Hensley and Boyer have been negotiating for several months over issues related to the
purchase and sale of some real estate. They draft a letter of intent which:
a. protects both parties by ensuring the other side is serious and creates a binding
agreement on the issues on which the parties have agreed thus far.
b. may or may not be an offer, depending on the exact language and whether the
document indicates that the parties have reached an agreement.
c. has no legal effect, but provides a record for the parties as to where the negotiations
stand.
d. courts will consider to be a valid offer which the other party must accept if offered in
good faith.
Under the UCC, which of the following contracts may be enforceable, even without a
written memorandum?
a. The seller is specially manufacturing the goods for the buyer.
b. The seller admits in court that there was a contract.
c. The seller has delivered the goods.
d. All of the above.
Regency Construction placed an order for two hundred 2 x 4s from Lumber Jack. If the
place of delivery and time for shipping the goods are not specified, the UCC provides:
a. the place of delivery is Lumber Jacks and the time for delivering the lumber is a
reasonable time based on normal trade practice.
b. the place of delivery is Regency Construction and the time for shipping is within 30
days.
c. the place of delivery is Lumber Jacks and the time for delivering the lumber is within
30 days.
d. there is no contract because having more than one open term made the offer too
indefinite.
If the agent is disloyal to the principal:
a. the agency agreement automatically terminates and the principal may rescind the
transaction.
b. the principal has the right to collect any actual damages sustained as a result of the
agent’s disloyalty.
c. the principal has a right to recover any profits earned as a result of his agent’s disloyal
conduct.
d. All the above are correct.
Don runs a construction company. He hires people to work on his projects and tells
them they are all “independent contractors.” Legally, they are not independent
contractors since Don tells the workers when to come to work, how long to work, what
days to work, what they are to do each day, and so forth. At the end of each week, Don
pays his workers in cash rather than with a check. Also, he does not withhold any state,
federal or local withholding tax (since he claims the workers are independent
contractors). Which statement is correct?
a. Don has committed both unethical and illegal conduct.
b. Don has committed unethical conduct, but it is legal.
c. Don has committed ethical conduct but it is illegal.
d. Don has committed both ethical and legal conduct.
If Jane persuades Linda to buy her horse by telling Linda that the horse runs “like the
wind,” then Jane’s statement is:
a. fraud.
b. misrepresentation.
c. a unilateral mistake.
d. puffery.
The major disadvantage of a trust is:
a. expense.
b. lack of privacy.
c. it may have to go through an often lengthy probate process.
d. lack of control.
TECO Coal Corporation mines and ships more than six million tons of coal annually.
TECO is comprehensively regulated by the U.S. Bureau of Mines. The U.S. Bureau of
Mines may conduct a surprise inspection of one of TECO’s mines:
a. only if it has a search warrant.
b. only if it has a subpoena.
c. only if it has reason to believe a violation of a regulation has occurred.
d. without a search warrant to ensure safety.
Willis and Leslie orally agree to the sale of a parcel of land for $50,000: one-half
payable now as a down payment; one-half payable in 30 days at the time of closing
when the title will be transferred. The buyer, Willis, is to have possession immediately.
Willis pays Leslie $25,000, takes possession of the land, and starts building a house. At
the time of closing, Willis has made a substantial beginning on the house. However,
Leslie refuses to transfer the title, claiming the oral contract is not enforceable. This
contract is:
a. enforceable, because the statute of frauds does not apply to this interest in land.
b. unenforceable, because there is no writing signed by Leslie.
c. enforceable, because Willis has partially performed the oral contract and made
improvements on the land.
d. unenforceable, because the parol evidence rule applies.
The Williams Act:
a. is designed to regulate the conduct of those attempting to take over a company.
b. is designed to regulate the conduct of the target company subject to a takeover.
c. prohibits corporate defensive tactics.
d. None of the above.
The case of Carafano v. Metrosplash.com, Inc. held:
a. the Fourth Amendment applies to computers.
b. Congress, in enacting the Communications Decency Act, intended that ISPs should
not be held liable for information provided by someone else.
c. Congress had weighed free speech interests with protection of the public from
offensive or obscene materials and determined that protection of the public was more
important in the Internet setting.
d. Matchmaker, because it had provided the questionnaires for collecting information
from its users, must be considered an “information content provider under the
Communications Decency Act, and it is therefore liable under the Act.
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.
A manager used her position in the company to develop a new business the company
might have pursued. This is a breach of the:
a. duty of care.
b. duty of non-competition.
c. duty of loyalty.
d. duty of recognition.
