the two tracts are adjacent, but in fact they are not. Gert is still willing to sell the
land, but under these circumstances the deal would adversely affect Hank.
Refer to Fact Pattern 14-1. Because of the parties belief about the adjacency of the
property, their contract is
a. unavoidable.
b. unconscionable.
c. unenforceable.
d. voidable.
Homebuyers Mortgage Corporations promise to pay its employees a year-end bonus “if
it seems like a good idea at the time is
a. an enforceable contract.
b. an illusory promise.
c. an unconscionable proviso.
d. a unilateral pact.
Earl holds 1,000 pounds of perishable fruit in storage for Fresh Food Corporation. Fresh
Food does not pay for the storage. Earl sells the fruit to Green Grocers, Inc. This sale
represents
a. a breach of contract.
b. a mitigation of damages.
c. rescission and restitution.
d. specific performance.
Nori files a suit against Mica to enforce an oral contract that would otherwise be
unenforceable under the Statute of Frauds. The court could enforce such a contract if
a. Nori foreseeably and justifiably relied on Micas promise to her detriment.
b. Mica denies the existence of any contract.
c. neither party has begun to perform.
d. the deal does not involve customized goods.
Fact Pattern 19-A1
Olisa enters into a contract to buy a stove from Pay-to-Own Appliance store with the
price to be paid in monthly installments. After thirty-six months of payments, Olisa has
paid more than twice the price of a similar stove. Eighteen payments remain due under
the contract.
Olisa files a suit against Pay-to-Own, claiming that their contract is so unfair and one
sided that it would be unreasonable to enforce it. Olisa is asserting
a. the concept of good faith.
b. the principle of fair trade.
c. the predominant-factor test.
d. the doctrine of unconscionability.
The Federal Trade Commission (FTC) orders GR8 Steaks Company to reveal certain
information. GR8 Steaks complains to a court, arguing that the order is an abuse of the
FTCs discretion. Like other agencies, the FTC can use a subpoena to
a. compel a party to testify, but not to obtain documents.
b. obtain any information except what a party refuses to reveal.
c. pressure a party to settle an unrelated matter.
d. reveal violations of the law.
A Quito contracts with Rewind Graphix, Inc., to pay $5,000 for its work on the
animated film “Song. After Rewind performs, they sign an accord, in which Quito
promises to pay $4,000 within ten days instead of $5,000 later. But Quito does not pay.
Rewind can sue Quito under
a. neither the accord nor the original obligation.
b. the accord only.
c. the accord or the original obligation.
d. the original obligation only.
In interpreting a commercial agreement, a court will assume that the course of dealing
between the parties was taken into account.
A principal whose identity is not known by a third party with whom an agent contracts
on the principals behalf is an apparent principal.
Oral evidence to “fill in the gaps of a contract with incomplete terms can be introduced
at a trial.
Operators of public water systems must meet the Environmental Protection Agencys
standards regardless of the economic and technological feasibility.
Dharma is the trustee of a trust in which Elin has a life estate and Frank has the
remainder interest. The trust property is a farm. The farm is leased to Glen, who pays
the rent to the trust. Property taxes are paid annually on the farm. Long-term
improvements are occasionally made and paid for. A section of the farms land is sold to
Haruo, one of the farms neighbors. How are the payments for taxes and improvements
classified (ordinary or extraordinary)? How are the receipts of rent and the proceeds
from the land sale classified? To whom are these costs and benefits allocated?
Savory Cooking Sauces, Inc., a U.S. business firm, makes and sells distinctively
flavored cooking sauces. Although the recipes are secret, the ingredients could be
revealed and the sauces could be reconstructed with diligent efforts. What can Savory
do to prevent its products from being “decoded and pirated abroad?
A signature can consist of a word, mark, or symbol.
Ethics is concerned with the fairness or justness of an action.
Concurrent jurisdiction exists when both federal and state courts have the power to hear
a particular case.
Once default has occurred and the secured party has obtained possession of the
collateral, the secured party has no more options.
A limited liability company must be managed by non-member managers.
Dill and Edy form a partnership. Edys capital contribution is $10,000, and Dills is
$15,000. The partnership agreement provides that profits are to be shared, with 40
percent for Edy and 60 percent for Dill. Later, Edy makes a $10,000 loan to the
partnership when it needs working capital. When the partnership is dissolved, its assets
are $50,000, and its debts are $8,000. How should the assets be distributed?
An integrated contract is a contract with more than one subject or part.
In a suretyship relationship, a third persons credit becomes the security for a debt.
Picking pockets is not robbery.
Under a deed in lieu of foreclosure, the property is conveyed to the lender in
satisfaction of the mortgage.