What administrative agency regulates pesticides, insecticides, fungicides and
rodenticides?
a. The Food and Drug Administration.
b. The Occupational Safety and Health Administration.
c. The EPA.
d. All the above.
Under what circumstances might the court reject a debtor’s Chapter 13 plan?
a. The plan requires future earnings to pay off debts.
b. The plan promises to pay all secured and priority claims.
c. The plan anticipates paying the unsecured creditors less than what they would get
under Chapter 7.
d. The plan treats all unsecured classes equally.
A partnership is the association of two or more persons to carry on as co-owners a
business for profit. The association:
a. must be established by filing Articles of Partnership with the Secretary of State.
b. must be established by a formal agreement.
c. means a voluntary relationship between the persons.
d. includes all direct descendants.
Peter, a minor, purchased a car from ACME Motors. Using a fake ID, he misrepresented
his age to be 18. The contract is fully executed. Which of the following is correct?
a. Peter cannot disaffirm the contract because a car is a necessary.
b. Peter cannot disaffirm the contract because of his misrepresentation.
c. Peter can disaffirm the contract, because a minor must be saved from his own poor
judgment, including his lie.
d. Either b or c may be applicable depending on the law of the jurisdiction in which the
contract was formed.
Which of the following Acts sets goals without regard to the cost involved in meeting
the goals?
a. Clean Water Act.
b. Clean Air Act.
c. Both the Clean Water Act and the Clean Air Act.
d. Neither the Clean Water Act nor the Clean Air Act.
A corporation’s obligation to provide shareholders with financial information:
a. depends on whether the company is publicly or privately held.
b. depends on the requirements of the Model Business Corporation Act, which is widely
followed in regard to the shareholders’ right to information.
c. is extensive and is carefully regulated by the SEC if the company is privately held.
d. All the above.
What is the name of the treaty that allows American patents to be recognized and
enforced in member countries?
a. The Paris Convention for the Protection of Industrial Property.
b. The International Treaty of Trademarks and Patents.
c. The World Agreement of London.
d. The Berne Convention.
Shareholder proposals on the company proxy statement:
a. must be stated in the form of a request or recommendation according to SEC rules.
b. may only be implemented by the company if they receive support from at least a
simple majority of the shareholders.
c. are, in about half of the cases, withdrawn before a vote because the company decides
to implement the proposal.
d. may address only corporate-governance issues, such as cumulative voting or
executive compensation, but may not address the shareholders political agenda, such as
saving the environment.
Precision had a contract to supply Higgins, Co. with 500 medical instruments for
delivery in three months. Several weeks later Higgins reads in the Wall Street Journal
that Precision has been sued for selling defective instruments. Higgins could:
a. require written assurances from Precision.
b. sue Precision for damages immediately.
c. “cover.”
d. declare the contract is breached.
Which of the following promises ordinarily must be in writing to be enforceable?
a. Promises made as a part of a prenuptial agreement.
b. The agreement to sell a car for $1500.
c. The promise by an executor of an estate to pay a debt of the decedent.
d. All of the above.
Generally, a seller has no duty to disclose facts. However, there is a duty to disclose
information or facts if the disclosure is necessary to:
a. correct a previous assertion.
b. correct a basic mistaken assumption on which the other party is relying.
c. report a latent defect that the buyer would not be expected to discover.
d. All of the above are true.
When one party to a contract fails to perform as promised, it is called:
a. litigation.
b. breach.
c. liquidated damages.
d. bad faith.
Pamela applies for a life insurance policy with Forever Young Insurance Company.
When completing the application form about past surgeries, Pamela forgot about a past
outpatient surgery when she had an infected hang-nail removed and her toe treated. One
year after issuing the policy, Pamela died suddenly from a brain aneurysm. Forever
Young denies payment under the policy based on misrepresentation. If Pamela’s sister,
Paula, sues Forever Young, she will:
a. win, because once an application has been accepted, an insurer may not use a
misrepresentation on the application to avoid liability.
b. win, because Pamela’s misrepresentation was not a material fact and did not increase
Forever Young’s risk in insuring Pamela’s life.
c. lose, because Pamela’s application contained a misrepresentation of material fact.
d. lose, because an insurer can always use any misrepresentation on an application to
avoid paying.
Which of the following actions would prevent a discharge of debts under Chapter 7?
a. Discharge under Chapters 7 or 11 within the past eight years.
b. Falsified records presented to bankruptcy court by debtor.
c. Failure to disclose assets.
d. All of the above would prevent a discharge of debts.
In the Schauer v. Mandarin Gems of California, Inc. case, the court held:
a. the plaintiff was entitled to proceed with her contract claim against the jeweler
because the jeweler must have understood that she was an intended beneficiary of the
sales contract.
b. both of the contracting parties must intend to benefit the third party to create a right
to sue in the third party.
c. a specific manifestation by the promisor of an intent to benefit the third person is
required to create a third party beneficiary contract.
d. the plaintiff was a donee beneficiary and, as such, she had no right to sue.
Gorhan Construction, Brighton Bros., and Tirenn Construction agreed that on three
upcoming projects, Gorhan would bid lowest on one, Brighton would submit the lowest
bid on the second project, and Tirenn would submit the lowest bid on the third project.
In this way, they would each be assured of work for the upcoming season. This
behavior:
a. is legal and acceptable practice in the construction industry to spread work more
evenly.
b. is a per se violation of the Sherman Act.
c. is a rule of reason violation of the Sherman Act.
d. violates ethical, but not legal, standards.
“Bait and switch” is:
a. advertising a product for sale and then giving a rain check.
b. placing the store brand and the national brand side-by-side in a store.
c. selling the store brand at a lower price than the national brand.
d. the act of advertising certain goods and then pressuring the customer to buy different,
more expensive goods.
The concept of stare decisis focuses most on:
a. predictability.
b. flexibility.
c. legislative intent.
d. change.
Punitive damages are awarded:
a. for past and future medical expenses.
b. to repay the victim for losses suffered.
c. to punish the defendant.
d. for past and future pain and suffering.
Sit-down strike, in which members stop working but remain at their job posts,
physically blocking replacement workers from taking their places are legal.
Public officials and public figures receive less protection from defamation than ordinary
people.
Cincy, Inc. is building a $20 million dollar addition onto its distribution facility. To
build the facility, Cincy must fill in two acres of wetlands. Under the Clean Water Act,
Cincy must obtain a permit before filling in the wetlands.
Jeremiah was a partner in a partnership, but he quit unexpectedly when he got his
feelings hurt over an internal decision. Dissociation has occurred.
Nelson writes Leah a check for mowing his lawn. Leah deposits the check in her bank,
but it is not paid by Nelsons bank. Leah calls Nelson to notify him that her bank
returned his check to her unpaid. Leahs notice of the dishonor is insufficient; she must
provide written notice.
The workers at Thom Trucking went on strike over wages. Thom Trucking may hire
permanent replacement workers.
Rayco entered into a contract to buy Chia Pets from We Grow Em. The contract
specified that the shipment would be “F.O.B. destination; title to pass on the date of
shipment.” The goods were destroyed in transit to Rayco. Rayco argues that the loss is
We Grow Em’s. Analyze the situation and determine who is liable for the loss.
Any contract involving a sale of goods of $100 or more must be in writing.
Identify four factors courts consider in deciding the validity of commercial
impracticability and frustration of purpose claims.
NAFTA is a trade agreement between the United States, Canada and Mexico.
The common law requirement that the seller make a tender of delivery that conforms in
all respects to the contract requirements was retained by drafters of the UCC, although
the Code includes sections that limit the rule’s effect.
Robert offers to buy a car from Jane for $400. Jane must accept this offer in order to
form an enforceable contract.
Assume that Joel signs a promissory note to Andrew, who in turn negotiates the
instrument to Luke. Of the three, Joel is the only person who has primary liability.
Andy wants to start his own business. He has decided to rent space in a ‘strip mall” and
open a pet shop. Additionally, he will provide dog grooming services. He figures he can
do almost everything himself, though he will need to hire a part-time employee on an
“as needed” basis. His friend, Lacy, has agreed to work when needed.
Andy is considering operating his business as a sole proprietorship. What are the
primary legal advantages and disadvantages to this form of business ownership for
Andy’s pet shop?
Only one party can have an interest in particular goods at a particular time.
Discuss when monopoly power is not a violation of Section 2 of the Sherman Act.
An auditor for Ralco Accounting firm was auditing the financial statements of E-prise.
The auditor suspected that E-prise was engaged in conduct that violated FCPA, a
federal law. Under Section 10A of the 1934 Act, the auditor is required to notify
E-prise’s board of directors of the suspicions.
The Federal Trade Commission Act considers the terms “deceptive and “unfair to be
synonymous when determining what practices should be prohibited.